Federal Court Imposes Heavy Sanctions for Operating Unregistered Trading Operation
The U.S. Commodity Futures Trading Commission (CFTC) has secured a significant courtroom win against Michael Shah and Jason B. Scharf, who were held accountable for running a widespread binary options fraud. The ruling mandates that both defendants pay over $40 million in total penalties and restitution after defrauding thousands of retail investors.
Details of the Deceptive Operation
According to court filings, Michael Shah, through his company Zilmil Inc., and California businessman Jason B. Scharf, along with a network of associated entities, misled over 8,000 retail clients, generating illicit revenue exceeding $16 million. The CFTC accused the parties of violating federal commodities laws by operating an unregistered trading business and promoting fraudulent investment platforms.
Financial Penalties Imposed
|
Entity / Individual |
Restitution |
Civil Fine |
|
Michael Shah |
$9.3 million |
$1 million |
|
Zilmil Inc. |
$8.55 million |
$4 million |
|
Jason B. Scharf & affiliates |
$4.48 million |
$13.4 million |
The amounts were stipulated in a consent order (for Shah and Zilmil) and a default judgment (against Scharf and his firms).
How the Fraud Operated
Between June 2013 and July 2017, Shah’s Zilmil Inc. launched aggressive online marketing campaigns designed to lure unsuspecting investors. These campaigns directed victims to binary options websites run by Scharf, including:
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Citrades.com
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AutoTradingBinary.com
Once on these sites, users were misled by:
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Fake claims of high returns
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Fabricated customer success stories
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“Guaranteed profit” promises
Zilmil acted as the traffic driver, while Scharf’s companies capitalized on the deception.
A Broader Network of Scams
Shah was also a central marketer for numerous fraudulent binary options platforms, such as:
-
LBinary
-
Global Trader 365
-
Vault Options
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TraderXP
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Trade Rush
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Banc de Binary
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OptionMint
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OptionRally
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RBOptions
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Bloombex Options
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Redwood Options
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BeeOptions
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Amber Options
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OptionsXO
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SpotFN
None of these entities were ever licensed to offer binary options in the United States or any other regulated jurisdiction.
Connection to GreyMountain Management (GMM)
Several platforms promoted by Shah were allegedly tied to the GreyMountain Management (GMM) network operated by David and Jonathan Cartu. This operation is widely regarded as one of the most expansive binary options fraud structures of its time.
Currently, GMM is being dissolved by Deloitte Ireland, a move which some victims believe is aimed at erasing evidence. Legal claims against GMM and its executives continue.
The Scam-Or Project has documented the GMM case extensively, outlining the scope of its global impact.
Case Information
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Case Title: CFTC v. Scharf et al.
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Docket No.: 3:17-cv-00774
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Court: U.S. District Court, Middle District of Florida