On April 20 and 21, 2021, the U.S. District Court for the Central District of California entered final consent judgments against one German citizen and two Israeli citizens charged by the Securities and Exchange Commission with owning and controlling entities that orchestrated fraudulent sales of high risk securities known as binary options to thousands of U.S. retail investors.
According to the SEC’s complaint, filed on September 26, 2019, between October 2014 and August 2017, Kai Christian Petersen, Gil Beserglik and Raz Beserglik owned, controlled, and operated three unregistered binary option brokers named Bloombex Options, Morton Finance, and Startling Capital, which together defrauded U.S. and foreign investors out of tens of millions of dollars. According to the complaint, the brokers controlled by the defendants utilized call centers in Germany and Israel that operated as “boiler rooms,” in which salespersons used high pressure sales tactics to offer and sell speculative and fraudulent binary options to investors. Employees at these call centers allegedly lied about their names, locations and expertise in trading securities, and falsely told investors that the brokers only earned money if investors made money. In reality, the brokers earned money only from investor losses and thus had no incentive to advise investors on how to trade binary options profitably. The complaint alleged that most investors who traded binary options through the three brokers lost money, and some retirees lost their entire savings. The complaint also alleged that none of the defendants registered with the SEC as brokers or dealers.
Without admitting or denying the allegations of the SEC’s complaint, Petersen, Gil Beserglik and Raz Beserglik consented to the entry of final judgments enjoining them from violating the registration provisions of Section 5 of the Securities Act and Section 15(b) of the Securities Exchange Act and the antifraud provisions of Section 10(b) of the Securities Exchange Act and Rule 10b-5 thereunder. They also consented to conduct-based injunctions that prohibit them from offering, selling, causing others to offer or sell, or profiting from the sale of binary options, securities-based swaps, or other securities over the internet, and to associational and penny stock bars. Petersen agreed to pay $200,296 in disgorgement and prejudgment interest, and a $100,000 civil penalty. Gil Beserglik agreed to pay $2,347,224 in disgorgement and prejudgment interest, and a $300,000 civil penalty. Raz Beserglik agreed to pay $2,086,421 in disgorgement and prejudgment interest, and a $465,000 civil penalty.
The SEC’s investigation was conducted by Jason Anthony and Deborah Maisel, and supervised by Jennifer Leete. The litigation was conducted by Ken Donnelly and Samantha Williams, and supervised by Fred Block.