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Whistleblower News: CFTC Virtual Coin Warning, Binary Scam

by HB Whistleblower Legal Team


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Wall Street Banks Want Muni Whistle-Blower Suit Dismissed

Eight banks that help sell municipal bonds for Illinois asked a judge to dismiss a $1 billion whistleblower lawsuit accusing them of fraud and collusion.

The remarketing agents for variable-rate demand obligations say that the suit filed on April 5 by Edelweiss Fund LLC under the Illinois False Claims Act doesn’t identify specific statements made by any of the defendants, false or otherwise. They also claim that it’s based upon conjecture rather than inside knowledge; and that the majority of deals cited were done through conduits "made on behalf of non-State entities who bear all of the financial risks of the transactions.”

The banks seeking dismissal of the lawsuit are: Morgan Stanley; JPMorgan Chase & Co.; Citigroup Inc.; Bank of America Corp.; Barclays Capital; Fifth Third Bancorp; William Blair & Co.; and BMO Capital Markets Corp.

Michael Lissack, a spokesman for Edelweiss, declined to comment. read more »

New Guidance Alerts Customers to Use Caution and Research before Purchasing Virtual Coins or Tokens

The Commodity Futures Trading Commission today issued a Customer Advisory warning customers to use caution and do extensive research before purchasing virtual coins or tokens, including those that are self-described as “utility coins,” or “consumption coins.” This is the fourth advisory about virtual currencies the CFTC has issued to give customers a greater understanding of virtual currencies.  

“This advisory is part of the CFTC’s education and outreach efforts to help educate and inform market participants, who, given the pace of technology-driven change, will increasingly come in contact with new financial products and services,” said Erica Elliott Richardson, Director of the Office of Public Affairs and Office of Customer Education and Outreach. “The CFTC’s Office of Customer Education and Outreach closely coordinates with LabCFTC in order to keep pace with developments in the markets the CFTC regulates, and we look forward to staying ahead-of-the-curve in providing customers the information they need to protect themselves against fraud or manipulation in the marketplace.” read more »

US seeks record $75m. from marketer for steering victims to Israeli binary scams

Florida-based Michael Shah allegedly sent traffic to Israeli-run binary options sites including LBinary, TraderXP, Trade Rush, Banc de Binary and OptionRally.

While Israeli law enforcement continues to ignore the country’s robust online fraud sector, the United States government has asked a Florida court to impose some $75 million in fines and penalties against a single alleged US-based binary options fraudster. The alleged fraudster, Michael Shah, worked in tandem with call centers in Israel, the Commodities and Futures Trading Commission motion charges, and steered his American and other financial victims to numerous binary options websites based in Israel.

The penalties sought in this case are the largest the CFTC has requested so far from an alleged binary options fraudster, and the scale of the damages sought from a single alleged crook hint at the colossal scale of the overall fraud. read more »

A $3.6 Trillion Regulatory Hole Around ETFs Gets SEC Scrutiny

U.S. watchdog wants information on indexes and their providers
These companies are growing in influence but aren’t monitored

A regulator’s work is never done -- and when it comes to exchange-traded funds, it seems it’s only just begun.

The U.S. Securities and Exchange Commission, which is working on an ETF-specific oversight regime and considering reviving a proposal to limit the use of derivatives in the funds, is also asking questions about the stock and bond benchmarks that underpin 98 percent of the $3.6 trillion market for exchange-traded products. Currently the firms that create the indexes supporting these funds do so without SEC supervision.

“Everyone is watching intently and we’re trying to be as best prepared as we can be,” said Dave Gedeon, head of research and development at Nasdaq Global Indexes. “One of the things that’s been the hallmark of the industry has been innovation. I would worry that if we went to a new regulatory regime, that essence of the market would be damaged.”

It’s all part of a broader effort by regulators to get their arms around the fast-growing business that’s seen its U.S. assets triple since 2011, yet has spent decades in the shadows of the investment world. read more »