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US regulators clamp down on Cyprus betting exchange

By Douwe Miedema
US regulators on Thursday charged a Cyprus -based company with illegally selling financial contracts to US clients, the latest crackdown on online betting after Dublin-based Intrade was forced to cease trading.

The Commodity Futures Trading Commission and the Securities and Exchange Commission both filed lawsuits against Banc de Binary Ltd., saying it offered investments known as binary options that enable investors to bet on market prices.

Binary options are bets on the price of anything from shares to grains or foreign currencies, that either pay out the full agreed amount if these prices reach the level the investor has said they would, or nothing at all.

The regulators said Banc de Binary preyed on investors of modest means. The SEC’s complaint noted that one Banc de Binary customer had a monthly income of $300, while another was encouraged to deposit additional funds even after he said he had no work and less than $1000 in the bank.

“Just because foreign companies can more easily communicate with American investors doesn’t mean they should skirt our longstanding laws,” Andrew Ceresney, co-head of enforcement at the SEC, said in a statement.

Banc de Binary said it had no comment due to ongoing legal processes. comment. It was not immediately clear whether the group has hired a lawyer for its defence.

Cyprus’ SEC said it was looking into the matter in cooperation with the US counterpart and the CFTC.
“We will study the case to see if there had been a violation of Cypriot and EU legislation,” SEC chairwoman Demetra Kalogirou said.

“Much of the binary options market operates through Internet-based trading platforms that are not necessarily complying with applicable US regulatory requirements,” the two US regulators said in a joint warning to investors.

In November, the CFTC sued the owner of Intrade, which allows speculators to bet on anything from the Papal conclave to the date of the next major terror attack, alleging it allowed unauthorized trading by U.S. customers.

Intrade has since ceased trading, closing and crediting all open bets to customer accounts. (Reuters)

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