Israel Police arrested 20 people this week in conjunction with a global FBI sting against an international crime ring that has allegedly scammed tens of millions of dollars from individuals and companies over the Internet.
Among those detained on March 1 were Harry Meir Amar of Netanya, Shimon Ben Shitrit of Ashdod, Tamzi Bebershvili of Netanya, Ori Saadon of Beit Shemesh, Stanislav Nazarov of Or Akiva, Timur Kardanov of Netanya, Rabia Abdel Hai of Tira, Ahmad Abu Naji of Nazareth, Husam Hariri of Umm el-Fahm and Moshe Hazan of Ramat Gan.
They are suspected, variously, of fraud, aggravated fraud, conspiring to commit crimes, threats, extortion, money laundering and running a criminal organization.
The arrests are part of an ongoing investigation by police fraud officers, in conjunction with the FBI, that the Israel Police has dubbed “Case 278: Social Engineering.”
In the information security world, the term “social engineering,” refers to the psychological manipulation of people into performing actions or giving away secret information. The suspects allegedly approached companies, including insurance companies, banks and pension funds abroad, and impersonated senior executives of those companies. They spoke to mid-level employees of the companies and led them to believe they were being entrusted to handle a large financial transaction on behalf of the company, but one that had to be treated with the utmost secrecy. The mid-level employees were then instructed to wire money from the company’s corporate bank accounts to bank accounts controlled by the alleged fraudsters.
This money was then rapidly wired to bank accounts in China and elsewhere, and then transferred on to the alleged fraudsters and their co-conspirators. Among the organizations targeted, according to Israel Police, were companies in Poland, Finland, India, France and the United States.
According to Israel Police, the alleged fraudsters hired the Israeli-Arab Hariri crime organization, one of Israel’s most powerful and dangerous organized crime groups, to provide protection through the use of threats and extortion, in exchange for a percentage of the proceeds. Police seized luxury cars, cash and documents during the raids, which took place at multiple locations throughout Israel.
Later the same day, police also arrested Meir Cohen, a business owner from Modiin, as well as Swiss citizen and Tel Aviv resident Jonathan Maman. Both were arrested for alleged Internet fraud through impersonation, although the court protocols do not indicate if these arrests were connected to Case 278 or relate to a separate investigation.
Two of the suspects arrested on Wednesday, Harry Meir Amar and Shimon Ben Shitrit, had also been arrested by Israel Police in November 2016 as part of a crime ring of about 35 individuals who operated out of apartments in Ashdod, Netanya and Ashkelon. This ring allegedly committed a variety of scams against companies and individuals abroad, including selling fictitious products and services, fictitious diamonds, fraudulent binary options and forex investments, as well as what is popularly known as the “fake CEO scam,” a scam that involves impersonating the CEO of a company and asking an employee to wire money somewhere.
The CEO scam closely resembles what the Israel Police have dubbed “social engineering.” When asked if the arrests on Wednesday were connected to the arrests last November, however, an Israel Police spokeswoman told The Times of Israel that despite the fact that the two cases involve some of the same individuals and methods, they are separate.
In a press release dated March 1, Israel Police said that although the crime ring is international in scope, it is centered in Israel.
“These international fraudulent schemes involving social engineering are growing in scale and doing unprecedented damage to the reputation of Israel, which is perceived as a center that exports this kind of fraud,” the police warned. This kind of language echoes that now being used by the Israel Securities Authority to describe the vast, largely untackled binary options fraud that has flourished out of Israel for the past decade, involving over 100 firms fleecing victims worldwide out of tens of billions of dollars.
“That is why it is a priority of the Israeli police to tackle this phenomenon.”
Indeed, one of the individuals arrested in last November’s raids was Simon Dov Chikli, who together with his brother Gilbert pioneered the fake CEO scam more than 10 years ago. Both Chikli brothers were extradited to France in 2008 but later found their way back to Israel. Gilbert Chikli was tried in absentia and remains a wanted man in France, but lives freely in Israel, a situation that Israeli police have refused to explain, according to media reports.
In fact, Gilbert and his brother Simon were the subjects of a 2015 feature film in France, “Je Compte Sur Vous” (“Thank You for Calling” in English), which made many Jews worldwide uncomfortable, fearing it could stoke anti-Semitism with its portrayal of two French-Israeli fraudsters stealing from people in France while the Israeli police sat idly by.
Underlining the cooperation between the FBI and Israel Police, the US domestic intelligence agency announced on March 1 that it had indicted 19 individuals taking part in various international fraud and money laundering conspiracies, 16 of whom had been arrested overnight or that morning. The arrests, the FBI said, took place in New York and Los Angeles, as well as Hungary, Bulgaria, Germany, and Israel. Seven of these 19 individuals are Israeli, and three of them — Harry Amar, Ori Saadon and Stanislav Nazarov — are among the 20 suspects also listed as having been arrested by Israeli police.
In the FBI press release, the organization hinted that it does not limit its interest to criminals that target Americans, but seeks to crack down on anyone who uses US financial infrastructure to launder their funds.
“Transnational criminal organizations attempt to exploit financial institutions and money service businesses and their anti-money laundering programs by moving illicit funds obtained in various scams perpetrated against businesses and citizens across the United States and the world that use the financial infrastructure of the United States to launder their illicit proceeds,” the FBI press release said.
Four of the other Israelis named by the FBI as being detained are Itzhak Salama, 40, an Israeli-born resident of Los Angeles; Golan Chkechkov, 39, born in Israel and a resident of New York; Michael Admon, 50, born in Israel and a resident of New York, and Haviv Arazi, 27, a citizen of Israel and a resident of New York. They were indicted for running an unlicensed money transmitting network, or Hawala (an Arabic term), in the United States, Europe and Israel.
Hawala is a means of transferring money internationally without actually moving it, based on a trust system among brokers situated in different countries. Despite the fact that Hawala is an ancient practice rooted in mutual good faith, the system is often used by criminals who seek to launder money.
Another of those indicted by the FBI, Israeli citizen Stanislav Nazarov, was accused of generating “hundreds of thousands of dollars in proceeds from various fraudulent schemes and engaging in international money laundering.”
The FBI also unveiled indictments against eight Hungarians who sold fictitious vehicles over the Internet, as well as against Sabina Selimovic, a resident of Germany and citizen of Serbia, and Cristian Flamanzeanu aka “Christiano Flamanzeano,” 32, a resident and citizen of Romania. Selimovic and Flamanzeano are suspected of committing fake CEO fraud alongside Amar.
“These indictments and today’s arrests followed an international investigation into an interconnected web of money launderers, fraudsters and individuals that aided and abetted their criminal activities,” said US Attorney for the District of Columbia Channing D. Phillips. “The defendants in the cases being unsealed today are accused of taking part in schemes in the United States and abroad, costing victims millions of dollars. The investigation demonstrates the importance of international cooperation amongst law enforcement in combatting fraud and money laundering on a global basis.”
The ‘swindle of the century’
As The Times of Israel has reported, Israel has become a haven for criminals from abroad in recent years, particularly from France, many of whom commit Internet fraud and money laundering here. Last March, the Paris prosecutor estimated that French citizens had been defrauded to the tune of €4.5 billion ($4.8 billion) in the past six years, with much of this fraud emanating from Israel. A half billion euros of this fraud, according to French authorities, was due to the fake CEO scam and about €4 billion was due to binary options and forex fraud.
The FBI estimates that binary options fraudsters steal $10 billion annually from victims all over the world. Israeli Police have made almost no arrests in connection to binary options and forex, despite the fact that thousands of Israelis are employed in the widely fraudulent industry.
In a related development, on February 24, French magistrates referred two French-Israeli alleged masterminds of carbon-VAT fraud to French criminal court for trial, AFP reported. The two men, Cyril Astruc and Gregory Zaoui, along with 12 others, will soon face trial, despite the fact that six of the suspects are fugitives from French justice abroad.
Astruc and Zaoui are suspected of being behind a company called Crepuscule (or Twilight) which allegedly stole nearly €146 million ($155 million) of VAT taxes from the French government between April 2008 and March 2009.
The Crepuscule case is one of about 15 separate cases proceeding through the French justice system that are related to carbon-VAT fraud, which has been dubbed “the swindle of the century” in France.
In the years 2008 and 2009, multiple groups of fraudsters took advantage of differing tax rules in different EU countries to buy and sell carbon credits, or permission to emit carbon dioxide, on exchanges in Europe. The fraudsters would buy the credits in a country with no value-added tax, and quickly sell them in France or other countries that did charge VAT. Generally, merchants have 90 days to remit the VAT they collect to the French government. The fraudsters took advantage of this time window to divert the money offshore and transfer it through a series of shell companies until it effectively vanished.
The French government has estimated it lost €1.6 billion ($1.7 billion) in unpaid VAT taxes this way and the total loss to all European countries is estimated at between €5-10 billion.
According to Marius Christian-Frunza, a lecturer at the Sorbonne and author of the book “Fraud and Carbon Markets,” multiple organized criminal groups from throughout Europe mastermined and engaged in the fraud, each trying to get a piece of the action before European regulators figured out what was happening and shut it down in 2009. Thus Georgian-Russian mafia operating in Spain were likely involved, as were Russian mafia from St. Petersburg, and German, Polish, Bulgarian and other organized crime groups.
In France, where an estimated €1.6 billion was stolen, many of the suspects were French Jews who either had or later obtained Israeli citizenship. One such network, headed by Arnaud Mimran and Marco Mouly, stole €283 million in VAT taxes. Much of this crime, according to a Haaretz investigative report, was carried out from the perpetrators’ computers in offices in Tel Aviv.
Mimran and Mouly were each sentenced to eight years in prison by a French court last July. However, several of their co-conspirators were sentenced in absentia and are believed to be living freely in Israel.
In the transcript of Mimran’s first interrogation by French police in the case, he said explicitly that he financed Prime Minister Benjamin Netanyahu’s 2009 re-election campaign to the tune of $200,000. Netanyahu has said Mimran only gave him $40,000 in 2001. This claim is contradicted by the French police record.
Zaoui had fled France in 2014, lived for some time in Israel, and was arrested at the Paris airport in Roissy in March 2016. Zaoui is suspected of having set up and conducted the fraud on behalf of the Crepuscule company but the investigations do not show that he benefited from the fraud.
Cyril Astruc moved to Israel at some point in the last decade and bought real estate in Eilat and Herzliya. French judges claim that his real estate holdings in Israel may have been partially financed by carbon-VAT fraud. Astruc, who also goes by the name of Alex Khan, became very close to Israeli crime boss Amir Mulner during his time here, according to Israeli crime reporter Amir Zohar as well as documents from an Israeli criminal trial involving Astruc and members of Mulner’s crime organization.
According to French investigative magazine, Mediapart, some of the Crepuscule money went to offshore companies that are financially linked to the South American Sinaloa cartel and cocaine trafficking. The Sinaloa cartel in turn has been linked to the Lebanese terrorist group Hezbollah.
In addition, French authorities told The Times of Israel in May 2016 that there is overlap between the French-Israeli owners of fraudulent binary options and forex companies and some of the perpetrators of carbon-VAT scams. Several former employees of French-owned binary options companies in Israel told The Times of Israel that they were frequently paid in cash and that rumors were rife that carbon-VATproceeds were being “laundered” through binary options companies as well as through purchases of Israeli real estate.