At least 12 under criminal investigation for binary options, forex fraud

As a bill that would ban the entire binary options industry makes its way through the Knesset, The Times of Israel has learned that at least 12 binary options company owners and employees are under police investigation or have been referred to the state prosecutor with a recommendation for indictment.

Among these, the state prosecutor said, are the owner and three senior employees of a group of forex and binary options firms it is currently deciding whether to indict for fraud, breach of trust, money laundering and other charges.

Aviv Talmor and his three former employees, Rafi Bar-Lev, Sagi Stambolsky and Ehud (Udi) Shaham, were the owner and senior staff of Utrade Premium Ltd., a forex company that targeted Israeli clients. Talmor also operated the forex and binary options sites CapitalOption, SkyFX, Forex TG Pty Ltd (FXTG), Algobank, PlusFN, OneBinary, OptioNow, Zluti Marketing and affiliatekey.com. Israel Securities Authority Chairman Shmuel Hauser recommended in April that Talmor and his three former employees be indicted, and the state prosecutor is still weighing whether to go ahead with an indictment.

Law enforcement sources told The Times of Israel earlier this month that investigations are ongoing into two additional cases.

One is that of Eliran Saada, who was arrested on May 16 for aggravated fraud, misrepresentation, false accounting, forgery, extortion and blackmail in connection with his operation of the websites InsideOption, SecuredOptions and OptionChase.

The second case is that of Ido Fishman and six of his former employees, Daniel Swartz, Naor Noah, Jonathan Tourjman, Itzhak Babler, Itam Durab and Maor Jerby, all of whom were arrested last November by the Israeli Securities Authority on suspicions of aggravated fraud and providing investment advice without a license. These seven men were associated with the Itrader.co.il website, which offered forex and binary options trading to Israelis. Itrader has shared an office and employees with the company that operates the FMTrader.com website, which targets investors globally.

If any of these 12 men is indicted, it would be one of the first instances, after more than 10 years of a metastasizing fraud, that the owner of an allegedly fraudulent forex or binary options firm is put on criminal trial in Israel, not for tax evasion or a crime that is ancillary to their business activity, but for securities fraud.

Talmor, Bar-Lev, Stambolsky and Shaham were the owner and senior employees of Utrade Premium Ltd., a forex company that targeted Israeli clients and promised outsize returns on their investments through the use of a sophisticated “trading robot,” or algorithm that would trade on behalf of clients and supposedly had the power to beat the market. The company was established in 2007 and operated until late 2015, when, due to mounting complaints from allegedly defrauded Israeli investors, the Israel Securities Authority ordered the company to cease operations.

In an April 18 press release announcing the recommendation for indictment, the Israel Securities Authority stated: “There is a sufficient evidentiary basis that the central suspect and the three additional involved parties committed securities violations and other crimes, including fraud, making false claims in corporate documents, violations of corporate manager and employee law, breach of trust, money laundering, managing investment portfolios without a license, failure to comply with the demands of the Israel Securities Authority and obstruction of judicial proceedings.”

According to the ISA, in 2012-2015 Utrade raised $27 million in investments from 604 Israeli investors. This was done in a way that “deceived investors through misrepresentation, falsifications, and manipulative and aggressive sales practices.”

According to the ISA’s investigation, Talmor appropriated millions of dollars of investors’ money for personal use, including for his other businesses, and did so using front men to disguise his involvement.

In addition, the ISA alleges, Talmor and his senior managers and employees worked to hide evidence and obstruct the investigation against them after it had begun.

The Times of Israel asked all 12 men for a response to the allegations.

Moshe Mazor, a lawyer for Stambolsky, responded: “To the best of our knowledge, and after checking, the state prosecutor has not yet decided to indict Mr. Stambolsky, and Mr. Stambolsky has not even been summoned for a hearing in the matter. We believe that after the state prosecutor examines the case, it will be shelved.”

Moran Bickel, a lawyer for Bar-Lev, Fishman, Swartz, Noah, Tourjman, Babler, Iam Durab and Jerby, responded with regards to all of his clients, “no comment.”

The Times of Israel began exposing the widely fraudulent industry in a March 2016 article entitled “The wolves of Tel Aviv: Israel’s vast, amoral binary options scam exposed.”

Fraudulent Israeli binary options companies ostensibly offer customers worldwide a potentially profitable short-term investment. But in reality — through rigged trading platforms, refusal to pay out, and other ruses — these companies fleece the vast majority of customers of most or all of their money. The fraudulent salespeople routinely conceal where they are located, misrepresent what they are selling, and use false identities.

A bill to ban Israel’s binary options industry is currently making its way through the Knesset, having passed a first reading last month. The proposed law would ban all binary options trading, period, and thus put a complete halt to the blight of Israeli binary options firms duping victims all over the world into parting with their money. (It also targets unregulated forex and CFD companies operating from Israel, requiring them to obtain a specific license to operate in any country where they have customers. Many such companies operating from Israel also engage in fraudulent practices.)

The law would give the ISA the authority to impose penalties of up to two years in prison to anyone who violates the ban.

The Israeli binary options industry has been estimated to bring in between $5 billion and $10 billion a year, to number well over 100 companies, and to employ between 5,000 and many tens of thousands of employees. In recent months, in anticipation of the proposed law, several binary options companies have shut down, while many have relocated their call centers abroad, including to Ukraine and elsewhere in Eastern Europe.

Although Utrade was a forex company, Talmor operated several binary options brands as well, and employees who worked for both considered the entire operation to be a single company, according to Utrade’s temporary receiver, highlighting the similarity between the fraudulent binary options industry and fraud in the forex industry.

Unlikely suspects?

One of the suspects in the Utrade case is Rafi Bar-Lev, the son of a former senior ranking police officer, Uri Bar-Lev, whose 2010 bid to become chief of the Israel Police was derailed by a sexual harassment scandal.

The Israel Securities Authority alleges that Rafi Bar-Lev was central to the fraud, encouraging large numbers of investors to trust the company with their money when he knew that the company’s promises were false.

Sources told The Times of Israel that Bar-Lev’s brother Yoni is an officer in the Israel Police anti-fraud unit. When the Israel Police was asked to confirm this, a spokesman responded, “Why do you need to know this?” and did not respond to further email inquiries.

Sagi Stambolski, similarly accused by the ISA of being central to the fraud, worked as “director of sales and client services” at Utrade from August 2013 to October 2015, according to his LinkedIn profile. Among the achievements he lists in that position are a “20% increase in revenues and upsurge in clients’ satisfaction levels” as well as “added record number of new customers.”

Ehud (Udi) Shaham was a third senior employee at the company.

Finally, Aviv Talmor, the owner of Utrade Premium, is a former poet, filmmaker, teacher and mentor for at-risk youth who became frustrated by his penniless lifestyle, according to a profile in the Hebrew business daily Globes, and launched a new career as a forex and binary options entrepreneur.

In 2012, he released a film, “I am Bialik,” a mockumentary that won the fringe award at the Haifa Film Festival. It was about a frustrated poet and teacher named Aviv Talmor whose father had disowned him and cut him out of his will. The movie documents Aviv Talmor’s quest for a father figure through an obsession with the Israeli poet Haim Nahman Bialik. The film took Talmor 12 years to make, and during this period, in 2008, he changed the name of his film production company “Albatross Productions,” first to “Albatross Ventures” and then to “Utrade Premium Ltd.”

According to the Globes profile, around this time Talmor did actually manage to find a father figure, in the form of a mentor who was teaching him to make money in the world of finance.

“I started to hear that he had an economic mentor, a kind of life coach,” an actor who had played a key role Talmor’s film told Globes. “It was after we had shot the film but before it came out. He started sending everyone invitations to meet with the coach. I didn’t really talk to him about it but I heard that he was making money.”

The actor recalled how a few years later, Talmor and his wife had a baby. “He seemed to be successful, happy, on the winning side of life. I was happy for him.”

The actor did not know the identity of Talmor’s new mentor. Court documents in the numerous lawsuits since filed against Utrade Premium Ltd. offer some possible hints.

They reveal that Talmor spent time working as a salesman at Forex Place, a now-defunct forex company, many of whose former employees went on to launch their own binary options brands.

Another company owned by Talmor, called Utrade Global Markets, was founded in February 2012 and seemed to provide marketing services for Utrade Premium. The company, which is still registered in the Israeli corporate registry, is jointly owned by Talmor and Chen Malka, a binary options entrepreneur associated with the brands IntegraOption, Tradesolid and SolidCFD.

Meanwhile, Talmor owned yet another company called Binary Call Center Ltd, founded in 2013, which, according to a January 2016 motion filed by the temporary receiver of Utrade Premium, operated a number of brands that targeted investors all over the world.

These included CapitalOption, SkyFX, Forex TG Pty Ltd (FXTG), Algobank, PlusFN, OneBinary, OptioNow, Zluti Marketing and affiliatekey.com. According to the temporary receiver, all the brands operated as a single company, and employees of Utrade Premium worked for other brands as well. Much of the money allegedly stolen by Utrade Premium was pumped into Binary Call Center to finance its activities, the receiver said.

In April 2016, Cysec, the Cyprus Securities and Exchange Commission, rescinded its license for Capital Option and SkyFX. In 2015, Japan’s Financial Services Agency (FSA) placed FXTG on an investor warning list of companies offering investment services without being registered in Japan.

Binary Call Center Ltd. the Israeli company that operated all the above-mentioned brands, was not founded by Talmor. According to Israel’s corporate registry, Binary Call Center was founded in March 2013 by Leon Okun, a shareholder at the time of SpotOption, the binary options platform company.

On July 19, 2017 Okun wrote to The Times of Israel in response to this article, as follows: “Though it is true I was among the incorporators of this company, it is also true that I sold my shares in it a month after its incorporation and before it carried out any business activities. Moreover I was not a director of SpotOption and I left SpotOption about six months later –almost four years ago!”

“Therefore,” he continued, “your mentioning of my short lived and expired association with this company has no relevance to the article.”

According to Israel’s corporate registry, Okun transferred his shares in Binary Call Center on August 6, 2013. He remained a shareholder at SpotOption until at least April 2015, according to corporate documents.

It is not immediately clear why — given that Utrade Premium would appear to have been just one company in a larger, international operation, and that the $27 million Utrade allegedly stole from Israeli investors is a very small proportion of a scam that law enforcement agents outside Israel estimated brings in as much as $10 billion a year — the ISA focused its investigation on one part of one individual’s forex and binary options operation.

There have been hundreds of other owners and senior managers of allegedly fraudulent binary options and forex companies. Even within Utrade Premium itself, it is not clear why the ISA recommended indictments against the employees it did, as opposed to other individuals in the company.

A spokeswoman for the Israel Securities Authority said she did not know the answer to these questions and would check, but added that the ISA’s recent recommendations for indictment do not preclude future recommendations against other individuals involved with this or other companies.

Nimrod Assif, a lawyer for victims of forex and binary options fraud, who has long been critical of the ISA’s inaction against forex and binary options fraud carried out from Israel, told The Times of Israel he was not impressed.

“The ISA’s decision to enforce the law against this one trading platform is too little too late,” he said.

“The conduct that Utrade engaged in, as the ISA alleges, is no different from what many other forex and binary options companies in Israel have been doing. Among other things, unlicensed provision of financial advice and portfolio management has been pretty much the standard in the Israeli forex and binary options industries. The ISA has even been presented with clear evidence showing that, but, unfortunately, it decided to stay on the sidelines for many years, allowing the illegality to reach an enormous size.”

Police ‘still investigating’ SecuredOptions boss

Last month, in a move that indicated the Israel Police had finally begun to tackle the multi-billion dollar global fraud, Eliran Saada, the Tel Aviv owner of a fraudulent binary options firm, was arrested on suspicion of aggravated fraud, misrepresentation, false accounting, forgery, extortion and blackmail.

A police source told The Times of Israel that Saada has since been released from custody but that the investigation against him and against his company, Express Target Marketing, which ran the InsideOption and SecuredOptions websites, is ongoing. Both InsideOption.com and SecuredOptions.com are no longer operational, but a third website owned by the same offshore company, OptionChase.com, is still up and running.

Last November, the Israel Securities Authority carried out a raid and arrested the director and six employees of itrader.co.il. The Israel Securities Authority told The Times of Israel last week that the investigation into itrader is ongoing.

ITrader “is essentially a well-oiled machine of fraud and exploitation of customers,” attorney Eran Shacham-Shavit, the deputy counsel of the ISA’s investigations department, told the Tel Aviv Magistrate’s Court in November.

Speaking at a November 9 hearing for the suspects’ release under restrictive conditions, he added, “Customers did not understand what they were investing in, and believed the falsehoods presented to them by employees of the company, who presented themselves as trading coaches and knew exactly what deceptive things to say to get customers to fork over more money.”

Itrader.co.il is owned by an Israeli company called Gal Media Trade Ltd. Ido Fishman is the director of the company and the company is owned in trust for an unidentified owner. Until April 2013, itrader.co.il was operated by an Israel company called 24 Group Ltd., founded jointly by Ido Fishman and Lee Hayun. Lee Hayun is the wife of Roey Hayun, who is currently serving a prison sentence for money laundering and running illegal gambling establishments in Israel. He is also the founder of 24option.com. His current jail sentence is not directly connected to his binary options activity.

Hayun’s name appeared in the Panamanian press in November 2016, when the Panamanian public minister opened an inquiry into a Panamanian investment firm called “Principia Financial Group” for alleged securities violations. According to Panamanian government documents, Principia Financial Group operated a call center that was promoting the websites markets.com, traders.com and 24option.com to Spanish-speaking investors. La Estrella Panama reported in November 2016 that Roey Hayun was one of the investors in the company, and also alleged that Erez Navon, the son of Israel’s former president Yitzhak Navon, was an investor in the Principia Financial Group.