A Cyprus-based company has agreed to pay $11 million to settle charges that it illegally sold binary options to US investors.

A federal judge signed a court order to authorise the distribution of this money to harmed investors through a so-called 'fair fund.' The regulators behind the action were the Securities and Exchange Commission and the Commodity Futures Trading Commission.

The SEC filed a complaint in 2013 against Banc de Binary Ltd, its founder Oren Shabat Laurent and three affiliates alleging that they had failed to register the offering before soliciting American customers through YouTube videos, spam e-mails, and other Internet advertising. They failed to register as a broker-dealer before communicating directly with US clients by phone, e-mail and instant messenger chats.

A binary option differs from a more conventional option contract because the payout typically depends entirely on whether the price of a particular asset underlying the option will rise above or fall below a specified amount. It is, in fact, a straight bet.

Banc de Binary, Laurent, and the affiliates agreed to jointly pay $7.1 million in disgorgement and $1.95 million in penalties to the SEC as well as $2 million in penalties to the CFTC, which took parallel action. The court has established a 'fair fund' that will be administered by the National Futures Association to compensate harmed investors. Banc de Binary, Laurent, and the affiliates also agreed to be suspended from the securities industry for a year and permanently barred from issuing any penny stock offerings. The settlement has been approved by the US District Court for the District of Nevada.