Commonwealth Bank and St George held accounts for Options Rider investor scam, FinCEN files show
A friend recommended Carmelita Roque invest her savings in Options Rider.
Options Rider’s use of Australian banks gave the US Army officer comfort her money was safe.
“Seeing the money that I would be wiring would be going to a country like Australia, in my mind that was convincing enough that that company was legitimate,” Ms Roque said.
She deposited thousands of dollars into Options Rider’s Australian bank account and watched it grow to nearly $100,000 on its online platform.
Then the website stopped loading — it was a scam ripping off thousands of investors around the world to the tune of at least $8 million in one year.
“The heaviest part of it was when I kept beating myself up about how stupid I was getting into that ordeal,” she said.
A leak of highly secretive US Treasury documents reveals new details of the scam’s American and Canadian victims, who wired thousands of dollars to a company used by Options Rider with accounts at Australia’s Commonwealth Bank and St George Bank.
In mid-2015, a suspicious activity report (SAR) filed by the Bank of New York Mellon in the US raised concerns about Fund Options Australia, one of the companies that received money for Options Rider.
It said it was one of multiple SARs previously filed about the scheme.
SARS are documents banks use to raise concerns with regulators, and are not necessarily evidence of wrongdoing.
One of the concerns was based on information sent from the Commonwealth Bank (CBA) about Fund Options Australia, stating: “It did not know the nature of business that the entity was involved in and did not know what the purpose of its transactions were.”
The Australian Federal Police (AFP) began investigating Options Rider in mid-2015 and eventually restrained funds in 37 different bank accounts at various Australian banks and financial institutions.
“It’s a Ponzi scheme, it’s a scam. We saw no evidence of any actual trading being performed, any actual investing. It was simply: ‘Give us your money.’ They collected that from victims and sent it offshore,” said AFP agent Matt Oliveiro.
The ABC can reveal the alleged controller of the syndicate behind Options Rider in Australia — Kristijan Krstic — fled the country before the AFP investigation, but was arrested by Serbian police in July over further investment scams.
How the scheme used Australia’s banks to give an air of legitimacy
Options Rider claimed to be an online binary-options-trading scheme based in New Zealand and managed in Australia that used expert traders and specialised software to provide big returns.
The high-risk speculative investments try to predict whether the price of an asset, commodity or index will trade above or below a specific price at a specific time.
Binary options can be legitimate and legal, but many are also unlicensed, with authorities issuing multiple scam warnings over the last few years.
More than 2,500 victims of Options Rider sent funds to Australia from around the world, including from the United States, Philippines, Switzerland, Austria, Bulgaria, Canada, Romania and Russia.
It used US-based managers to promote the scheme internationally and an Australian-based syndicate to set up shell companies and bank accounts.
The scheme counted on mum-and-dad investors recommending it to others, selling them on the Australian financial system.
“The managed fund is in Australia. WHY? Because Australia is the 2nd best and safest banking system in the world … the U.S. is the 13th!” marketing material read.
“A variety of financial institutions … were used, however the big four banks were used most commonly as they are suspected to have presented a greater air of legitimacy to the syndicate’s operations,” Mr Oliveiro said.
American ‘felt comfortable’ depositing into Commonwealth Bank
Ms Roque was serving in the US Army in Pakistan when she got involved in Options Rider.
She said she sent two payments of $3,000 in late 2015, with at least one of those going to Bankwest, owned by the Commonwealth Bank.
“It’s exciting in the beginning when you see your money grow [on the Options Rider platform], especially at that rate … when I last saw my account it was almost close to $100,000. For me that was massive — if that was for real,” Ms Roque said.
Soon after, the website went down, no-one answered her emails and she never got her money back.
“It’s money earned from putting myself on the line on a daily basis. I could have sent that to my relatives [in the Philippines] to buy rice. It’s a lot mentally,” she said.
Fellow American Jeff Carley said he deposited $10,000 into Fund Options Australia’s account at the Commonwealth Bank — which was used by Options Rider — thinking it was an interesting new investment.
“When I saw I was sending my money to Australia, I looked into it and it was a big, highly reputable bank in Australia … so I felt comfortable it was going to a big bank,” he said.
He got his money back after fighting the scheme and complaining to US authorities, but he said many others did not.
“It was really sad, a lot of folks put their life savings into it,” he said.
‘Commonwealth Bank should have understood’
The Options Rider scam began around March 2015.
A SAR shows people were sending funds to Fund Options Australia’s account at the Commonwealth Bank since at least April 2015.
It said Fund Options was suspicious because it appeared shell-like, wires were sent in repetitive round-dollar amounts and the CBA said it did not know the purpose of its transactions or the nature of the company’s business.
The SAR shows transactions coming into the Commonwealth account in April and May, including one with a reference stating “live account at Options Rider” — linking the company with the scheme.
By mid-May, Federal Court documents show Fund Options had already received more than $3.7 million in more than 2,200 separate deposits into its CBA account and it did not carry an Australian Financial Services licence.
Anti-money laundering consultant John Chevis said the CBA should have discovered Fund Options and Options Rider were unlicensed in its due diligence to understand the nature of the business being carried out at the bank.
“Ideally to comply with the [anti money-laundering] rules, Commonwealth Bank should have understood that Fund Options was operating as some sort of financial services entity requiring a licence and then asked for that licence to ensure they’re not facilitating some sort of crime,” Mr Chevis said.
The liquidator was appointed in May and asked that debits be frozen, but deposits be allowed to continue.
It continued to receive more than $150,000 until early July.
Fund Options also received more than $500,000 between June and August 2015 into an account at the St George Bank.
The AFP started investigating in late June that year after being provided information from the FBI.
Ms Roque agrees the banks should have frozen accounts when the funds started flowing in.
“If they have to stop, if they have to freeze first, then they should have done that. That would have alleviated more and more people getting scammed,” she said.
“I’m just hoping something can be done to protect the small people like me when it comes to investment scams like this.”
The Commonwealth Bank, St George Bank, the AFP and the regulator, AUSTRAC, were unable to say whether the banks filed suspicious matter reports about Fund Options in the lead-up to the police investigation, citing legal restrictions.
The CBA told ABC Investigations it was unable to comment on individual matters: “We work closely with law-enforcement bodies that are involved in regulating and enforcing laws relating to financial crime.”
It said it was committed to ensuring it took appropriate steps to identify, mitigate and manage money-laundering risks.
Westpac, which owns St George Bank, also said it could not comment on individual matters and interactions with law-enforcement and regulatory agencies.
“We are determined to continuously uplift our Financial Crime standards, comply with our obligations and uphold our customer, community, and regulatory expectations,” it said in a statement.
AUSTRAC also could not comment on specific matters but in a statement said banks “must take steps to identify a customer, checking they are who they say they are and reporting suspicious matters”.
It also requires the businesses to monitor customer transactions, perform ongoing customer due diligence and “conduct enhanced customer due diligence by collecting additional information or doing additional checks”.
Mr Chevis said if the Commonwealth Bank and other banks were filing suspicious matter reports to AUSTRAC, early steps to restrict funds should also be considered to prevent further harm to victims.
“Where they can’t refute those suspicions, then they should be making moves pretty quickly to prevent further transactions, either by rejecting them when they come in or restricting the account or closing the account,” he said.
“You would hope that the Commonwealth Bank’s systems were robust enough to detect that sort of offending early on and prevent further offending. 2,200 deposits and $3.7 million sounds like a fairly significant amount of offending … which might be indicative of Commonwealth Bank not having those robust systems and procedures in place.”
Alleged controller continued scamming after leaving Australia
Mr Oliveiro told the ABC “all the evidence” pointed towards Mr Krstic as the alleged controller of a “well-resourced, well-organised syndicate”.
“He fled the country before the AFP became aware of the investigation and he convinced associates of his to set up shell companies,” Mr Oliveiro said.
As the AFP identified and shut down bank accounts, the syndicate would get victims to send money to new accounts, leading to a cat and mouse chase with investigators.
Since fleeing Australia, Mr Krstic is suspected of continuing to run investment scams overseas until his arrest by the Serbian police in an FBI-led investigation in July.
It’s too little, too late for the thousands of Options Rider victims who never saw their money again, Ms Roque said.
“Five years … the timeline is too long for someone to be captured … how many more people were scammed in that time before the arrest?”