In first, Israeli judge rules that binary options victims were ‘defrauded’
Defendant’s actions meet 'all fundamental criteria of fraud'

In first, Israeli judge rules that binary options victims were ‘defrauded’

In civil judgment that could set precedent for future lawsuits from overseas victims of years of fraud, Haifa judge orders owner Shabtay Yaacobi to repay $600,000

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

Shabtay Yaacobi (Facebook screenshot)
Shabtay Yaacobi (Facebook screenshot)

An Israeli judge in a civil case has found that an Israeli binary options operative systematically defrauded his victims, impersonating a broker named Zack Peterson and refusing to let them withdraw their money.

The judge has ordered the defendant to return the nearly $600,000 he fraudulently obtained.

The judgment is the first time an Israeli judge has described a binary options company as fraudulent and ruled entirely in favor of overseas victims, potentially paving the way for a slew of lawsuits in which alleged victims could get their money back.

Israeli prosecutors have yet to indict a single binary options suspect on criminal charges of fraud, while the United States has indicted about two dozen Israelis and taken civil enforcement actions against many others.

There are however, dozens of civil lawsuits by alleged victims making their way through Israeli courts, including many that have been filed since The Times of Israel last reported about such lawsuits in December.

Most of these cases are ultimately settled, with the plaintiffs receiving some or all of the money they demanded, often in exchange for withdrawing their complaint and signing a non-disclosure agreement.

The judgment against Yaacobi was issued in April. Despite the fact that courts were largely closed due to the coronavirus, Judge Ron Sokol, Vice President of the Haifa District Court, on April 18 issued a ruling in which he ordered Yaacobi, the owner of the online investment website, to pay a total of NIS 2,051,982 ($591,536) to five overseas plaintiffs who had sued him in October 2017.

Argued on behalf of the plaintiffs by attorney Eldar Perez, the case was the first binary options proceeding in which a judge heard arguments from both sides and definitively concluded that the defendant had defrauded investors.

“I am persuaded that all of the defendant’s activity in establishing the companies and structuring the trades was intended to deceive investors, including the plaintiffs,” the judge wrote. “There is no doubt in my mind that the defendant’s behavior fulfills all the fundamental criteria of fraud.”

The binary options industry flourished in Israel for a decade before it 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 employed thousands of Israelis who allegedly fleeced billions out of victims worldwide. The fraudulent firms would dupe victims 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 investor and disappeared with all or almost all of their money.

Who was ‘Zack Peterson’?

The plaintiffs suing Yaacobi were five men and a woman from South Africa, Switzerland and the UK, some of whom had been friends prior to the lawsuit and had gotten each other excited about trading binary options back in 2015.

The first plaintiff, a 72-year-old Belgian citizen living in South Africa by the name of Jacques, had been hoping to move to Mauritius for his retirement, but had to buy real-estate in the African country to receive residency there. To that end, he was trying to earn money through online investing.

He invested a total of 290,750 British pounds with the online trading website B4binary, believing, as he had been told, that his money was being managed by experienced brokers. After a series of successful trades, the amount of money in his account appeared to increase to 1 million pounds, he said in an affidavit, but shortly thereafter the account started to lose money.

When Jacques tried to withdraw his money, his account manager, who went by the name of Zack Peterson, became unresponsive.

An exhibit from the lawsuit against b4binary showing the same photo alongside the name “Zack Peterson” and Shabtay Yaaccobi (Courtesy)

“I’m just extremely busy with so many things… I’m trying my best for you,” Peterson wrote at one point.

On another occasion when Jacques tried to reach Peterson, he was told that his broker had been hospitalized and that no one else could help him with his account.

When Jacques realized that he was unlikely to get any of his money back, he started surfing the Internet, looking for information about B4binary. He perused “Zack Peterson’s” LinkedIn profile, and noticed that another LinkedIn profile with precisely the same photo belonged to an Israeli man who called himself “Shabtay Yaacobi.”

In the meantime, a 44-year-old Swiss affiliate marketer for B4binary, apparently believing that the company was legitimate, began investing in binary options himself. In December 2015, the man, named Robert, travelled to London, where he, his spouse Anita, and their friend, a 46-year-old British man named Michael, met “Peterson” in person at the Four Seasons Hotel.

Later, over dinner at Nobu, an upscale Japanese restaurant, Robert told Peterson that he was building an app that could analyze people’s personality based on a small number of data points, like their date of birth. Peterson told Robert his date of birth, which Robert later learned was the same as Shabtay Yaacobi’s.

Robert ultimately invested and lost 28,705 Euros to B4binary, while Anita lost 75,000 Euros. Their friend, Michael lost 25,000 British pounds.

The Four Seasons Park Lane Hotel in London, where the owner of B4binary reportedly met defendants in December 2015 (Facebook screenshot)

In his defense against the civil action, Yaacobi said he was not Zack Peterson and that he had never met or defrauded the defendants. He said he had been the salaried director of an Israel-based call center called Sicom Marketing in Caesarea, which merely provided services to Service Global 52 Ltd., the British company that owned B4binary.

Judge Sokol rejected Yaacobi’s claims.

“I have concluded that the plaintiffs have adequately proven that Shabtay Yaacobi is the person who presented himself as Zach Peterson, that he actively managed their online trading accounts and that he is the person behind B4binary, as well as [the British company] Service Global 52 Ltd and [the Israeli company] Sicom Marketing. I have also come to the conclusion that the defendant acted fraudulently, misled the plaintiffs and that he must compensate them for their losses caused by these deeds.”

Jason Roy, senior fraud investigator at the Manitoba Securities Commission (Courtesy)

Yaacobi was born in the Republic of Georgia, and prior to starting B4binary, worked in the cigarette industry as well as selling investment real-estate in both Georgia and the United States. He also had a business that imported hazelnuts from Georgia to Israel.

B4binary was the subject of an investor caution by Canada’s Manitoba Securities Commission in December 2016. Jason Roy, Senior Investigator with the commission, told The Times of Israel that a Manitoba man who had lost money to the company had seen credit card charges to “Corporate Options Security Brokers” and two Chinese companies: Tianxintang Mall and GuangQu. The payments, he said, were processed through a company called Astechpay (A.S. Technologies and Consulting Ltd).

Related frauds thriving

Nimrod Assif, an Israeli lawyer who is suing several Israeli binary options firms on behalf of alleged victims abroad, said he felt encouraged by the judgment in the B4binary case.

“The court understood that the practices of the binary options operation in question — including the solicitation tactics, the evasive responses to withdrawal requests, and the use of offshore companies to conceal the identity of the perpetrators — were nothing but fraud. Anyone who knows anything about this industry can tell that these practices were common among many binary options operations in Israel.”

Assif said he hoped that in the absence of criminal enforcement by Israeli authorities, the United States would continue to step up to the plate.

“It’s unfortunate that plaintiffs’ lawyers have to do the investigative work that should have been done by the Israeli police or Israeli Securities Authority, but it’s encouraging that, despite all the inherent difficulties, attorney Perez got the job done,” said Assif.

“I certainly hope that in light of the ongoing failure of Israeli government agencies to enforce the law in this area, the American agencies will continue to investigate and prosecute cases, as they did so well, for example, in the Yukom case,” he added.

Assif also warned of thriving related frauds. “With no enforcement, fraud is profitable, and the fact that the Israeli legislature has banned binary options does not prevent scammers from using their knowhow to market other fraudulent investments besides binary options,” he said.

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