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Securities & Exchange Commission v. Banc de Binary, Ltd.

United States District Court, D. Nevada

August 7, 2013

SECURITIES AND EXCHANGE COMMISSION, Plaintiff,
v.
BANC DE BINARY LTD., Defendant

Decided August 5, 2013

Page 1230

For Securities & Exchange Commission, Plaintiff: Blaine T Welsh, LEAD ATTORNEY, U.S. Attorney's Office, Las Vegas, NV; John W. Berry, Leslie A Hakala, LEAD ATTORNEYS, U.S. Securities and Exchange Commission, Los Angeles, CA.

For Banc de Binary Ltd., Defendant: A. Jeff Ifrah, PRO HAC VICE, David Brian Deitch, Rachel Hirsch, LEAD ATTORNEYS, Ifrah PLLC, Washington, DC; Justin R. Cochran, LEAD ATTORNEY, Snell & Wilmer L.L.P., Las Vegas, NV; Craig S Denney, Snell & Wilmer LLP, Reno, NV.

OPINION

ROBERT C. JONES, United States District Judge.

Page 1231

ORDER

This case arises out of the alleged trading of unregistered securities. The Court has granted a Motion for Preliminary Injunction (ECF No. 6). For the reasons given herein, the Court vacates the previous order, replaces it with the present Order, and denies Defendant's Motion to Reconsider (ECF No. 29).

I. FACTS AND PROCEDURAL HISTORY

Defendant Banc de Binary, Ltd. is a Cypriot company with a license to operate in Cyprus under supervision of the Cyprus Securities and Exchange Commission, as well as licenses to operate in Germany, Spain, and the United Kingdom, but it has no license from Plaintiff Securities and Exchange Commission (" SEC" ) to operate in the United States. ( See Compl. ¶ ¶ 7-8, June 5, 2013, ECF No. 1). Defendant operates an " online trading platform," selling " binary options." ( Id. 9). A customer can go to Defendant's website and purchase a binary option, for example in stock of XYZ, Inc. ( Id. ). The customer selects the amount of the binary option (between $1 and $3000) and bets whether the stock of XYZ, Inc. will rise or fall from the current price as of a given time and date in the future. ( Id. ¶ 14). Defendant's website then determines the percentage payout the customer will receive if correct. ( Id. ¶ 15). If the customer is correct, he receives back the initial amount he paid for the binary option plus his winnings (the initial bet multiplied by the percentage payout); if the customer is incorrect, he loses much or all of the price he paid for the binary option. ( Id. ¶ ¶ 9, 16). The wagers are called " binary" options because there are only two possible outcomes.

Defendant has never registered with the SEC. ( Id. ¶ 8). Defendant solicits customers within the United States. ( See id. ¶ ¶ 19-23). Although Defendant claims to have stopped soliciting U.S. customers, existing U.S. customers can still use their accounts to purchase binary options. ( Id. ¶ 24). The SEC has sued Defendant in this Court for violations of § 5 of the Securities Act of 1933 and § 15(a) of the Securities Exchange Act of 1934 and has asked the Court to issue a preliminary injunction.

II. LEGAL STANDARDS

The Court of Appeals has used two separate sets of criteria for determining

Page 1232

whether to grant preliminary injunctive relief:

Under the traditional test, a plaintiff must show: (1) a strong likelihood of success on the merits, (2) the possibility of irreparable injury to plaintiff if preliminary relief is not granted, (3) a balance of hardships favoring the plaintiff, and (4) advancement of the public interest (in certain cases). The alternative test requires that a plaintiff demonstrate either a combination of probable success on the merits and the possibility of ...

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