Shipkevich Bitcoin and ICO Attorney
Felix Shipkevich November 16, 2019

ATM Coin creators have been ordered by the US Commodity Futures Trading Commission (CFTC) to pay $4.25 million to settle a fraud case brought forward by the agency’s Virtual Currency Task Force, as reported by the CFTC earlier this month.

An order of default for committing fraud and misappropriating client funds was entered by the US District Court for the Eastern District of New York against Blake Harrison Kantor and Nathan Mullins, both from New York, alongside four companies—Blue Bit Banc, Blue Bit Analytics Ltd., Mercury Cove Inc. and G. Thomas Client Services.

The case, which was first filed in 2018, charged Kantor, Blue Bit Analytics and G. Thomas Client Services with fraud in connection to a binary options scam involving ATM Coin, a cryptocurrency. The defendants acted illegally as Futures Commission Merchants without registering with the CFTC.

According to the CFTC, the group lured customers to invest in binary options, promising a return on their investment at set intervals, which is inconsistent with how binary options typically work.

Some binary options are overseen by US regulators, but many online schemes are outside of regulatory laws, requirements, and protections.  

Binary options rely on what the CFTC calls a “yes/no” proposition. Generally, the price of assets relies on external factors, such as whether the stock price of a company reaches a certain value on a given day. Once acquired, holders are not given the right to sell or purchase binary options. They receive, instead, a set amount of cash or nothing. As a result, binary options are sometimes considered “all or nothing” investments.

In this case, investors were unaware that Blue Bit Banc computer software was used to tamper with data relating to their binary options. Doing so ensured that investors were on the losing end of the yes/no proposition. In addition, Blue Bit Banc investments were converted into ATM Coin, a cryptocurrency deemed “worthless” by the CFTC, despite Kantor’s promises to the contrary regarding its value.

The court has ordered the defendants to pay $4.25 million, including $846,405 in restitution, a penalty of $300,000 against Mullins and a fine of $2.5 million against Kantor and the associated companies. Kantor and Mullins must also return $515,759 and $89,574, respectively, in funds that are considered ill-gotten gains.

The CFTC has previously issued a fraud advisory warning consumers of the risks associated with binary options trading. The watch dog warns that scam artists may refuse to honor cash withdrawals, refuse rewards or reimbursement, and may also use software to generate ‘no’ trades, as in the case with ATM Coin.