Fraud trial of Lee Elbaz to enter third day of jury deliberations
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Fraud trial of Lee Elbaz to enter third day of jury deliberations

As the prosecution and defense await verdict, jury members ask for sticky notes, paper clips and a definition of ‘beyond a reasonable doubt’

Simona Weinglass is an investigative reporter at The Times of Israel.

Lee Elbaz arrives at federal court for jury selection in her trial in Greenbelt, Maryland, July 16, 2019. (AP Photo/Jose Luis Magana)
Lee Elbaz arrives at federal court for jury selection in her trial in Greenbelt, Maryland, July 16, 2019. (AP Photo/Jose Luis Magana)

GREENBELT, Maryland — The jury in the fraud trial of Israeli binary options operative Lee Elbaz ended deliberations after a second day on Friday without reaching a verdict, and asked to reconvene on Monday to continue its work.

Elbaz was indicted by a grand jury in March 2018 on three counts of wire fraud and one count of conspiracy to commit wire fraud in connection with her role as CEO of Yukom Communications, an Israeli call center that ran the binary options brands BigOption and BinaryBook, which together allegedly caused investor losses totaling $145 million.

The jury convened in a specially designated room where they discussed the case among themselves with the goal of arriving at a unanimous verdict. During their deliberations they communicated with the judge by means of paper notes. On Friday, the jury made a written request for sticky notes, paper clips, extra permanent markers, a whiteboard and speakers to listen to recordings. They also asked the judge for a precise definition of the term “reasonable doubt.”

Aside from these requests, no additional hints were offered as to what was going on inside the jury room.

Elbaz and her family nervously waited inside and near the courthouse on Friday, with Elbaz alternatively sobbing and proclaiming piously to those around her, “there is one God, justice will prevail!”

During closing arguments on August 1, trial attorney L. Rush Atkinson described Elbaz as someone who lied to investors about their chances of making money and lied about their ability to withdraw money once they had deposited it. He further claimed that in the rare cases where an investor traded well, Elbaz and her co-conspirators rigged the trading system and put that investor on “high risk,” which he said meant that they were more likely to lose trades.

“In her own words, she was ‘a money-making machine.’ She was the center of a devastating fraud,” Atkinson said.

“Her workers couldn’t remember a single client who withdrew the money they invested,” he added.

‘Not all lies are created equal’

Elbaz’s defense attorney Barry Pollack stated in his closing argument that being a “money-making machine” is not a crime.

“Lee Elbaz thinks she was a ‘fucking money-making machine,’” he said. “It’s not a crime as long as she did not cross the line between selling and criminal fraud.”

Pollack argued that Elbaz had drawn that line at a place she thought was proper, based on a legal opinion offered to her by a lawyer for Yukom Communications, David Bitton. Bitton had opined that under Israeli law it is not illegal for a business to lie unless that lie is specifically about the product they are selling.

“Not all lies are created equal,” said Pollack.

BinaryBook’s website homepage.

Elbaz had earlier argued on the witness stand that lying about her name, age and level of experience (which she did in recordings played by the prosecution) was not prohibited lies because these lies were not about the product itself.

Pollack further argued that most of the evidence brought by the prosecution related to allegedly fraudulent activities, like promising unrealistically high profits, which were carried out by Elbaz’s employees but not by Elbaz herself.

“If she’s leading the conspiracy, why isn’t she doing what they are?” he asked.

Pollack also sought to undermine the credibility of the prosecution’s four cooperating witnesses, showing instances in which each had contradicted their own statements during and prior to their testimony.

In the government’s rebuttal to Pollack’s closing statement, trial attorney Caitlin Cottingham told jurors to use their common sense. It made little sense, she said, that Elbaz’s many employees could be committing fraud on a daily basis without Elbaz, their boss, being aware of it.

“This was a scheme to lie to customers to get them to send money — to get money and not to give it back. Lee Elbaz managed the scheme every day,” she said during the rebuttal.

Cottingham said that far from being harmless lies, the fake names and locations Elbaz and other used were essential to the alleged scheme.

“They used fake names because they didn’t want to get caught,” she said.

Cottingham also said that the cooperating witnesses’ “testimony is corroborated by emails and documents. You don’t have to take their word for it, but you can. All four witnesses are obligated to tell the truth.”

Elbaz testimony

On July 31, Elbaz took the stand and testified to the effect that while she now realizes there were many instances of fraud going on around her when she was CEO at Yukom Communications, she was unaware of this fraudulent activity at the time.

Elbaz insisted that the Israeli-registered company Yukom Communications is not the same as the websites BinaryBook and BigOption, but merely provided services to these brands, which were owned by some other person or entity she did not name.

She also insisted that a Tel-Aviv-based company called Numaris Communication was entirely separate from Yukom Communications and under separate ownership.

The US government has alleged that all of these companies were part of the same conspiracy.

Elbaz further insisted that SpotOption, the platform provider for BigOption and BinaryBook, was regulated.

Asked by her attorney whether she thought it was wrong to use a fake name when interacting with investors, Elbaz replied: “No. I saw a legal opinion that it was allowed and I was asked by the broker to do it and also not to say we are from Israel; some people don’t like it [for anti-Semitic reasons].”

Lee Elbaz, an Israeli woman on trial in the United States for binary options fraud, enters the Greenbelt, Maryland courthouse on July 25, 2019. Behind her is Larry Burton, an American man who testified during the trial that he lost $140,000 to the Israeli-run website BinaryBook.com (Photo credit: Times of Israel)

She said that her understanding of the legal opinion she read is that it is illegal to misrepresent a product or service itself but not illegal to lie about other things that are not specifically about the product.

Elbaz also insisted that binary options trading in general is not a bucket shop, as the US government alleged, where the company and sales agents make money directly from the client’s losses, but that in fact clients buy put or call options and that BinaryBook goes and buys an option on a larger exchange.

She also claimed that when she asked the platform provider SpotOption to put someone on high risk it was not in order to make them lose trades but because she suspected they were abusing the system through scalping.

No time to read emails

Asked why she had forwarded and received calling scripts filled with false and misleading statements promising investors exorbitant profits, Elbaz said she had not listened to the scripts in question before forwarding them as she had been too busy.

In fact, Elbaz said, she did not like to use scripts at all when speaking to customers. “I was against it. Each customer was an individual. I give customer support from here and here,” she said pointing to her head and heart.

“Did you lie to any of victims?” Pollack asked her.

“Never.”

“Did you intend to defraud anyone”

“Never in my life,” she said.

Lee Elbaz’s attorney Barry Pollack arrives at federal court for jury selection in her trial in Greenbelt, Maryland, July 16, 2019 (AP Photo/Jose Luis Magana)

‘Not responsible’ for losses

Under cross-examination, prosecuting attorney Henry Van Dyck asked Elbaz how much money she believed investors lost.

“Approximately 70 percent of money invested,” she replied.

This was in contrast to a statement she made to the FBI upon her arrest in September 2017 that 95% of clients lose their money, but Elbaz clarified during her testimony that “95 percent” referred to investors in markets in general.

“Do you feel responsible for investor losses?” Van Dyck asked.

“I don’t know if responsible is the right word. If clients had listened to guidance and training they would not have lost.”

Elbaz told the court that this 70% loss rate at Yukom was better than in the markets as a whole, where she said 95% of investors lose their money.

Asked how she knows this, Elbaz replied: “This is something I knew and also at the finance college I worked at. Ninety-five percent of people are losing money in the financial investment market.”

“Why weren’t your clients more successful?” Van Dyck asked.

“Some were.”

“Were you shocked that so many of your account managers were promising high rates of return?”

“More than shocked,” replied Elbaz. “Disappointed and shamed to hear these things.”

“Did you know that so many of your employees were committing fraud?” asked Van Dyck.

“I figured it out in court.”

“Do you think your employees agreed together to defraud investors in binary options?” he asked.

“I cannot answer. I am not familiar with that.”

Van Dyck also asked Elbaz whether the legal opinion she had relied upon said it is okay to lie to investors about high rates of return.

“No, this is not allowed,” she replied.

When asked whether it was acceptable for employees to lie about their degrees and experience, Elbaz replied, “It was not relevant because the employees were relying on professional analysts,” referring to a man named Michael Roberts and others who made the rounds of binary options companies to teach employees about market trends.

“Did you know your employees used fake names?” Van Dyck asked.

“We were asked by our broker not to expose Israeli names, and anti-Semitic-wise we are Jewish, working with people who don’t like it.”

“Some names are difficult to pronounce,” she added, offering this as another reason that employees used what she referred to as stage names.

“Why did Austin Smith need a fake name?” asked Van Dyck. “What about Oren Montgomery?”

“It’s hard to pronounce,” she replied.

“Harder to pronounce than Bill Shneizer?” he asked, referring to the pseudonym used by an employee named Oren Montgomery.

Van Dyck asked, “When lawyers called asking for their client’s money, were you glad you had a fake name?” referring to the fact that Lee Elbaz referred to herself as “Lena Green” when interacting with clients.

“No, they knew my name,” she insisted.

‘A devastating romantic relationship’

Van Dyck then referred Elbaz to an audio recording in which she could be heard taking credit for the success of Yukom and related companies, for increasing its revenues from $30,000 a month to $12 million a month, she said, and for making millionaires out of her bosses. The recorded conversation was with a man named Rami Regaim.

“Who is Rami Regaim?” asked Van Dyck.

Elbaz paused for a long moment, then said, dramatically, “I was in a devastating romantic relationship with him.”

Elbaz claimed that most of her statements in this recording were not true, but exaggerations she had used in an effort to impress Rami Regaim.

“When you said you brought the company to 140 employees and $12 million a month?”

“That was a lie,” she said.

“Did you spend 100,000 to buy 3 percent of Kobi Cohen’s sports betting company in the Congo?”

“No,” she said.

“But this is true — you’re a money-making machine,” said Van Dyck, referring to a statement she made at the end of the recording.

“I believe so,” replied Elbaz.

Elbaz was arrested by the FBI on September 14, 2017, as she got off a plane at JFK airport in New York. She was indicted by a US federal grand jury in March 2018 for allegedly participating in a scheme to “defraud investors in the United States and across the world.”

Five former employees of Yukom Communications Ltd. and Numaris Communication Ltd. in Israel — Lissa Mel, Shira Uzan, Liora Welles, Austin Smith and Yair Hadar — signed plea deals with the US government. All but Mel have testified at the trial on behalf of the prosecution, saying that Elbaz instructed them to lie to investors in order to get those investors to deposit as much money as possible, and to do everything possible to prevent them withdrawing their funds.

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 fraud, employing thousands of Israelis.

In a “trial brief” filed shortly before the Elbaz trial began, the US government sets 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.

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