GREENBELT, Maryland — In tearful testimony before a US court last week, convicted American-Israeli binary options fraudster Liora Welles said that when she first took a job selling binary options “I didn’t know the magnitude of this thing. If I could take it all back I would.”
Welles pleaded guilty to conspiracy to commit wire fraud in December 2018, and as part of her plea deal agreed to cooperate with US prosecutors and to testify at court proceedings or trials on the government’s behalf. On July 22 and 23, Welles testified on behalf of the prosecution at the trial of Yukom Communications CEO Lee Elbaz, who was indicted by a US federal grand jury in March 2018 for allegedly participating in a $145 million scheme to “defraud investors in the United States and across the world.”
Elbaz had been Welles’ boss. Welles and Elbaz are two of 15 Israeli binary options operatives who have been indicted in the United States in connection with the allegedly fraudulent websites BigOption.com and BinaryBook.com. Five have pleaded guilty, Elbaz is on trial, and a further nine were indicted in February, with six of those names under seal.
During her testimony last week, Welles expressed regret about her activities at the company.
“It took me a long time to realize what I did,” she said.
Welles, a graduate of the Interdisciplinary Center in Herzliya — an elite college many of whose students and graduates worked in the binary options industry — was a sales representative for BinaryBook and BigOption from September 2014 through August 2016.
Welles testified during the trial that her job involved getting clients to deposit as much money as possible into a trading account, getting them to trade and lose money, and using multiple pretexts to prevent client withdrawals — thereby earning money for the company and herself. According to the indictment against her, she was directly responsible for approximately $2,395,310 in investor losses.
During the trial, which is expected to run through August 2, Welles testified that she lied and misled clients to earn this money — and did so under the direction of the defendant, Elbaz.
Elbaz instructed her to “fight them like a lioness” when clients requested withdrawals, Welles testified.
When asked by Department of Justice attorney Rush Atkinson what she thought this phrase meant, Welles replied, “it meant do what you’re good at: save the withdrawals.”
‘I’m taking responsibility for what I did’
Elbaz’s defense lawyer, Barry Pollack, depicted Welles as a skilled liar and manipulator who was fingering her former boss, Elbaz, in an effort to get a lighter sentence.
”You committed a lot of fraud at Yukom. You pled guilty. You are looking at a lot of jail time,” he said. “The offense you pled guilty to carried a maximum sentence of five years. The government could have charged you with wire fraud for a sentence of 20 years. If the government likes what they hear, it’s up to them to decide whether or not to make a motion [to lighten your sentence].”
“It’s not about liking,” Welles countered, “it’s about me cooperating and telling the truth.”
“You were a very good salesperson at Yukom; you were good at lying to people?” Pollack suggested.
“Mr. Pollack, that was part of the job,” she replied.
“And you were good at it?”
“I’m taking responsibility, I’m here, aren’t I?” said Welles.
“Telling people what they want to hear is part of being a salesperson,” said Pollack. “And these are the people that you most need to sell?” he asked, gesturing towards the prosecution attorneys.
“I had a choice to come back here. I came back and took responsibility. I knew I might be charged,” she said.
“If you had stayed in Israel you could have been extradited?” suggested Pollack.
“I don’t know,” said Welles, “I hear the laws of extradition are pretty hard.”
“Do you hope to get a lighter sentence?” asked Pollack.
“Yes, I hope to get a lighter sentence.”
‘Was it scary being stopped by the FBI?’
Pollack also pointed out inconsistencies between Welles’ initial statements to the FBI, when she was stopped at the airport in 2017 and her later guilty plea.
“On September 18, 2017 when you met with representatives of the FBI, you told them you did not know if BinaryBook.com was affiliated with Yukom?” asked Pollack.
“I was stopped on an airplane with my sister, I hadn’t worked there for a while,” she replied.
“Was it scary being stopped by the FBI?”
“Of course,” replied Welles.
“When customers [of BinaryBook and BigOption] lost, the reason they lost is because they traded compulsively like gamblers?’ he asked her.
“No,” she said. “They lost because they were promised high returns and weren’t delivered that.”
“When you met with the FBI you said it was because they traded impulsively?”
“I was without a lawyer at the time and didn’t know what to say,” Welles said.
“Did you say that most clients lost money by trading impulsively?” Pollack asked, adding “Do you know it’s a federal offense to lie [to the FBI]?”
“I don’t remember,” she replied. “I was so nervous, I had no attorney at the time. I was panicking.”
‘When the FBI stopped you, you were hoping to convince them you had done nothing wrong and they should let you go?” Pollack asked at another point in the cross-examination.
“I didn’t know I did something that wrong. When it hit me in the face I realized how bad it was.”
‘Shut up and take my money’
Welles began working at Yukom Communications in 2014 after having been a successful salesperson for a company called Binary Call Center Ltd.
On July 22, the prosecution played a video recording from a Yukom Communications holiday celebration in late 2014, attended by Welles, at which which Lee Elbaz congratulated the staff.
“We earned $3 million gross and $2.5 million in net deposits this month,” Elbaz said in the video. “Congratulations. I appreciate all your hard work. Have a wonderful New Year. Together we are stronger and better,” she announced, and gave the entire staff a day off to express her appreciation.
Welles told the court that the video had been taken at the company’s old office in Caesarea, before the company expanded and outgrew it. She said that the $2.5 million netted that month constituted investor deposits minus withdrawals, and that the company made money when clients deposited money but did not withdraw it.
She said that the old Yukom office had a sign on the wall that said “Shut up and take my money!” as well as a poster from the movie “The Wolf of Wall Street.”
“The movie was idolized around the office,” Welles said, adding that her boss, Elbaz, had not seemed to object to either poster.
During her testimony, Welles mentioned the names of several colleagues, many of whom used pseudonyms and developed fake biographies which they used when talking to clients over the phone.
All sales agents claimed to have expertise in the stock market and financial trading, she said, and they claimed to be calling from London, as opposed to Israel.
Among the colleagues mentioned by Welles were Dave Barzilai, Guy Harel, Afik Tori, Ronen Roitman, Natalie Smith, Sabrina Olipher and a woman who used the pseudonym Jessica Giovanni and whose real name was “Hadas something,” according to Welles.
Welles’ fake name was Lindsay. She went by the names Lindsay Taylor, Lindsay Cole or Lindsay Wells.
“The fake name made it easier to lie. I left my conscience at home and went to the office and was someone completely different,” she told the court.
Welles described how she and other sales agents would frequently give clients a “bonus,” whose primary purpose, she said, was to “lock in the client’s money.” This was because clients who were given a bonus could not withdraw money from their accounts unless they had made a very large volume of trades.
In March or April of 2016, her bosses Lee Elbaz and Yukom owner Yossi Herzog asked her to sign a “code of ethics,” she said.
But Welles said she believed this “code of ethics” to be a joke, and that very little changed around the office after employees had signed it, with the exception that they were no longer allowed to make trades on behalf of clients.
Pollack showed Welles an email that had been sent to employees by management.
“We all have goals to reach but naturally not at all costs,” it read. “We are a company that works towards being clean and orderly. We do not charge clients credit cards without their approval and we do not charge by making false promises.”
“Did Yossi Herzog tell people to work clean?” Pollack asked Welles.
“The company’s definition of clean is not Webster’s definition of clean,” she replied. “The company had its own internal dictionary. It meant work convincingly and manipulatively,” she said. “It meant telling better, more convincing lies.”
Binary options fraud flourished in Israel for about a decade before the entire industry was outlawed via Knesset legislation, in October 2017, largely as a result of investigative reporting by The Times of Israel that began with a March 2016 article entitled “The wolves of Tel Aviv.” At its height, hundreds of companies in Israel were engaged in the widely fraudulent industry.
Despite the fact that thousands of Israelis were employed in the binary options industry, Israeli prosecutors have to date only indicted three, for their role in a separate alleged fraud.
In a “trial brief” filed shortly before the Elbaz trial began, the US government set out how binary options fraud was generally perpetrated, describing how victims were approached, lured in, lied to, encouraged to make ever-greater deposits, and thwarted if and when they tried to withdraw their money. Setting out in detail the means by which Elbaz allegedly fleeced her victims, the prosecution document constitutes a devastating insight into the cynical practices by which the fraudulent industry stole immense amounts of money from trusting victims around the world. The document confirms on behalf of the US government much of the reporting by The Times of Israel over the past three-and-a-half years, regarding the methods by which binary options fraudsters duped their victims.
The trial continues. Elbaz denies the allegations against her.
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