Former businessman charged with $10M fraud

The leader of an international binary options scheme was arrested and a federal indictment was unsealed.

The leader of an international binary options scheme was arrested and a 19-count federal indictment was unsealed, charging him with defrauding investors out of at least $10 million, according to a news release from the U.S. Attorney’s Office, Northern District of Ohio.

Jared J. Davis previously lived in the Columbus area, but resides in Kalispell, Montana, the release said.

Davis was indicted on multiple charges including conspiracy to commit wire fraud, conspiracy to launder money, wire fraud, money laundering and obstruction of justice.

He was arrested early morning June 5 at Cleveland Hopkins International Airport, said the release.

The indictment said Davis and others ran a fraudulent binary-options investment scheme between 2012 and 2016 through Erie Marketing LLC, headquartered in Sandusky, where Davis was involved in real estate ventures and businesses, the release said.

The options business used trade names, including OptionMint, OptionKing and OptionQueen. A binary option is a concept in which an investor seeks a future payout based on the future price of a given security or commodity, said the release.

Binary options are sometimes traded on regulated exchanges that match two investors, one who believes the price of the asset will go up and the other who believes it will go down.

The option exchange makes a commission, but otherwise has no interest in the outcome of a trade, according to the release.

Davis’ binary options businesses were not registered with the Securities and Exchange Commission nor the Commodity Futures Trading Commission, which have regulatory oversight, including registration and licensing.

Davis, acting as a broker, did not connect investors to a legitimate binary options exchange that would match investors who chose different options outcomes, the release said.

Instead, Davis took the opposing position on each trade, similar to a casino or sports book, said the release.

Davis only made money when investors lost money, providing a built-in incentive to employ manipulative and deceptive practices, including failing to disclose to victims that they were not matched with individual investors, failing to disclose to them that he could and did manipulate trading conditions, falsely telling investors their money was held in an account when Davis actually spent victim deposits as he received them, and falsely portraying his employees as “brokers” or “analysts” when in fact they had no relevant experience or qualifications, the release said.

Davis also falsely represented to victims that they could withdraw their money at any time when he actually required unnecessary and burdensome documentation to closing an account, falsely represented to victims they could make “risk free,” “insured,” or “guaranteed” binary options trades if they deposited more money, and other deceptive practices, according to the release.

Davis solicited victims through internet marketing campaigns and call centers that he operated out of Sandusky, Costa Rica and St. Maarten.

He enlisted foreign nationals who, under Davis’ direction, created an elaborate web of foreign corporations in the United Kingdom, Belize, Anguilla, Costa Rica, St. Vincent and the Grenadines and St. Maarten to receive and launder the victims’ deposits, the release said.

“This defendant portrayed himself as a legitimate investment broker when he was really no better than a simple con man,” said First Assistant U.S. Attorney David Sierleja. “He fleeced his victims out of $10 million by manipulating trading conditions, falsely telling investors his salespeople were financial analysts and using offshore companies to spend money as fast as it came in.”

Ryan Korner, IRS-Criminal Investigations special agent-in-charge, said crime knows no borders, and neither does the financial investigative reach of IRS-Criminal Investigation.

“IRS-CI will follow the money wherever it may be to ensure those who prey upon the finances of others are held accountable for their action,” Korner said.

FBI Special Agent-inCharge Stephen D. Anthony said Davis defrauded investors out of their hard-earned money and used their money for his personal real estate interests.

“The FBI, along with our law enforcement partners, will continue to identify, investigate and bring financial frauders to justice,” Anthony said.

This case was investigated by the Internal Revenue Service–Criminal Investigations and Federal Bureau of Investigation. Assistant U.S. Attorney Gene Crawford is prosecuting the case.