By Aodhán Ó Faoláin
A group of investors who claim they lost millions of euro in an electronic trading scam have brought a High Court damages action against an Irish-registered firm and Irish- and Israeli-based directors.
They have sued Greymountain Management Ltd, which is in liquidation, and its four directors, Israel-based brothers Jonathan and David Cartu and Dublin-based Ryan Coates and Liam Grainger.
The investors claim they believed they were investing in a complex trade known as binary options, when in fact the software system their trades were conducted on was rigged to ensure they lost their money.
Also known as ‘all or nothing options’, binary options are a product where the investor gets either a payoff of some fixed monetary amount if successful or nothing at all from their investment. The outcome of the investment depends entirely on the outcome of a yes/no proposition.
The yes/no proposition depends on whether the price of a particular asset will rise above or fall below a specified amount at a specified date and time.
Binary options are banned in most jurisdictions due to the high risk and fraud.
In what is understood to be one of the first cases of its type, the investors claim they lost about €4.1m in total from investing in binary options either indirectly or through third parties directly with Greymountain Management, which it is claimed provided services to binary options providers.
The investors, who come from the US, Canada, Singapore, UAE, and Britain claim they were induced by the defendants to open binary accounts with false claims that they would earn significant profits.
The investors made payments to Greymountain, which it is alleged played a pivotal role in the scheme.
Instead of acting honestly it is alleged the defendants conspired to defraud them. It is claimed the defendants misrepresented the location, qualification, and identity of brokers and advisers with whom the investors interacted.
The investors, it is alleged, were told the brokers and advisers would act in their interests, generate profits for the investors, and earn commissions on profits earned from their investments.
The brokers and advisers’ objectives, it is claimed, was to cause harm to investors.
They claim the software systems upon which the trades were conducted and executed were not legitimate and transparent and were rigged to ensure the investors lost their money.
The defendants allegedly manipulated the software systems in a way to induce investors to invest additional money on top of their original investment, before engaging in fraudulent devices to ensure they lost money.
It is claimed that the investors were directed to a website operated by the defendant that contained false testimonials and bogus descriptions of historical returns.
It is alleged the directors used Greymountain as a device to facilitate the binary options trading scam.
It is claimed Mr Grainger, of Charlemont, Griffith Avenue, Dublin 9, and Mr Coates, Hogan Square, Hogan Place, Dublin 2, operated and managed Greymountain for the purpose of the alleged scam, and acted as agents for the Cartu brothers who were shadow directors of the company.
In their action, the investors seek damages for deceit, breach of contract, breach of duty misrepresentation, and conspiracy to defraud the plaintiffs.