Three months after its owner pleaded guilty to fraud in the United States, Wealth Recovery International’s Israel office has shut down, several former employees told The Times of Israel.
Wealth Recovery International was one of several Israeli companies that offered to recover money on behalf of victims of binary options fraud in exchange for an upfront fee plus a percentage of the recovered. On Wednesday, Wealth Recovery’s workforce, which numbered over 20 individuals, were told that the company was shutting down and that they would not be paid for their last month of work, leaving the fate of the company’s thousands of global clients uncertain.
In March, Wealth Recovery’s owner Austin Smith (who also goes by the name Avi Smith) pleaded guilty in the United States to conspiracy to commit wire fraud in connection with his earlier employment as a salesperson for the binary options brands BigOption and BinaryBook, as well as some of his activity at Wealth Recovery International. Smith was released to his parents’ custody on $300,000 bail and will be sentenced on September 3, 2019.
The Justice Department’s charges against Smith largely pertain to the period from August 2015 to January 2016, when he was employed in the binary options industry. Smith made no secret of having worked in the industry and told clients of Wealth Recovery International that he had had a change of heart and was now devoted to helping victims of fraud recover their money.
But the Justice Department also accused Smith of, on at least one occasion, earning a hefty commission from a client he had previously personally participated in defrauding.
According to a court filing, Smith obtained $125,000 in fees and commissions for the services of Wealth Recovery International from at least one client whom he had directly defrauded when he was an employee at BinaryBook. Smith did not disclose to this client that he was one of the people who had earlier defrauded him.
In March, Wealth Recovery’s then-in-house attorney Tammi Hamm told The Times of Israel that Wealth Recovery International has recovered $8.5 million for clients and that a large percentage of the company’s clients were satisfied.
Former employees of the company told The Times of Israel that only a minority of clients received their funds back, and that the company’s work was made harder by the lax law enforcement environment in Israel.
“The binary options company owners weren’t really afraid of Israeli law enforcement,” an ex-employee said, “so we didn’t really have any levers to pressure them with. They might agree to give someone their money back once or twice, but after that it would stop working.”
According to its website, which is still online, Wealth Recovery International has a second office in New York. The Wealth Recovery International trademark was registered to Emilie Smith, Austin Smith’s mother.
A binary option is an option contract whose payoff depends on the price of another asset, like gold, wheat, or Apple stocks. If the holder of the option guesses correctly about the direction that the price has moved at the time of expiry, he earns a predetermined amount of money, and if not he loses the money “invested” in a particular trade.
In the case of the Israeli binary options industry, however, companies offering these contracts were almost without exception fraudulent. They would dupe victims worldwide into believing that they were successfully investing and earning money, encouraging them to deposit more and more into their accounts, until the company eventually cut off contact with the investors and disappeared with all or almost all of their money.
At its peak, the Israeli industry consisted of hundreds of companies, employing thousands of Israelis, duping vast numbers of victims worldwide out of billions of dollars.
The Knesset finally outlawed the binary options industry in October 2017, largely as a consequence of relentless reporting about the fraudulent industry by The Times of Israel. However, some companies continue to operate after the ban, selling fraudulent cryptocurrencies, forex or other products. While more than 10,000 Israelis are believed to have been involved in this criminal activity, Israeli authorities have prosecuted only three of them.