A client of Greymountain Management, a Wexford-based company, has been linked to what the American government believes is a vast scam based on fake stock option trades.
Greymountain previously supplied technology, sales and market information to companies that trade in so-called binary or “all or nothing” options — a multibillion-dollar market in which traders either win big or lose it all on estimating the future price of a stock, currency or commodity.
State regulators in the US and Canada have warned the public against investing in binary options, and Israel has banned its citizens from binary options trading.
Last month, the US Commodity Futures Trading Commission announced a civil lawsuit against Israeli-American binary options operator Jason B Scharf, a Greymountain client, alleging that he and the companies he controls have swindled more than $16m (€13.5m) from at least 8,000 victims, most of them in America.
Alan O’Flynn, of the Grange, Ovens, Co Cork, is suing BigOption in Tel Aviv, another Greymountain client, in an attempt to recover a €178,000 investment. His solicitors, from PJ O’Driscoll & Sons in Cork, have obtained email records showing that BigOption vowed to give O’Flynn his money back, with a $20,000 bonus, if he invested another $10,000 in the next two minutes. They later emailed him to say that all his money was lost in trading and that the company “can’t change the rules”.
Matheson, the Dublin solicitors representing Greymountain, said the company supplied technology to binary option merchants, did not hold money on behalf of clients and was not responsible in any way for any financial loss of clients of the binary trading merchants.
An investigation by The Times of Israel has detailed losses running to tens of thousands of euros by people trading with clients of Greymountain. One former Israel employee of a binary options firm based in Tel Aviv said some of the traders were making $70,000 a month as reward for hitting sales targets.
The company was owned by the same people who controlled Greymountain.
Greymountain applied to the High Court in July to have a liquidator appointed to the company, citing the regulatory clampdown on binary trading merchants in Australia and Canada. In the US, Visa and MasterCard restricted the use of their cards for binary trading, which also hit the business.
As part of its application, Greymountain provided the High Court with a list of 44 binary option trading clients, the majority of which were based in the Marshall Islands and Saint Vincent and the Grenadines.
Greymountain is nominally owned by an individual in Niagara Falls, Ontario, in trust for the Israeli David Cartu. In his affidavit to the High Court, Cartu said that, following a complaint, the money laundering section of the Central Bank of Ireland wrote to the company last year, seeking details on why it was advertising itself as giving “rapid and hassle-free payment methods” for a binary options company called Glenridge Capital.
Marie Townsend, of the unauthorised providers unit of the Central Bank, told Greymountain that it had no licence to act as a money transmission business. In April, Glenridge was placed on the US Commodity Futures Trading Commission’s red list of companies that are seeking US investors without a licence.
Cartu said Greymountain later confirmed to the bank that it did not offer payment services. Greymountain was also the subject of an audit by Revenue, which took away documents and files from its Gorey, Co Wexford office.
Cartu, who has a passion for sports cars and sponsors a racing team in Tel Aviv, told the High Court in an affidavit that problems with Revenue stemmed from an inadvertent VAT mistake where it recorded clients’ profits to its own accounts. He told the High Court that Greymountain was fully tax compliant.
The fallout for investors continues. Robert Velasquez, a US disabled veteran, said that he had contacted the FBI after losing $38,000. Valasquez also contacted the Irish company seeking details of the whereabouts of his money. In internal emails, Danielle Earle, a Wexford-based manager of Greymountain, appealed to its owners to respond to Velasquez.
David Van Dessel of Deloitte was appointed provisional liquidator to Greymountain.