SEC v. DAVID SECHOVICZ, No. 1:19-cv-12027, District of Massachusetts (Sept. 30, 2019) — Complaint

UNITED STATES DISTRICT COURT
DISTRICT OF MASSACHUSETTS

SECURITIES AND EXCHANGE
COMMISSION,

Plaintiff,

                v.

DAVID SECHOVICZ

Defendant.

Case No.

COMPLAINT

 Plaintiff Securities and Exchange Commission (the “Commission” or “SEC”) alleges:
SUMMARY OF THE ACTION
1. This complaint concerns an affiliate marketer who along with his business partner
fraudulently offered and sold securities called “binary options” by disseminating f alse and
misleading videos, websites, and advertising through the Internet to millions of prospective
investors in the United States and globally.
2. From at least January 2014 through December 2016 (the “Relevant Period”),
David Sechovicz (“Defendant”) together with his business partner, Peter Szatmari (“Partner”),
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created and disseminated numerous false and misleading Internet-based marketing campaigns
designed to induce investors to open and fund binary options trading accounts with overseas
brokers.  These brokers, in turn, paid Defendant and Partner each time a new investor referred by
them made an initial deposit for trading binary options.  These brokers were not registered with

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 The Commission has filed separately an action today against Mr. Szatmari.

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the SEC, and they offered and sold unregistered binary options referencing securities and
securities indices to investors opening and funding those accounts.
3. Defendant with Partner worked as an “affiliate marketer.”  Affiliate marketing is a
form of performance-based marketing where an advertiser promotes a third party’s goods or
services, often over the Internet.  The affiliate marketer receives a payment each time a person
referred to the third-party takes a specified action, like clicking a link or making a purchase.
Here, Defendant and Partner promoted the opening of binary options trading accounts with
overseas unregistered brokers that offered and sold unregistered binary options referring to
securities.  In doing so, Defendant was a necessary factor and substantial participant in the offer
of unregistered securities-based binary options by those brokers.
4. Defendant with Partner solicited investors by sending, or paying others to send,
millions of emails to prospective customers.  The emails contained links to the binary options
marketing campaigns, which included written communications and videos that touted free
software trading programs supposedly capable of generating large profits for investors who
opened binary options trading accounts with specific “recommended” brokers.
5. Defendant with Partner also paid various third-party websites to host numerous
advertorials – advertisements stylized as news articles – that contained false and misleading
statements designed to funnel prospective investors to Defendant and Partners’ binary options
marketing materials, typically websites containing the false and misleading videos.
6. These videos purported to show actual investors and real results, including people
enjoying rich lifestyles supposedly achieved through binary options trading.   The videos also
contained purported “live” demonstrations of people opening and funding accounts in “real time”

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and seeing their trading balances increase automatically.  The participants in the videos insisted
to viewers that their stories were true.
7. Yet what was depicted was entirely fiction.  Paid actors pretended to be the
creators of software that could effortlessly generate millions of dollars trading binary options;
fake testimonials claimed falsely that there was great wealth made by investing in, and using the
free trading software to purchase, binary options; and fabricated photos showed only fictional
account statements.  The “live” demonstrations of profitable trading were shams.
8. In addition, the videos claimed that the software only worked with a specific and
“recommended broker.”  In reality, there was never any software capable of producing the
promised results.  Additionally, the “recommended” brokers were simply those who agreed to
pay Defendant and/or Partner each time an investor opened and funded a binary options trading
account.
9. Defendant with Partner received a flat commission – customarily between
approximately $350 and $450 – for every customer who viewed their materials and then opened
and funded a binary options trading account with a recommended broker.
10. By virtue of this conduct and other conduct described in this Complaint,
Defendant violated the antifraud provisions of Section 17(a) of the Securities Act of 1933 (the
“Securities Act”), 15 U.S.C. § 77q(a), and Section 10(b) of the Exchange Act of 1934 (the
“Exchange Act”), 15 U.S.C. § 78j(b), and Rule 10b-5 thereunder, 17 C.F.R. 240.10b-5.
11. Defendant was also a necessary factor and substantial participant in an illegal
offering or sale of unregistered securities and also violated the registration provisions of Section
5 of the Securities Act, 15 U.S.C. § 77e.

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12. The Commission seeks civil monetary penalties and remedial ancillary relief,
including, but not limited to, disgorgement of ill-gotten gains, injunctions, and such other relief
as the Court may deem necessary and appropriate.  Unless restrained and enjoined by this Court,
Defendant is likely to continue to engage in the acts and practices alleged herein.
JURISDICTION AND VENUE
13. The Commission brings this action pursuant to Sections 20(b), 20(d)(1) and 22(a)
of the Securities Act, 15 U.S.C. §§ 77t(b), 77t(d)(1) & 77v(a), and Sections 21(d)(1),
21(d)(3)(A), 21(e) and 27(a) of the Exchange Act, 15 U.S.C. §§ 78u(d)(1), 78u(d)(3)(A), 78u(e)
& 78aa(a).  Defendant, directly or indirectly, made use of the means or instruments of
transportation or communication in interstate commerce or of the mails in connection with the
activities alleged in this Complaint, including by making use of the Internet to offer securities
and sending or receiving interstate email and participating in interstate voice or video calls.
14. Venue is proper in this district pursuant to Section 22(a) of the Securities Act and
Section 27(a) of the Exchange Act because, during the Relevant Period, Defendant lived in this
district and carried on his affiliate marketing from this district; thus, acts and transactions in
violation of the federal securities laws as alleged in this Complaint occurred within this district.
DEFENDANT
15. David Sechovicz, age 37, resided in Massachusetts during the Relevant Period of
the unlawful activities alleged in this Complaint and today resides in Puerto Rico.
FACTS
I. AFFILIATE MARKETING IN BINARY OPTIONS SECURITIES
16. Binary options are financial instruments with a value tied to the price of a
reference asset, including securities and securities indices.  An investor chooses whether the
underlying asset’s price will be above or below a certain price at a particular time (e.g., will

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Apple, Inc. stock be above $100 per share at 1 p.m. on a particular day).  The options are
considered “binary” because they carry only two possibilities: the investor whose prediction is
correct makes money; the investor whose prediction is incorrect loses the investment.  Unlike
other types of options, a binary option does not give the holder the right to purchase or sell the
underlying asset.  Instead, it is “cash settled.”
17. Binary options referencing a security or securities within the meaning of Section
2(a)(1) of the Exchange Act, 15 U.S.C. § 77b(a)(1), and Section 3(a)(10) of the Exchange Act,
15 U.S.C. § 78c(a)(10), are themselves “securities” within the meaning of those provisions.
18. Affiliate marketers typically promote over the Internet a product or service owned
or provided by a third party (e.g., a vendor) and are paid by the vendor when they cause someone
to take a specific action, like clicking a link or buying the vendor’s product or service.  Here,
binary options brokers paid Defendant and/or Partner a pre-set commission (typically $350 to
$450) for each investor who opened and funded an account with those brokers after viewing
fraudulent marketing materials that Defendant with Partner created and disseminated.
II. DEFENDANT AND PARTNERS’ FRAUDULENT
 OFFERS OR SALES OF BINARY OPTIONS
19. Between 2014 and 2016, Defendant with Partner created and distributed at least
six false and misleading marketing campaigns designed to persuade potential investors
predominately in the United States to open and fund binary options trading accounts with
overseas unregistered brokers operating on the Internet.  The marketing campaigns’ advertising
materials generally consisted of (a) textual materials disseminated over the Internet; (b) a
website; and (c) one or more videos embedded into the website.
20. The six binary options affiliate marketing campaigns that were created and
disseminated during this period consisted of campaigns going by the following names:

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Campaign Name

Year

Wall Street Millionaire 2014
Automated Money Kit 2014
Click Click Money 2014
The Cash Code / Robert Allen System 2015
Guaranteed Wealth 2015
The Conservative Investor 2016

21. Defendant with Partner disseminated the materials associated with these
campaigns using bulk/spam emails and paying media companies to distribute advertisements to
their subscribers by email or as “sponsored content”, a practice known as media buying.  The
materials disseminated by email and the media buys typically contained false and misleading
statements touting a free and easy way to make money using a secret software system.  These
written materials were designed to entice potential investors into clicking a link that would take
them to the campaign websites falsely describing the secret software system and its potential to
make users rich.
22. For example, an electronic mail message disseminated in connection with
Defendant and Partner’s Wall Street Millionaire binary options campaign read: “I’ve been
cashing in an additional $9500 weekly income ever since I started using this amazing FREE
software.  Download your FREE copy here before they start selling it.”  Embedded in the email –
typically where it read “here” – was a hyperlink that directed readers to the campaign website.
23. Similarly, an email sent in connection with the campaign called Cash Code
contained the following language: “ Imagine the size of your bank balance going from $0 to
$135,000 in the next few months.  Now imagine you did it with totally automated software.

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Software you can set up in 7 minutes or less . . . I’ve never seen anything like this. >>Read the
shocking details and proof here<<”.
24. Investors who clicked the hyperlink in the written materials were taken to the
campaign websites that featured the false and misleading videos.  Generally, the videos included
the following types of misstatements: (1) false guarantees that the trading software would
automatically generate significant profits for customers after they opened and funded accounts
with a broker; (2) actors pretending to be real users, creators, or owners of the trading software;
(3) fictitious depictions of customer bank and trading statements reflecting large balances or
profits; (4) fictitious testimonials where actors claimed to have profited using the fake software;
(5) fake “live” software demonstrations; and (6) false representations that the brokers to which
the materials referred investors were actually “recommended” for reasons other than their
payment to Defendant and Partner.
25. For example, the videos contained the following falsities:
a. The Wall Street Millionaire videos told a contrived story about a person named
Stanley who developed a purported system for trading binary options that
supposedly enabled him to generate $1.54 million in a year, or an average of
$4,500 each day.  In reality, “Stanley” was a paid actor who never developed any
software nor profited trading binary options.
b. Click Click Money featured videos that included a fictional spokesperson, Seth
Warburton, who displayed fake bank account statements reflecting nearly
$800,000 he supposedly earned in just months using the software.  The actor
portraying Warburton falsely claimed the software “can generate between $523

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and $4,098 of pure profit per day. . . for even the hopeless newbie,” and can pick
winning trades at least 92 percent of the time.
c. The Cash Code included a video that falsely stated that the corresponding
software “has made more millionaires in the past 6 months than any other website
on earth.”   Further, the video: (1) showed several fake bank account balances in
the millions that supposedly resulted from use of Cash Code; (2) showed the
supposed real-time growth of an account from $250 to hundreds of thousands of
dollars in just minutes; (3) claimed the system has “100% accuracy;” and (4)
stated that “All of our clients are financially independent within 60 days of using
this system . . .on average – by that they require no job or any other source of
income to sustain themselves from that point on.”
d. The Guaranteed Wealth videos featured “Victor Lambert,” who supposedly
discovered a system that picked winning binary options trades with over 90
percent accuracy.  Lambert claimed he made “over $2.8 million in profits” over
the past two years.  The video displayed fake account statements to show
purported winning trades and purported real-time updates showing an account
balance increasing from $250 to more than $23,000 in a matter of days.  The
video includes a series of false testimonials in which purported users of the
software told of their five-digit returns.
26. The videos also falsely stated that the brokers linked on the campaign websites
were chosen because they were trustworthy or their systems contained a glitch that could be
exploited by the software to make money.  In reality, the brokers were chosen only because they

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had agreed to pay to Defendant and/or Partner a referral fee for each investor signing up and
making a deposit.
27. Defendant knew or was reckless in not knowing that their marketing materials
were materially false and misleading.
28. Partner’s work on these campaigns generally included identifying, soliciting,
and/or negotiating with binary options brokers regarding commissions and other matters;
creating solicitation materials; obtaining, rebranding, and distributing automated trading
software; performing accounting functions; and arranging for the bulk dissemination of
solicitations, including through social media.  Defendant’s work generally included monitoring
the customer service email addresses associated with the campaigns and responding to investor
emails; developing content and design for internet websites that supported the campaigns;
registering campaign websites; and arranging for the bulk dissemination of solicitations
29. Defendant with Partner caused false and misleading materials related to these
campaigns to be sent to millions of potential investors.  These materials were viewed by more
than 350,000 persons and they caused more than 25,000 investors to make deposits for trading
binary options with one of approximately 35 unregistered brokers.
30. The unregistered brokers offered and sold binary options referencing securities
over the Internet to investors in the United States.  For example the table below reflects the
securities and securities indices offered and sold by three brokers, representing approximately
two-thirds of the referrals that Defendant and Partner made over the relevant period.

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Broker
Number Investors
Referred
Securities Offered Securities Indices
Offered
Broker 1
5377 19 (e.g., Microsoft, Apple,
Coca Cola, Nike).
20 (e.g., DJIA,
NASDAQ, S&P,
FTSE, Hang Seng)
Broker 2
8822 20 (e.g., Apple, Facebook,
IBM, Exxon).
8 (e.g., DJIA,
NASDAQ, S&P)
Broker 3
3532 28 (e.g., Apple, Nike, Tesla,
Netflix).
5 (e.g., DJIA,
NASDAQ, S&P)
31. Defendant himself personally realized approximately $1.9 million in profits from
operating these six campaigns with Partner between 2014 and 2016.
32. Defendant with Partner also engaged in what they referred to as “remarketing” by
distributing other affiliate marketers’ false and misleading binary options marketing campaigns,
including using their own email mailing lists, for compensation.  Defendant knew or recklessly
failed to know that the campaigns they “remarketed” included false and misleading statements
about profits and risk of loss.
VIOLATIONS OF THE FEDERAL SECURITIES LAWS
FIRST CLAIM FOR RELIEF
Fraud in the Offer or Sale of Securities
Violations of Section 17(a) of the Securities Act

33. Paragraphs 1 -32 are realleged and incorporated by reference herein.
34. Defendant, by engaging in the conduct described above, directly or indirectly, in
the offer or sale of securities by the use of means or instruments of transportation or
communication in interstate commerce or by use of the mails:
(a)  with scienter, employed devices, schemes, or artifices to defraud;

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(b)  obtained money or property by means of untrue statements of a material fact
or by omitting to state a material fact necessary in order to make the statements made, in
light of the circumstances under which they were made, not misleading; or
(c)  engaged in transactions, practices, or courses of business which operated or
would operate as a fraud or deceit upon the purchaser.
35. By reason of the foregoing, Defendant violated, and unless enjoined will again
violate, Section 17(a) of the Securities Act, 15 U.S.C. § 77q(a).
SECOND CLAIM FOR RELIEF
Fraud in Connection with the Purchase or Sale of Securities
Violations of Section 10(b) of the Exchange Act and Rule 10b-5

36. Paragraphs 1 -35 are realleged and incorporated by reference herein.
37. Defendant, by engaging in the conduct described above, directly or indirectly, in
connection with the purchase or sale of a security, by the use of means or instrumentalities or
interstate commerce, of the mails, or of the facilities of a national securities exchange, with
scienter:
(a)  employed devices, schemes, or artifices to defraud;
(b)  made untrue statements of a material fact or omitted to state a material fact
necessary in order to make the statements made, in the light of the circumstances under
which they were made, not misleading; or
(c)  engaged in acts, practices or courses of business which operated or would
operate as a fraud or deceit upon other persons.
38. By reason of the foregoing, Defendant violated, and unless enjoined will again
violate, Section 10(b) of the Exchange Act, 15 U.S.C. § 78j(b), and Rule 10b-5 thereunder, 17
C.F.R. § 240.10b-5.

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THIRD CLAIM FOR RELIEF
Unregistered Offer or Sale of Securities
Violations of Section 5 of the Securities Act

39. Paragraphs 1-38 are realleged and incorporated by reference herein.
40. No registration statement had been filed or was in effect for any of the security-
based binary options offered or sold through Defendant and Partners’ marketing campaigns.
41. Defendant, by engaging in the conduct described above, directly or indirectly,
made use of means or instruments of transportation or communication in interstate commerce or
of the mails to offer to sell or to sell such securities.
42. By reason of the foregoing, Defendant violated, and unless enjoined will again
violate, Section 5 of the Securities Act, 15 U.S.C. §§ 77e.
RELIEF REQUESTED
WHEREFORE, the Commission respectfully requests that this Court:
a) Find that Defendant committed the alleged violations;
b) Order Defendant to disgorge, with prejudgment interest, all ill-gotten gains
received or derived from the activities set forth in this Complaint, and to repatriate any ill-
gotten funds or assets caused to be sent overseas;
c) Order Defendant to pay civil penalties under Section 20(d) of the Securities
Act, 15 U.S.C. § 77t(d), and Section 21(d)(3) of the Exchange Act, 15 U.S.C. § 78u(d)(3);
d) Order that Defendant is prohibited from, directly or indirectly, including
through any entity he owns or control, participating in the marketing, offer or sale of
securities over the Internet or by email or other forms of electronic communication;

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e) Permanently enjoin Defendant from directly or indirectly violating Sections 5
and 17(a) of the Securities Act, 15 U.S.C. §§ 77e & 77q(a), and Sections 10(b) of the
Exchange Act, 15 U.S.C. §§ 78j(b), and Rule 10b-5 thereunder, 17 C.F.R. § 240.10b-5;
f) Retain jurisdiction over this action in order to implement and carry out the
terms of all orders and decrees that it may enter, or to entertain any suitable application or
motion for additional relief within the jurisdiction of this Court; and
g) Grant such other and further relief as may be necessary or appropriate.

Dated:  September 26, 2019

Respectfully submitted,

/s/ Kenneth W. Donnelly
Kenneth W. Donnelly (DC # 462996)
Trial Counsel for Plaintiff
Securities and Exchange Commission
100 F Street, N.E.
Washington, DC 20549-5949
Tel. (202) 551-4946
Fax (202) 772-9282
Email: [email protected]

Of Counsel:
Jennifer A. Leete
Jason M. Anthony
Michael S. Fuchs

UNITED STATES DISTRICT COURT 
DISTRICT OF MASSACHUSETTS 

 
 
SECURITIES AND EXCHANGE 
COMMISSION, 
 

Plaintiff, 
 
                v. 
 
DAVID SECHOVICZ 
   

Defendant. 
 

  
 
 
Case No.  
 
 

 
COMPLAINT 

 Plaintiff Securities and Exchange Commission (the “Commission” or “SEC”) alleges:     

SUMMARY OF THE ACTION 

1. This complaint concerns an affiliate marketer who along with his business partner 

fraudulently offered and sold securities called “binary options” by disseminating false and 

misleading videos, websites, and advertising through the Internet to millions of prospective 

investors in the United States and globally.    

2. From at least January 2014 through December 2016 (the “Relevant Period”), 

David Sechovicz (“Defendant”) together with his business partner, Peter Szatmari (“Partner”),1 

created and disseminated numerous false and misleading Internet-based marketing campaigns 

designed to induce investors to open and fund binary options trading accounts with overseas 

brokers.  These brokers, in turn, paid Defendant and Partner each time a new investor referred by 

them made an initial deposit for trading binary options.  These brokers were not registered with 

                                                 
1 The Commission has filed separately an action today against Mr. Szatmari. 

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the SEC, and they offered and sold unregistered binary options referencing securities and 

securities indices to investors opening and funding those accounts.   

3. Defendant with Partner worked as an “affiliate marketer.”  Affiliate marketing is a 

form of performance-based marketing where an advertiser promotes a third party’s goods or 

services, often over the Internet.  The affiliate marketer receives a payment each time a person 

referred to the third-party takes a specified action, like clicking a link or making a purchase.  

Here, Defendant and Partner promoted the opening of binary options trading accounts with 

overseas unregistered brokers that offered and sold unregistered binary options referring to 

securities.  In doing so, Defendant was a necessary factor and substantial participant in the offer 

of unregistered securities-based binary options by those brokers. 

4. Defendant with Partner solicited investors by sending, or paying others to send, 

millions of emails to prospective customers.  The emails contained links to the binary options 

marketing campaigns, which included written communications and videos that touted free 

software trading programs supposedly capable of generating large profits for investors who 

opened binary options trading accounts with specific “recommended” brokers.   

5. Defendant with Partner also paid various third-party websites to host numerous 

advertorials – advertisements stylized as news articles – that contained false and misleading 

statements designed to funnel prospective investors to Defendant and Partners’ binary options 

marketing materials, typically websites containing the false and misleading videos. 

6. These videos purported to show actual investors and real results, including people 

enjoying rich lifestyles supposedly achieved through binary options trading.   The videos also 

contained purported “live” demonstrations of people opening and funding accounts in “real time” 

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and seeing their trading balances increase automatically.  The participants in the videos insisted 

to viewers that their stories were true. 

7. Yet what was depicted was entirely fiction.  Paid actors pretended to be the 

creators of software that could effortlessly generate millions of dollars trading binary options; 

fake testimonials claimed falsely that there was great wealth made by investing in, and using the 

free trading software to purchase, binary options; and fabricated photos showed only fictional 

account statements.  The “live” demonstrations of profitable trading were shams. 

8. In addition, the videos claimed that the software only worked with a specific and 

“recommended broker.”  In reality, there was never any software capable of producing the 

promised results.  Additionally, the “recommended” brokers were simply those who agreed to 

pay Defendant and/or Partner each time an investor opened and funded a binary options trading 

account.   

9. Defendant with Partner received a flat commission – customarily between 

approximately $350 and $450 – for every customer who viewed their materials and then opened 

and funded a binary options trading account with a recommended broker.  

10. By virtue of this conduct and other conduct described in this Complaint, 

Defendant violated the antifraud provisions of Section 17(a) of the Securities Act of 1933 (the 

“Securities Act”), 15 U.S.C. § 77q(a), and Section 10(b) of the Exchange Act of 1934 (the 

“Exchange Act”), 15 U.S.C. § 78j(b), and Rule 10b-5 thereunder, 17 C.F.R. 240.10b-5.   

11. Defendant was also a necessary factor and substantial participant in an illegal 

offering or sale of unregistered securities and also violated the registration provisions of Section 

5 of the Securities Act, 15 U.S.C. § 77e.   

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12. The Commission seeks civil monetary penalties and remedial ancillary relief, 

including, but not limited to, disgorgement of ill-gotten gains, injunctions, and such other relief 

as the Court may deem necessary and appropriate.  Unless restrained and enjoined by this Court,  

Defendant is likely to continue to engage in the acts and practices alleged herein.  

JURISDICTION AND VENUE 

13. The Commission brings this action pursuant to Sections 20(b), 20(d)(1) and 22(a) 

of the Securities Act, 15 U.S.C. §§ 77t(b), 77t(d)(1) & 77v(a), and Sections 21(d)(1), 

21(d)(3)(A), 21(e) and 27(a) of the Exchange Act, 15 U.S.C. §§ 78u(d)(1), 78u(d)(3)(A), 78u(e) 

& 78aa(a).  Defendant, directly or indirectly, made use of the means or instruments of 

transportation or communication in interstate commerce or of the mails in connection with the 

activities alleged in this Complaint, including by making use of the Internet to offer securities 

and sending or receiving interstate email and participating in interstate voice or video calls. 

14. Venue is proper in this district pursuant to Section 22(a) of the Securities Act and 

Section 27(a) of the Exchange Act because, during the Relevant Period, Defendant lived in this 

district and carried on his affiliate marketing from this district; thus, acts and transactions in 

violation of the federal securities laws as alleged in this Complaint occurred within this district. 

DEFENDANT 

15. David Sechovicz, age 37, resided in Massachusetts during the Relevant Period of 

the unlawful activities alleged in this Complaint and today resides in Puerto Rico. 

FACTS 

I. AFFILIATE MARKETING IN BINARY OPTIONS SECURITIES 

16. Binary options are financial instruments with a value tied to the price of a 

reference asset, including securities and securities indices.  An investor chooses whether the 

underlying asset’s price will be above or below a certain price at a particular time (e.g., will 

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Apple, Inc. stock be above $100 per share at 1 p.m. on a particular day).  The options are 

considered “binary” because they carry only two possibilities: the investor whose prediction is 

correct makes money; the investor whose prediction is incorrect loses the investment.  Unlike 

other types of options, a binary option does not give the holder the right to purchase or sell the 

underlying asset.  Instead, it is “cash settled.” 

17. Binary options referencing a security or securities within the meaning of Section 

2(a)(1) of the Exchange Act, 15 U.S.C. § 77b(a)(1), and Section 3(a)(10) of the Exchange Act, 

15 U.S.C. § 78c(a)(10), are themselves “securities” within the meaning of those provisions. 

18. Affiliate marketers typically promote over the Internet a product or service owned 

or provided by a third party (e.g., a vendor) and are paid by the vendor when they cause someone 

to take a specific action, like clicking a link or buying the vendor’s product or service.  Here, 

binary options brokers paid Defendant and/or Partner a pre-set commission (typically $350 to 

$450) for each investor who opened and funded an account with those brokers after viewing 

fraudulent marketing materials that Defendant with Partner created and disseminated. 

II. DEFENDANT AND PARTNERS’ FRAUDULENT 
 OFFERS OR SALES OF BINARY OPTIONS  

19. Between 2014 and 2016, Defendant with Partner created and distributed at least 

six false and misleading marketing campaigns designed to persuade potential investors 

predominately in the United States to open and fund binary options trading accounts with 

overseas unregistered brokers operating on the Internet.  The marketing campaigns’ advertising 

materials generally consisted of (a) textual materials disseminated over the Internet; (b) a 

website; and (c) one or more videos embedded into the website.   

20. The six binary options affiliate marketing campaigns that were created and 

disseminated during this period consisted of campaigns going by the following names: 

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6 
 

 

 
Campaign Name 

 
Year 

  
Wall Street Millionaire 2014 
Automated Money Kit 2014 

Click Click Money 2014 
The Cash Code / Robert Allen System 2015 

Guaranteed Wealth 2015 
The Conservative Investor 2016 

 
21. Defendant with Partner disseminated the materials associated with these 

campaigns using bulk/spam emails and paying media companies to distribute advertisements to 

their subscribers by email or as “sponsored content”, a practice known as media buying.  The 

materials disseminated by email and the media buys typically contained false and misleading 

statements touting a free and easy way to make money using a secret software system.  These 

written materials were designed to entice potential investors into clicking a link that would take 

them to the campaign websites falsely describing the secret software system and its potential to 

make users rich.   

22. For example, an electronic mail message disseminated in connection with 

Defendant and Partner’s Wall Street Millionaire binary options campaign read: “I’ve been 

cashing in an additional $9500 weekly income ever since I started using this amazing FREE 

software.  Download your FREE copy here before they start selling it.”  Embedded in the email – 

typically where it read “here” – was a hyperlink that directed readers to the campaign website.   

23. Similarly, an email sent in connection with the campaign called Cash Code 

contained the following language: “Imagine the size of your bank balance going from $0 to 

$135,000 in the next few months.  Now imagine you did it with totally automated software. 

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Software you can set up in 7 minutes or less . . . I’ve never seen anything like this. >>Read the 

shocking details and proof here<<”. 

24. Investors who clicked the hyperlink in the written materials were taken to the 

campaign websites that featured the false and misleading videos.  Generally, the videos included 

the following types of misstatements: (1) false guarantees that the trading software would 

automatically generate significant profits for customers after they opened and funded accounts 

with a broker; (2) actors pretending to be real users, creators, or owners of the trading software; 

(3) fictitious depictions of customer bank and trading statements reflecting large balances or 

profits; (4) fictitious testimonials where actors claimed to have profited using the fake software; 

(5) fake “live” software demonstrations; and (6) false representations that the brokers to which 

the materials referred investors were actually “recommended” for reasons other than their 

payment to Defendant and Partner.   

25. For example, the videos contained the following falsities: 

a. The Wall Street Millionaire videos told a contrived story about a person named 

Stanley who developed a purported system for trading binary options that 

supposedly enabled him to generate $1.54 million in a year, or an average of 

$4,500 each day.  In reality, “Stanley” was a paid actor who never developed any 

software nor profited trading binary options. 

b. Click Click Money featured videos that included a fictional spokesperson, Seth 

Warburton, who displayed fake bank account statements reflecting nearly 

$800,000 he supposedly earned in just months using the software.  The actor 

portraying Warburton falsely claimed the software “can generate between $523 

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and $4,098 of pure profit per day. . . for even the hopeless newbie,” and can pick 

winning trades at least 92 percent of the time. 

c. The Cash Code included a video that falsely stated that the corresponding 

software “has made more millionaires in the past 6 months than any other website 

on earth.”  Further, the video: (1) showed several fake bank account balances in 

the millions that supposedly resulted from use of Cash Code; (2) showed the 

supposed real-time growth of an account from $250 to hundreds of thousands of 

dollars in just minutes; (3) claimed the system has “100% accuracy;” and (4) 

stated that “All of our clients are financially independent within 60 days of using 

this system . . .on average – by that they require no job or any other source of 

income to sustain themselves from that point on.”     

d. The Guaranteed Wealth videos featured “Victor Lambert,” who supposedly 

discovered a system that picked winning binary options trades with over 90 

percent accuracy.  Lambert claimed he made “over $2.8 million in profits” over 

the past two years.  The video displayed fake account statements to show 

purported winning trades and purported real-time updates showing an account 

balance increasing from $250 to more than $23,000 in a matter of days.  The 

video includes a series of false testimonials in which purported users of the 

software told of their five-digit returns.   

26. The videos also falsely stated that the brokers linked on the campaign websites 

were chosen because they were trustworthy or their systems contained a glitch that could be 

exploited by the software to make money.  In reality, the brokers were chosen only because they 

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had agreed to pay to Defendant and/or Partner a referral fee for each investor signing up and 

making a deposit.  

27. Defendant knew or was reckless in not knowing that their marketing materials 

were materially false and misleading.   

28. Partner’s work on these campaigns generally included identifying, soliciting, 

and/or negotiating with binary options brokers regarding commissions and other matters; 

creating solicitation materials; obtaining, rebranding, and distributing automated trading 

software; performing accounting functions; and arranging for the bulk dissemination of 

solicitations, including through social media.  Defendant’s work generally included monitoring 

the customer service email addresses associated with the campaigns and responding to investor 

emails; developing content and design for internet websites that supported the campaigns; 

registering campaign websites; and arranging for the bulk dissemination of solicitations 

29. Defendant with Partner caused false and misleading materials related to these 

campaigns to be sent to millions of potential investors.  These materials were viewed by more 

than 350,000 persons and they caused more than 25,000 investors to make deposits for trading 

binary options with one of approximately 35 unregistered brokers.   

30. The unregistered brokers offered and sold binary options referencing securities 

over the Internet to investors in the United States.  For example the table below reflects the 

securities and securities indices offered and sold by three brokers, representing approximately 

two-thirds of the referrals that Defendant and Partner made over the relevant period.   

 

 

 

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Broker Number Investors 
Referred 

Securities Offered Securities Indices 
Offered 

Broker 1 5377 19 (e.g., Microsoft, Apple, 
Coca Cola, Nike). 

20 (e.g., DJIA, 
NASDAQ, S&P, 

FTSE, Hang Seng) 

Broker 2 8822 20 (e.g., Apple, Facebook, 
IBM, Exxon). 

8 (e.g., DJIA, 
NASDAQ, S&P) 

Broker 3 3532 28 (e.g., Apple, Nike, Tesla, 
Netflix). 

5 (e.g., DJIA, 
NASDAQ, S&P) 

31. Defendant himself personally realized approximately $1.9 million in profits from 

operating these six campaigns with Partner between 2014 and 2016.   

32. Defendant with Partner also engaged in what they referred to as “remarketing” by 

distributing other affiliate marketers’ false and misleading binary options marketing campaigns, 

including using their own email mailing lists, for compensation.  Defendant knew or recklessly 

failed to know that the campaigns they “remarketed” included false and misleading statements 

about profits and risk of loss. 

VIOLATIONS OF THE FEDERAL SECURITIES LAWS 

FIRST CLAIM FOR RELIEF 
Fraud in the Offer or Sale of Securities 

Violations of Section 17(a) of the Securities Act 
 

33. Paragraphs 1-32 are realleged and incorporated by reference herein. 

34. Defendant, by engaging in the conduct described above, directly or indirectly, in 

the offer or sale of securities by the use of means or instruments of transportation or 

communication in interstate commerce or by use of the mails: 

(a)  with scienter, employed devices, schemes, or artifices to defraud; 

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(b)  obtained money or property by means of untrue statements of a material fact 

or by omitting to state a material fact necessary in order to make the statements made, in 

light of the circumstances under which they were made, not misleading; or 

(c)  engaged in transactions, practices, or courses of business which operated or 

would operate as a fraud or deceit upon the purchaser. 

35. By reason of the foregoing, Defendant violated, and unless enjoined will again 

violate, Section 17(a) of the Securities Act, 15 U.S.C. § 77q(a). 

SECOND CLAIM FOR RELIEF 
Fraud in Connection with the Purchase or Sale of Securities  

Violations of Section 10(b) of the Exchange Act and Rule 10b-5 
 

36. Paragraphs 1-35 are realleged and incorporated by reference herein. 

37. Defendant, by engaging in the conduct described above, directly or indirectly, in 

connection with the purchase or sale of a security, by the use of means or instrumentalities or 

interstate commerce, of the mails, or of the facilities of a national securities exchange, with 

scienter: 

(a)  employed devices, schemes, or artifices to defraud; 

(b)  made untrue statements of a material fact or omitted to state a material fact 

necessary in order to make the statements made, in the light of the circumstances under 

which they were made, not misleading; or 

(c)  engaged in acts, practices or courses of business which operated or would 

operate as a fraud or deceit upon other persons. 

38. By reason of the foregoing, Defendant violated, and unless enjoined will again 

violate, Section 10(b) of the Exchange Act, 15 U.S.C. § 78j(b), and Rule 10b-5 thereunder, 17 

C.F.R. § 240.10b-5. 

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THIRD CLAIM FOR RELIEF 
Unregistered Offer or Sale of Securities   

Violations of Section 5 of the Securities Act 
 

39. Paragraphs 1-38 are realleged and incorporated by reference herein. 

40. No registration statement had been filed or was in effect for any of the security-

based binary options offered or sold through Defendant and Partners’ marketing campaigns. 

41. Defendant, by engaging in the conduct described above, directly or indirectly, 

made use of means or instruments of transportation or communication in interstate commerce or 

of the mails to offer to sell or to sell such securities. 

42. By reason of the foregoing, Defendant violated, and unless enjoined will again 

violate, Section 5 of the Securities Act, 15 U.S.C. §§ 77e. 

RELIEF REQUESTED 

WHEREFORE, the Commission respectfully requests that this Court: 

a) Find that Defendant committed the alleged violations; 

b) Order Defendant to disgorge, with prejudgment interest, all ill-gotten gains 

received or derived from the activities set forth in this Complaint, and to repatriate any ill-

gotten funds or assets caused to be sent overseas; 

c) Order Defendant to pay civil penalties under Section 20(d) of the Securities 

Act, 15 U.S.C. § 77t(d), and Section 21(d)(3) of the Exchange Act, 15 U.S.C. § 78u(d)(3); 

d) Order that Defendant is prohibited from, directly or indirectly, including 

through any entity he owns or control, participating in the marketing, offer or sale of 

securities over the Internet or by email or other forms of electronic communication;  

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e) Permanently enjoin Defendant from directly or indirectly violating Sections 5 

and 17(a) of the Securities Act, 15 U.S.C. §§ 77e & 77q(a), and Sections 10(b) of the 

Exchange Act, 15 U.S.C. §§ 78j(b), and Rule 10b-5 thereunder, 17 C.F.R. § 240.10b-5; 

f) Retain jurisdiction over this action in order to implement and carry out the 

terms of all orders and decrees that it may enter, or to entertain any suitable application or 

motion for additional relief within the jurisdiction of this Court; and 

g) Grant such other and further relief as may be necessary or appropriate. 

 
Dated:  September 26, 2019 

 
Respectfully submitted, 
 
 
/s/ Kenneth W. Donnelly 
Kenneth W. Donnelly (DC # 462996) 
Trial Counsel for Plaintiff 
Securities and Exchange Commission 
100 F Street, N.E. 
Washington, DC 20549-5949 
Tel. (202) 551-4946 
Fax (202) 772-9282 
Email: [email protected] 
 

 
Of Counsel: 
Jennifer A. Leete 
Jason M. Anthony 
Michael S. Fuchs 

 

 

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mailto:[email protected]

	I. Affiliate Marketing in Binary Options Securities
	II. Defendant and partners’ Fraudulent
	OfferS OR SaleS of Binary Options
	(a)  employed devices, schemes, or artifices to defraud;
	(b)  made untrue statements of a material fact or omitted to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading; or
	(c)  engaged in acts, practices or courses of business which operated or would operate as a fraud or deceit upon other persons.