SEC Charges Individuals with Defrauding Investors in Connection with an Unregistered Binary Options Business
Litigation Release No. 24370 / December 10, 2018
Securities and Exchange Commission v. Jared Jeffrey Davis and Dale Burke Pinchot, No. 3:18-cv-02829 (N.D. Ohio, December 10, 2018)
The Securities and Exchange Commission today announced charges against an Ohio resident and his Pennsylvania business partner in connection with an unregistered and fraudulent binary options business.
According to the SEC's complaint, Jared Jeffrey Davis and various shell companies controlled by Davis and his business partner, Dale Burke Pinchot, engaged in the fraudulent offer and sale of unregistered binary option securities under the brand names OptionMint, OptionKing, Option Queen, and OptionPrince. According to the complaint, Davis misrepresented the number of investors who successfully traded binary options and failed to disclose that, to be successful, an investor would need to win an unlikely high percentage of trades. The complaint alleges that Davis, Pinchot, and their companies effectively took the opposing position on each trade and therefore made money when customers entered into losing binary options trades. The complaint further alleges that Davis failed to inform investors that he frequently manipulated the options trading software to increase the odds of investor losses.
To learn more about binary options fraud, see Investor Alert: Binary Options Websites may be Used for Fraudulent Schemes.
The SEC's complaint, filed in federal district court in Ohio, charges Davis with violating the antifraud provisions of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, the registration provisions of Sections 5(a) and 5(c) of the Securities Act, and the broker-dealer registration provisions of Section 15(a)(1) of the Exchange Act and charges Pinchot with violating antifraud provision Section 17(a)(2) of the Securities Act. Without admitting or denying the SEC's allegations, Davis and Pinchot consented to the entry of judgments that permanently enjoin them from violating the above-mentioned provisions of the federal securities laws, and from participating in the issuance, purchase, offer, sale, or promotion of any binary option security. The final judgments provide that the court will determine disgorgement and civil penalties at a later date. The settlement is subject to court approval.
The U.S. Attorney's Office for the Northern District of Ohio announced criminal charges against Davis on June 5, 2018.
The SEC's investigation was conducted by James Thibodeau and Justin Sutherland of the Commission's Salt Lake Regional Office and supervised by Regional Director Daniel Wadley. The litigation will be led by David Whipple and Amy Oliver. The Commission appreciates the assistance of the U.S. Attorney's Office for the Northern District of Ohio, the FBI, the IRS Criminal Investigation Division, and the U.S. Commodity Futures Trading Commission in this matter.