Vault Options and Global Trader 365 — a lifetime trading ban for a scheme spanning 22 US states

Two Israeli companies operating exclusively online offered Americans supposedly profitable binary options trading, even though neither had ever registered with any relevant regulator. Vault Options Ltd. and Global Trader 365 operated effectively in parallel and managed to draw in clients across 22 US states. The money people deposited into their accounts was never invested anywhere and was almost never returned. This only came to light once the US Commodity Futures Trading Commission (CFTC) took up the case, and in the end both companies received a lifetime ban on trading activity.

Vault Options and Global Trader 365 presented themselves as ordinary online binary options brokers — a product that was, at the time, heavily advertised online as an easy way to make money from short-term predictions about currency, stock or commodity prices. A client simply had to register on the website, fund an account and bet on whether the price of an asset would go up or down within a defined short window of time. Representatives of both companies actively called and wrote to prospective clients in the US, assuring them that binary options trading made it possible to earn large profits quickly and effortlessly. Neither of the two companies was registered with the CFTC — the primary regulator of commodity derivatives in the US — and formally had no right to offer their products to American citizens.

In practice, the scheme was straightforward. Vault Options and Global Trader 365 accepted client funds as trading deposits, but this money never reached any organized market — all of the "trading" took place on the companies' own platform, whose results they themselves determined. According to the CFTC, the companies assured clients of the potential for large profits, while the vast majority of users quickly lost almost all of their invested funds, and requests to withdraw the balance or any profit were either ignored or only partially fulfilled.

On 2 February 2016, the CFTC filed a lawsuit against Vault Options Ltd. and Global Trader 365 in the federal court for the Northern District of Illinois, accusing both companies of fraud, of trading off-exchange binary options in circumvention of applicable law, and of operating without the required registration. Neither company appeared in court or filed any objection to the suit, so on 20 July 2016 the court entered a default judgment.

Under that judgment, Vault Options and Global Trader 365 were ordered to pay a 3 million dollar civil penalty and 1.59 million dollars in restitution to affected clients. In addition to the financial sanctions, the court imposed a permanent injunction on the companies and a lifetime ban on any trading activity involving derivatives within the United States.

Published 10 October 2023