Banc de Binary — when branded advertising concealed quote manipulation

For nine years, this Cyprus-based company looked like a respectable financial brand — with a CySEC license, a professional website and advertising around the world. Founded in 2009 by the Israeli-American entrepreneur Oren Shabat Laurent, it earned the status of one of the first CySEC-licensed binary options brokers and for years attracted clients in dozens of countries. According to lawsuits by the CFTC and the SEC, behind this facade lay a platform that manipulated the quotes on its own trading venue, cutting off the connection to the client precisely when they began to make money.

From the outset, Banc de Binary cultivated the image of a large, legitimate player. The company was founded in January 2009, and in January 2013 it obtained a license from the Cyprus Securities and Exchange Commission — one of the first among binary options brokers. The CySEC license became its principal marketing asset: large-scale online advertising, YouTube videos and mailings presented the company as a regulated financial brand to which one could entrust one's savings, and drew in clients all over the world, including in the United States, where the company had no formal right to operate.

Cracks in this image began to appear as early as 2013. In June, the CFTC filed a civil suit in the federal court in Nevada, accusing Banc de Binary of violating the ban on off-exchange options trading and of accepting and executing orders from American clients without being registered as a broker. A parallel SEC suit added the charge that the company had solicited investors in the US through advertising and spam mailings without registering the securities offering. In August 2013, Banc de Binary was barred from accepting new clients from the US, and in May 2014 the CFTC expanded the suit, adding three affiliated corporate entities to the defendants. According to regulators and client complaints, the mechanism was simple: the platform manipulated the trading settings so as to generate losing trades for the client, refused to credit funds to accounts and blocked the withdrawal of winnings — that is, the trade and support became unavailable precisely when the client began to win.

The resolution came in 2016. The company agreed to a settlement with the SEC and the CFTC for $11 million — without admitting or denying guilt, as is typical for such settlements: $7.1 million was the disgorgement of funds received, another roughly $3.95 million was penalties from the two regulators, and Laurent himself paid an additional $150,000 personally. The larger part of the sum, more than $9 million, was directed to a compensation fund for affected American clients under the supervision of the US National Futures Association. That same year, 2016, CySEC fined the company €350,000 for failing to comply with the requirements of the investment services law, and France's AMF and Belgium's FSMA issued separate warnings, naming Banc de Binary among the brokers with which local investors should be cautious.

On 9 January 2017, the company's management announced its closure, citing a "persistent negative media backdrop", and voluntarily surrendered its CySEC license, losing the right to operate in the EU. There was no criminal prosecution of the founder or the top management: all the settlements remained in the civil sphere, and the company did not formally admit guilt.

Published 4 July 2023