An Israeli citizen has been arrested in Bulgaria and is awaiting extradition to Austria in connection with an alleged online financial scam believed to have netted more than 100 million euros per year.
Austria’s Interior Ministry announced last week that a joint Austrian-German investigation had busted a transnational organized criminal group operating out of Bulgaria and the Czech Republic. The group allegedly defrauded thousands of Europeans, including Austrians and Germans, out of large sums of money through online trading platforms for binary options, forex, cryptocurrencies and other financial products.
The Sofia Globe and other Bulgarian media outlets have reported that the Israeli national awaiting extradition is Gal Barak, an Israeli call center manager living in Bulgaria. Barak was a director of, among other companies, E&G Finances, a call center in Bulgaria that operated online trading sites including Optionstars. Most of the employees of the call center were Bulgarian but the managers were Israeli, a source told The Times of Israel.
The Sofia Globe reported that Barak was apprehended as he attempted to cross the border into Serbia last month.
Neither the Austrian police nor the Israeli Justice Ministry would confirm that Barak was the detained Israeli suspect, with the Justice Ministry saying Sunday that “we have no comment since we are not a party to the extradition proceedings.”
In a February 26 press release (German) detailing the arrest, the Austrian Interior Ministry described shady methods identical to those employed in Israel’s binary options industry. The binary options industry employed thousands of Israelis and stole billions from victims around the world before it was outlawed by Israel in October 2017.
According to the Austrian press release, victims were allegedly contacted via social media, via mass emails or by call center agents and encouraged to deposit money with an online trading website. They were told they could earn high returns in a short period of time and reassured that there was little risk of loss. After making an initial deposit, victims would appear to be making money on their trades, and be encouraged by call center agents to deposit more and more money. Eventually the investor would lose all of their money and that money would then be laundered through an elaborate network of shell companies in different jurisdictions. Austrian authorities said they saw no evidence that the alleged fraudsters kept any money in reserve to pay out to investors who had ostensibly earned money by trading.
Furthermore, the alleged offenders used software that could influence the outcome of trades. They also created a vast network of companies that carried out discrete tasks like marketing, call center operation, software development or money laundering. In reality all the companies were controlled by the same leadership, the Austrian authorities said.
More than ten thousand Israelis worked in the binary options industry at its peak. Even before the Israeli ban, call centers hawking financial products run by Israelis had been expanding to countries abroad including Bulgaria, Romania, Serbia, Albania, Panama, and Cyprus. Israel has to date prosecuted three alleged fraudsters, but others have been arrested while traveling abroad in the United States, the Philippines and elsewhere.
In the initial stage of the most recent criminal bust, Austrian and German police cooperated with their Bulgarian counterparts to raid 21 companies and four private homes, and freeze 14 bank accounts, between January 28 and February 1. Raids were conducted against the trading websites XTraderFX, Optionstars, OptionstarsGlobal, Goldenmarkets, SafeMarkets, Cryptopoint and others.
Austrian authorities said that these brands netted at least 66 million euros but added that “it is assumed that these sums will increase many times after accurate analysis of the seized data.”
Barak, the reported suspect in the police raids, incorporated a company called Gal Barak Solutions in Israel in January 2015. Later that year it changed ownership and changed its name to Itzik Gellet Solutions. People familiar with the company told The Times of Israel the company operated a binary options call center at Allenby 103 in Tel Aviv, two blocks from the offices of the Israel Securities Authority.
It is unclear how long Barak and Gellet were in the binary options business and what position they occupied in the hierarchy of the spider’s web of transnational shell companies now being investigated by Austrian and German authorities. A 2011 article in the Israeli newspaper Makor Rishon described (Hebrew) Barak as the co-owner of a modest grocery store in Herzliya, while Itzik Gellet, a partner in some of Barak’s later Bulgarian ventures, was an employee of the same grocery store.
All of the websites mentioned by the Austrian authorities used software provided by Tradologic, a binary options platform that was founded in Israel in 2009 and later moved a significant portion of its operations to Bulgaria.
The Times of Israel has reached out to Gal Barak for his response.