LAS VEGAS (CN) – Cyprus-based Banc de Binary will pay $11 million to settle federal charges of illegally selling binary options, the SEC said.

Banc de Binary , its founder Oren Shabat Laurent , and affiliates agreed to jointly pay $7.1 million in disgorgement and $1.95 million in penalties to the SEC, and $2 million in penalties to the Commodity Futures Trading Commission to settle an identical complaint.

Five million dollars will go into a restitution fund, or ” Fair Fund ,” to compensate investors.

The co-defendant affiliates are ET Binary Options, BO Systems Ltd. Seychelles, and BDB Services Seychelles.

The National Futures Association will administer the Fair Fund. Banc de Binary et al. also agreed to a one-year suspension from the securities industry and a permanent ban against issuing penny stock offerings.

U.S. District Judge Robert C. Jones approved the settlement on Monday and ordered the creation of the Fair Fund.

The SEC in 2013 accused Banc de Binary of selling the binary options without being licensed to do so. It says Banc de Binary “broadly solicited” U.S. customers via online advertising, YouTube and emails, spoke directly to them over the phone, and acted as a securities broker without registering with the SEC.

Binary options are the securities equivalent of a proposition wager, in which the investor chooses whether he or she believes an asset will be worth more or less than a particular value at a particular time. The investor makes money if he or she is correct about the price movement and could lose everything invested in the binary option if not.

Binary options sold outside the United States generally are structured differently than those sold on U.S. exchanges.