German and Austrian police have carried out one of the largest operations to date against alleged online financial scammers, German public television reported earlier this month. A joint German-Austrian team has in recent months carried out 35 raids in five countries and investigated ten suspects in connection with five allegedly fraudulent online trading websites, the report said.
The five online trading sites being investigated by German and Austrian police are Option888, TradeInvest90, XMarkets, ZoomTrader and TradoVest, according to the July 3 report by Germany’s “Tagesschau” television news program.
Most of these sites are or were associated with Tradologic, an Israeli-founded and -run Bulgaria-based online trading platform.
In a related arrest, Israeli Gal Barak was apprehended in Bulgaria in February at the behest of Austrian prosecutors. At the time, Austrian prosecutors announced that they had raided the offices of six other Tradologic websites: XTraderFX, Optionstars, OptionstarsGlobal, Goldenmarkets, SafeMarkets and Cryptopoint.
One suspect in police custody, according to the July 3 report, is German national Karsten Uwe Lenhoff, a 55-year-old veteran of the sports betting and online gambling industry who had been dividing his time between a five-star Tyrolean hotel and the French city of St. Tropez, according to the report. The report did not name any other suspects.
Reporters for “Tagesschau” saw customer lists for the five online trading websites, which they said contained the names of more than 200,000 Germans.
In the German city of Saarbrücken alone charges are being brought against these trading platforms on behalf of 233 alleged victims, the report noted. On average, each victim lost more than 40,000 euros.
The report also said that the group of alleged criminals operating these five websites could have been responsible for 400 or more fraudulent websites, and that this number was confirmed to them by a Saarbrücken public prosecutor.
According to the report, police raided call centers, offices and apartments in Kosovo, Germany, Austria and the Czech Republic.
The report described the alleged fraudsters as employing methods identical to those of Israel’s binary options industry, which was banned by the Knesset in October 2017 but which continues to operate from Israel and other countries under the guise of forex, crypto or derivatives trading websites.
According to the German television report, alleged scammers would call investors and encourage them to place money in accounts on trading websites where they could supposedly earn quick profits by wagering on share prices, currency fluctuations or other financial movements. Some of the websites offered trading in Bitcoin and other cryptocurrencies.
According to the report, victims were recruited through social networks. After making an initial deposit, the investor would be assigned to an investment adviser who would encourage them to deposit more and more money so as to take advantage of supposedly lucrative trading opportunities.
According to the report, victims reported that when they tried to withdraw the money in their trading accounts, they were told that a software glitch was preventing the withdrawal, or that their investment adviser had gone on vacation and could not help. Almost all victims lost all of the money they deposited, according to the report.
German and Austrian prosecutors suspect, the report said, that the victims’ money had never been traded in the first place, and that users of these sites had interacted with a virtual interface with no real financial transactions behind it, and that money deposited by investors had in reality been siphoned off into the alleged scammers’ bank accounts.
The report further claimed that the suspected fraudsters had used banks in Western Europe to deposit their allegedly ill-gotten gains. These included Germany’s Postbank, Sparkasse Koblen and Munich-based online bank Fidor; Belgium’s ING; and Barclays Bank and HSBC in the United Kingdom.
Sparkasse Koblenz told “Tagesschau” it had terminated its relationship with the suspected scammers “because our control systems detected suspicious transaction patterns” and that it regrets that a “customer account in our bank was allegedly abused for fraudulent activity.”
Barclays also told “Tagesschau” it had closed an account opened by alleged scammers. The other banks did not comment, said the report, citing banking secrecy, but insisted that they comply fully with the law.
Sources inside one of the banks reportedly told the news program that men from Lithuania and Romania had opened the bank accounts on behalf of the alleged scammers and had indicated “software distribution” or “consulting services” as the nature of their business.
Publishing information about a shadowy industry
The companies targeted by German and Austrian police have been discussed at length for the past year on a website called Fintelegram.com, which focuses on these and other online trading networks in great detail.
The Times of Israel contacted Fintelegram to understand more about it and why it was focusing on this material. The site was founded by Austrian internet entrepreneur Werner Boehm. His business associate Elfriede Sixt has launched a sister company called the European Funds Recovery Initiative (EFRI), which says it helps victims of online trading scams recover their money.
Boehm, formerly a marketing manager at IBM, founded an internet startup called Yline Internet Business Services AG in 1999 that was traded on the Austrian stock exchange and worked closely with IBM Europe. Boehm was also reportedly once offered the post of infrastructure minister by a vice chancellor from the country’s right-wing Freedom Party. Boehm’s company Yline went bankrupt in 2001. According to Boehm, after Yline closed down “IBM and Boehm blamed each for the company’s problems” and civil and criminal charges were filed.
According to German-language news reports, several executives of Yline, including Boehm, were indicted on charges including fraud and insider trading. Boehm and others were eventually acquitted of all charges by an Austrian court in 2015.
In a (German-language) post on his site, Boehm explained the rationale behind Fintelegram, which appeared online in early 2018. He said that as an early entrepreneur in the cryptocurrency payments sector, he had been approached by people who wanted him to process payments for binary options sites, and that after doing due diligence on these companies he had refused.
“I have been working in the crypto sector since 2013 as an entrepreneur. As a result, I almost inevitably came into contact with scammers and criminally active persons. My motivation to co-found FinTelegram is to make the public aware of the multiple frauds in crypto,” he said in the post.
Boehm and Karsten Lenhoff, one of the suspects apprehended by police, previously had a business dispute surrounding the payments company Bitrush, of which Boehm was formerly the CEO.
Elfriede Sixt, a Vienna-based chartered accountant and Boehm’s business associate, told The Times of Israel that her organization has been providing information to the Austrian and German police, not just about alleged crypto scams but about online trading scams targeting Europeans, many of which have robust ties to Israel. She said Fintelegram is able to obtain very detailed information about the operations of online trading companies because of several high-level whistleblowers and insiders who have shared information, including internal company documents and bank statements, she said.
A spokeswoman for Austria’s Central Prosecutor’s Office for Economic Criminal Matters and Corruption, Silvia Thaller, confirmed to The Times of Israel that her office is overseeing a cross-border investigation into “cyber-trading fraud and binary options.” She said the alleged criminals are “internationally active and involved in professional, serious fraud and money laundering.”
Thaller said that prosecutors are investigating about ten suspects alleged to have stolen and laundered millions of euros, but would not say who they were.
“For reasons of privacy and data protection, names of individual parties can neither be named nor confirmed. Since this is an open preliminary investigation and ongoing investigations must not be jeopardized, I must ask for your understanding that currently no further information can be given about individual investigative or coercive measures.”