Ex-Broker in $2.1M Crypto Binary Options Fraud Targeted by Feds

Stay up-to-date with the latest developments in securities law through access to both news and all statutes and regulations. Find relevant corporate filings through a searchable EDGAR database. And...

By Lydia Beyoud

The CFTC has charged multiple individuals and companies with fraud connected to the operation of “ATM Coin,” a virtual currency scheme involving allegedly illegal binary options, according to a civil complaint released April 18.

The man accused of directing the alleged scheme is an ex-broker named Blake Kantor, alias Bill Gordon, who lost his license related to federal drug charges in 2003.

Kantor was arrested on April 16 by the FBI and the Internal Revenue Service Criminal Investigations division. Kantor potentially faces up to 20 years in jail for alleged wire fraud related to charges of defrauding more than 713 investors out of approximately $2.1 million.

Kantor ran the scheme through various companies, including Blue Bit Banc. Kantor later converted investors’ money into “ATM Coin,” which the Justice Department called a “worthless cryptocurrency,” according to a press release.

ATM Coin describes itself as the first “supranational legal tender currency of the digital asset market,” which can be exchanged for all major cryptocurrencies or any legal tender currency, according to its site.

Kantor allegedly told investors their converted assets were worth substantial amounts of money and could be converted into fiat currency. He allegedly told at least one investor that his or her ATM Coins were worth at least $600,000. However, the DOJ said Kantor knew the money “could not be converted into United States currency or any other currency and thus could not have been worth substantial sums of money.”

The U.S. Attorney’s Office for the Eastern District of New York has charged Kantor with conspiracy to commit wire fraud, obstruction of an official proceeding and making false statements to FBI special agents, according to its complaint.

CFTC Charges

In the Commodity Futures Trading Commission’s civil action, Kantor and Nathan Mullins, of New York, are charged with failing to register on a registered board of trade before executing transactions and failing to register with the CFTC, the complaint said. Binary options trading allows customers to make predictive trades on whether the price of a commodity will rise or fall by a certain date and time.

The judge for both cases in the U.S. District Court for the Eastern District of New York, Sandra J. Feuerstein, froze the defendants’ assets, as well as that of their related companies: Blue Bit Banc, based in the U.K.; Blue Bit Analytics Ltd., located in Nevis and Turks and Caicos; and the New York corporations Mercury Cove Inc. and G. Thomas Client Services. Blue Wolf Sales Consultants, owned by Kantor, is charged as a relief defendant.

The CFTC case is CFTC v. Kantor , E.D.N.Y., No. 2:18-cv-02247, complaint filed 4/16/18 .

The DOJ case is USA v. Kantor , E.D.N.Y., No. 2:18-cr-00177, order unsealed 4/16/18

To contact the reporter on this story: Lydia Beyoud in Washington at lbeyoud@bloomberglaw.com

To contact the editor responsible for this story: Michael Ferullo at mferullo@bloomberglaw.com

Copyright © 2018 The Bureau of National Affairs, Inc. All Rights Reserved.

Request Securities & Capital Markets on Bloomberg Law