Canadian racing driver and influencer accused of ‘massive fraudulent’ scheme

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Canadian race car driver Josh Cartu strikes a glamorous life style on social media: surrounded by expensive sports cars, hobnobbing with movie stars and fashion models, and travelling on his private jet to European party hotspots such as Ibiza and Cannes.

Cartu grew up in St. Catharines, Ont., and has more than 700,000 followers on an Instagram account (@jcartu) that documents his exploits racing Ferraris, attending Milan Fashion Week and taking a ride in a Russian MiG fighter jet to the edge of the stratosphere.

Securities regulators in Ontario and the United States are accusing Cartu and his two younger brothers of enriching themselves through an illegal online stock trading scheme run from an office in Israel.

U.S. officials allege the Cartus ran a “massive fraudulent” trading operation between 2013 and 2017 that could have funded Cartu’s lavish lifestyle through multi-million-dollar transfers to off-shore bank accounts in the Caribbean.

Regulators accuse the Cartu brothers of selling risky “binary options,” effectively bets on the future direction of a publicly traded stock’s price. The bets are all-or-nothing propositions. Guess correctly which way a stock will go and the investment pays out in full. Guess wrong and it’s gone.

Investors were apparently recruited online and offered returns of “between 60-85%” but most lost money.

The case was up for a hearing before the Ontario Securities Commission last week, which last year brought a civil enforcement action against Josh Cartu and his brothers Jonathan Cartu and David Cartu, claiming they illegally sold binary options to about 700 Ontario investors.

U.S. regulators allege the Cartus’ companies misrepresented the results of the trades and wouldn’t refund investors when they asked for their money back.

One of the alleged victims is a Barrie, Ont., man who works as a controller for a power utility. He swore an affidavit saying he had invested $628,000 through one of the Cartu companies and was unable to recover any of it. He stated that “this was a devastating loss as it represented virtually all of my retirement savings,” he said in the statement.

David Cartu has since settled with the OSC and is no longer part of the legal action but is still being sued in the U.S. and Ireland.

Josh Cartu, 42, which is the eldest brother was dropped as a client by the Toronto office of law firm Dentons in the OSC case. In January the firm said to the commission that he hadn’t paid his legal fees and that they had been unable to get instructions from him.

WHERE IS JOSH CARTU?

Finding Josh Cartu location has also been difficult for the Commodity Futures Trading Commission in the U.S., where he and his brothers face allegations involving many more investors from all over the world.

The Cartu brothers, a Texas man and two other Canadian brothers — Leeav Peretz and Nati Peretz, from Windsor, Ont., but now in Israel — are accused of securities violations involving companies that took in US$165 million in credit card payments from investors.

“These brokers also falsely claimed that the offered binary option transactions were profitable, when the majority of customers lost money,” the CFTC said in a statement, alleging the companies “manipulated the results of some trades to force customer losses and generate profits for themselves.”

None of the allegations have been proven in Texas court.

Josh Cartu did not respond to requests for an interview, and the U.S. lawyer representing the siblings declined a request from CTV News for comment.

In May, David Cartu did participate through legal counsel in the OSC case and agreed to a settlement in which he admitted breaching Ontario securities law. He will pay $315,000 in penalties and fees — a small amount of the money U.S. regulators say he received from their online operations.

OSC investigators said they were satisfied that David Cartu “was not the principal actor in the binary options trading program and did not induce the investors to enter into the trades.”

In a 2018 interview about his racing career, Cartu described himself as “a nerd. ” He said he was a poor student growing up and had an interest in computers. Catru used to run a bulletin board system and worked washing cars and later as a salesman at a Honda dealership.

It is unclear how Cartu got into selling operations, but in 2008, he was hired as CEO of a small online gaming company called Dice Partners, incorporated in Panama. The company operated in a grey area of law that prohibited gambling sites run from the U.S. Cartu helped set up the gaming platform overseas. Two investors in Wyoming sued Cartu, alleging he had gained control of the company’s websites and transferred US$10 million of its money to his own bank accounts.

Cartu denied all the allegations in the lawsuit and said had never even been to Wyoming. The Egans’ lawsuit was dismissed in 2013 at his request after the court found it didn’t have jurisdiction over a non-resident, as Cartu was a resident is Israel.

One of the investors went to the FBI but the bureau wasn’t interested in a dispute involving a business that operated on the margins of U.S. law.

CTV News reported that “online gambling appears to have springboarded Cartu into new ventures. According to the complaint filed by the U.S. CFTC, one of the online options trading companies, BeeOptions, began operating in 2013 out of the conference room in the office of a gaming company run by Josh and David. The commission says the Cartu brothers also ran a network of other companies, Rumelia Capital and Glenridge Capital— apparently named for the St. Catharines neighbourhood where their parents still live.”

The companies apparently made email solicitations to investors for binary options trades with the promise of exceptional returns.

The trades were pitched by Glenridge CEO “Vincent Glenn,” who the CFCT believes is an entirely fictional person. Jonathan Cartu, they allege, used the alias “Jon Cartier” when contacting investors.

A elderly man from Orangeville, Ont.-area told CTV News he started investing small amounts, but then was encouraged to keep putting in more money, and was offered bonuses to keep investing. The man tried but could never pull the money out, eventually losing nearly $30,000.

The victim said “I’m not loaded, it was a lot of money,” and “I was stupid. I was taken.”

The man is now one of 35 investors from around the world who are suing over the trades in Ireland.

The Cartu brothers’ business, according to the CFTC complaint, was highly lucrative. Josh and Jonathan each transferred US$9.2 million in profits from these companies to offshore accounts. Apparently, Josh’s money went to a company set up in Belize; Jonathan’s to the Seychelles; while David received US$4.9 million through a corporation in the British Virgin Islands and another US$4.1 million via a U.K. corporation.

Cartu’s dashing online presence has made him an ideal for motor sports enthusiasts and the financial press. He has been displayed on Forbes and Huffington Post, described as a millionaire race car driver, entrepreneur and branding and marketing expert.

Media coverage has been less favourable in Israel, where binary options schemes flourished until regulators began to crack down in 2016. Cartu and his brothers have been included in the Times of Israel’s “Wolves of Tel Aviv” investigation into binary trading boiler rooms.

CTV’s W5 reported that hundreds of Canadians had been gulled by binary trading schemes run from Israel, including an Edmonton man who committed suicide after losing $300,000 to a firm called 23Trading.

Whatever the outcome of the U.S. case, the Cartus face only potential monetary penalties, unless the allegations are escalated to the U.S. Department of Justice for criminal investigation. The Ontario Securities Commission cannot bring criminal charges, either — only fines and prohibitions on future trading.

But if the Cartus are found in violation of securities law, the agencies could possibly take steps to freeze assets they hold in Canada or the U.S. It is unclear whether any money will ever be recovered from Josh Cartu or his brothers, whose whereabouts are uncertain.

Although the whereabouts of Josh Cartu and his brothers are unknown, the CFTC believes Josh is currently living in Budapest or possibly somewhere in Russia and Jonathan is in either Israel or Russia.

David Cartu is still listed as a director of a Canadian corporation he registered in 2019. The current owner his old property told CTV News she believes Cartu and his wife moved to the republic of Georgia, located at the intersection of eastern Europe and western Asia.

The Cartus’ father also claims he doesn’t know where his sons are located.

“I have no idea,” said Lazar Cartu at the door of his St. Catharines home on Monday. He declined to comment on the allegations against them.

Their father said “you can do your investigation.”

This article was originally sourced by CTV News.