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ToI investigates

In major shift, Germany begins targeting platforms driving Israel’s online fraud

A rash of raids in 6 countries points to a new strategy: Going after the trading programs that allegedly allow scamsters to keep pushing crypto and other investment cons

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

Illustrative: German police carrying out a raid on a suspected money laundering ring in Duesseldorf, Germany on October 6, 2021. (AP/Martin Meissner)
Illustrative: German police carrying out a raid on a suspected money laundering ring in Duesseldorf, Germany on October 6, 2021. (AP/Martin Meissner)

On October 21, Caven Jechiel Czertok, a German citizen who was a permanent resident of Israel, was extradited back to his home country to face trial for professional fraud and membership in a criminal organization.

According to prosecutors, between October 2017 and November 2019, Czertok, 32, would phone victims from a call center in Bulgaria and convince them to gamble on foreign currency exchange rates, buy speculative cryptocurrencies, or bet on the movement of securities through an instrument known as contracts for difference, or CFD.

Sometimes he used the alias Kevin Becks, sometimes Thomas Edelstein. At least 100 Germans fell victim to him, losing a total of at least 1 million euros, they said.

One noteworthy victim, German prosecutors wrote in a mutual legal assistance request to Israeli prosecutors obtained by The Times of Israel, “lost approximately Euro 530,000 because he believed meaningless promises of Czertok and repeatedly made large deposits into his alleged account with the platform… Czertok convinced aggrieved parties to invest and pay more and more, knowing all along that it was a scam.”

The names Czertok would use were not the only things that would change. When he started out in 2017, he would tell his victims he was from a website called Kayafx. Later, he said he was from Kontofx, and by 2019, he was ostensibly representing Libramarkets. Still, the alleged scam remained the same, German authorities allege.

In the last several weeks, police in Israel, Bulgaria, Ukraine, Georgia, Cyprus, the Philippines, the Netherlands and Germany have carried out at least 10 raids or surprise arrests targeting online financial scams and some of the Israelis, like Czertok, alleged to be behind them, all at the behest of the FBI or German authorities.

Related: A detailed timeline of October’s raids and the suspects targeted

While past law enforcement actions led by the US Justice Department have targeted owners and employees of individual websites or boiler rooms, this month’s raids and arrests suggest that prosecutors in Europe are adopting a more ambitious tactic: targeting the owners and operators of the digital platforms that underpin those websites and call centers.

Dollars seized in an October 19 raid on an Israeli-run call center (Source: Generalstaatsanwaltschaft Bamberg)

A significant feature of online investment fraud emanating from Israel is that there are very few lone-wolf fraudsters. Most of the scammers reach their victims through a platform — a company with software that sets up and controls their trading system, taking a share of revenues in exchange, in the same way someone wishing to sell goods online might use Amazon’s platform to reach potential customers and run some aspects of the business. Often the platforms not only provide the software, but are also closely involved in setting up the websites and directing their ongoing operations.

In contrast to platforms in the legitimate economy, whose business models and practices have been rigorously analyzed and debated, the relationships between platforms (sometimes referred to in the online trading industry as ‘platform providers’) and the vast array of websites offering scam investments are far from transparent. But the decision of prosecutors to not only target the websites directly reaching consumers but the platforms facilitating their alleged scams could help shine a light on the ghosts inside Israel’s largely unfettered fraudulent investment machine.

The platform economy

Platforms are everywhere in the legitimate global economy. Companies like Google, Facebook, Amazon, eBay, Uber and Airbnb connect producers with consumers in a way that is efficient and offers unprecedented scale. Smaller economic actors may not want to use these platforms, but they often face a Hobson’s choice of signing up or being irrelevant.

In the world of online investment scams, platforms like Tradologic and SpotOption have allegedly allowed small-time crooks to vastly increase their audience of marks as well as streamline their operations. The fact that the crooks operated through a platform, as opposed to on their own, may have also helped them avoid scrutiny.

A Tradologic booth at the IfxExpo convention in Macau in January 2014 (Facebook screenshot)

According to prosecutors in Koblenz, Germany, Czertok worked for two Israeli men named Avi Itzcovich and Jacques Henri Wygodski. In May 2016, Itzcovich and Wygodski launched a website called TraderVC that ran on the platform of an Israeli company known as Panda TS. Panda TS was intimately involved in the setting up of the TraderVC website, prosecutors said.

When one fraudulent website attracted too much negative attention from the public or regulators, Itzcovich and Wygodsky would deactivate it and launch a new fraudulent site, prosecutors said. Thus when TraderVC fell under scrutiny,  Kayafx was already up and running, and when the same happened to Kayafx, there was Kontofx and then Libramarkets, which operated from March 2019 onward. While the websites took the heat, the platforms stayed up and running, meaning that the alleged fraudsters could keep their basic business model and just change their name and URL.

Panda did not respond to a request for comment.

‘Cybercrime is on the rise’

Mikhail Reider-Gordon, an anti-money laundering expert with Affiliated Monitors and a professor at the International Anti-Corruption Academy in Austria, told The Times of Israel that the anonymity offered by the internet has been a boon for criminals.

“Transnational organized crime has grown commensurate with the Internet,” she wrote in an email.

Mikhail Reider-Gordon (Courtesy)

“The past twenty years has seen the cyber-world allow criminals to easily communicate, organize, exploit new opportunities and transmit dirty money across borders, and it has allowed them to shift crimes below the visibility of physical surveillance. There is anonymity online through everything from email accounts to encrypted SMS; ways to meet in private cyber-rooms or even video games, in which to plan and coordinate, and carry out illicit transactions on a global scale now,” she said.

Internet fraud is a growing problem worldwide. Thirty-nine percent of Europeans claim to have been exposed to monetary fraud in the last two years. The FBI’s Internet Crime Complaint Center receives a record number of complaints year after year, including in 2020, when reports of internet-enabled crime were up 69 percent over the prior year.

Nino Goldbeck, First Public Prosecutor of Bamberg, Bavaria, told The Times of Israel that online trading fraud is one of the worst Internet frauds affecting Germans and Europeans in general.

“The losses in Germany are really very high,” he said. “I am not able to give a reliable estimate, but we can certainly talk about several hundred million Euros per year in Germany alone.”

In terms of Internet fraud, he said, “I don’t know of any modus operandi that causes similarly high losses to fake cyber-trading. Scams via fake [online] shops, for example, are also very widespread, but the losses are usually much lower.”

At an October 12 press conference discussing some of the recent raids carried out at the behest of German police, a German investigator said that while property crime in the real world has gone down in recent years, it has been replaced by internet fraud.

“Criminal acts are being shifted to the internet. It is both a crime scene and a method — cybercrime is on the rise,” said Michael Pientka, police chief in Braunschweig.

Israeli indifference, international enforcement

When companies offering fraudulent forex investments began proliferating in Israel after 2005, police and regulators ignored the phenomenon, allowing the fraud to grow into a full-fledged industry, hiding in plain sight under the guise of “high tech.” By 2013, many of the forex operatives began offering trading in a financial instrument known as binary options. After the Knesset outlawed binary options in 2017, as a direct result of The Times of Israel’s reporting on the widely fraudulent industry, many of the same operatives created websites that offered fake forex, CFD and cryptocurrency trading.

Some moved part of their operations abroad. While Israeli police have over the years arrested a handful of these operatives, almost none have been prosecuted. Similarly, while some Israeli media outlets have intermittently reported on individual investment scams, they have often depicted these as lone-wolf operations, failing to explain that they are part of a massive, interconnected industry operating with the help of one of several platforms.

In this undated image, an employee of the now-defunct binary options call center Yukom Communications strikes a gong to celebrate an investor making a large deposit (Courtesy)

Like German prosecutors, the US Department of Justice has been at the forefront of prosecuting binary options and other investment fraudsters. But the Justice Department has thus far prosecuted people associated only with the clients of online investment platforms, like Yukom Communications (a client of SpotOption) and Blue Bit Banc (a client of Tradologic).

The US Securities and Exchange Commission has sued SpotOption in a civil enforcement action, but the Department of Justice has yet to bring criminal charges against the company, despite the fact that it allegedly facilitated fraud against many thousands of Americans.

Europe appears to be aiming higher.

On July 14, Austrian prosecutors indicted Israelis Ilan Tzorya and Michael Golod, as well as a Bulgarian woman by the name of Milena Kabadzhova, for allegedly running the Tradologic platform.

Tradologic provided software and other tools for setting up allegedly fraudulent binary options, forex and cryptocurrency brokerages, according to Austrian prosecutors. Austrian police have described its business model as “crime as a service.”

Tzroya, Golod and Tradologic did not respond to requests for comment.

On October 11, the Public Prosecutor’s office in Bamberg, Germany, announced that they had indicted a 44-year-old Israeli who had been a senior manager of several online investment websites owned by convicted fraudster Gal Barak.

Barak was one of Tradologic’s clients as well as a minority shareholder in a number of companies that held ownership stakes of the platform. In 2020, Barak was convicted of fraud and money laundering and sentenced to four years in Austrian prison.

The man, who has been named in German media reports as Tal-Jacki Zecharia Fitelzon, was allegedly the “vice president of sales” for a group of call centers in Bulgaria, Serbia, Bosnia and Herzegovina, and Georgia that operated four allegedly fraudulent online trading sites that used the Tradologic platform: Safemarkets, OptionStarsGlobal, Cryptopoint and XTraderFX.

Yifat Fitelzon and her ex-husband Jacki in a photo she posted as part of her public campaign to get him freed (Facebook screenshot)

Fitelzon is “accused of being responsible for a total loss of around 8.7 million Euros caused to 335 people in the period from March 2016 to March 2019, together with his accomplices,” a press release said, adding that “it can be assumed that there is a considerable number of unreported cases.”

If convicted, he could face a prison sentence of up to 10 years.

Fitelzon was arrested in July 2020 at Athens airport and eventually extradited to Germany. Since then, his ex-wife Yifat Fitelzon has mounted an impassioned media campaign in Israel on his behalf, asking the Israeli government to intervene to get him out of jail and asking the Israeli public to contribute to his legal fees.

Fitelzon says that she does not believe the allegations against her ex-husband and that his boss, Gal Barak, had told him that everything he was doing was legal. “Anyone who knows Jacki knows he is the best human being in the world and wouldn’t hurt a fly,” his ex-wife wrote on her Facebook page.

Another raid, this time on a call center in the Tel Aviv suburb of Petah Tikva on October 20, targeted suspects who allegedly ran 11 websites using SpotOption and Tradologic.

Court documents show that the suspects also allegedly ran call centers in Israel, Georgia, Armenia, and Moldova.

Israeli police, working at the behest of German authorities, detained 15 individuals suspected of online investment fraud against citizens of Germany. After questioning, all but four people were released.

The call center has not been named and the Jerusalem court where they were brought for a remand hearing placed a gag order on the names of the suspects.

Low-profile player

A lesser-known platform, Tradersoft, has also been at the center of many of the raids.

On October 6, law enforcement agencies from Bulgaria, Cyprus, Germany, the Netherlands and Ukraine raided offices in Sofia, Limassol and Kyiv. These raids reportedly targeted the people behind the website Fx-leader and related websites using Tradersoft.

The coordinated raids resulted in “eight house searches (five in Bulgaria, one in Cyprus, two in Ukraine), 17 individuals questioned in Bulgaria and one high-value target arrested in Cyprus,” according to a Europol press release.

The Times of Israel’s analysis of a video released by Europol reveals that one of the call centers raided in Sofia is known as Dortome BG. Its directors, according to Bulgaria’s corporate registry, include at least two Israelis: Erez Moshe Almog and Lior Sanderovich.

Prosecutors in the German cities of Göttingen, Braunschweig and Rostock, who are jointly carrying out the investigation, found that this particular alleged criminal ring was linked to about 250 websites, at least 85 of which showed strong evidence of being fraudulent, they said.

German media reports have quoted prosecutors’ claims that the network targeted in the October 6 raids allegedly caused losses of 500 million euros per year to “tens of thousands” of victims.

Tradersoft first appeared online in late 2014, billing itself as a binary options platform that provides “everything you need to become a binary options broker.”

Tradersoft’s website as it appeared in late 2014 (Screenshot)

By 2016, the company had diversified its offerings, peddling CFD trading platforms in addition to binary options platforms. At times, the company displayed an Israeli phone number on its website.

Research by The Times of Israel shows that the phone number was used by several women employed by a company known as 24/7 Traffic Ltd. in Herzliya. Sources told the Times of Israel that at the time, 24/7 Traffic was a call center for the binary options website Opteck.com.

 

Unlike better-known binary options platforms such as SpotOption and Tradologic, Tradersoft has kept a low profile. Its owner does not publicly support charities or attach the company’s name to religious and cultural events. In fact, the company does not publicly disclose the identity of its owner.

According to the Cyprus corporate registry, the Cyprus branch of Tradersoft is owned by a British Virgin Islands company known as GT Ventures, whose ownership is unknown.

Erez Moshe Almog, director of a Bulgarian call center Dortome BG, that was raided by police on October 6, 2021 (Linkedin)

GT Ventures did own a second Cypriot company, however. From December 2014 to April 2019, it owned a company called Centralspot Trading, which in turn owned the same Opteck.com run out of the Herzliya boiler room.

Centralspot Trading’s director at the time was an Israeli man named Gilad Tisona, who grew up in Herzliya.

Tisona was a pioneer of Israel’s forex industry, founding GTForex, reportedly named after himself, in 2005 at the age of 23.

The lawyer who registered GTForex with Israel’s corporate registry in 2005 was the same Almog listed as a director of Dortome BG, which was raided last week.

Gilad Tisona happens to be the son of Likud power broker Yossi Tisona and the nephew of convicted drug money launderer Eli Tisona. There is no evidence he was involved in his relatives’ activities.

Tradersoft and Tisona did not respond to requests for comment.

Where were the Israeli police?

While Israeli law enforcement is aiding the German push, it is possible the raids of the last month would not have been necessary had Israeli police and prosecutors acted sooner.

With a booming tech sector and a large number of immigrants from around the world, Israel would appear to be a natural home for both legitimate internet businesses and online investment cons. Critics allege that lax law enforcement and a lack of vetting of immigrants with possible criminal backgrounds has only compounded the problem.

A police spokesperson did not address what happened in the past but said that Israeli police are currently working closely with their foreign counterparts.

“Enforcement against Internet crimes is carried out through professional and productive collaboration between countries,” said the spokesperson. “Whenever we receive information or requests from our law enforcement counterparts abroad, the Israel police carry out rigorous investigations, including locating, arresting, searching and seizing evidence in order to bring alleged perpetrators to justice.”

The police spokesperson said that Israel is not always aware of the crimes or investigations being carried out abroad: “We should emphasize that when a foreign law enforcement body carries out a covert investigation of suspected Internet fraud against citizens of a foreign country, we are not aware of the complaints or the investigation until that country officially requests our assistance. Similarly, we should note that most of the victims are foreign.”

In an interview last May, shortly before he became deputy public security minister, MK Yoav Segalovitz (Yesh Atid) told The Times of Israel he did not know why Israeli police had for years failed to tackle online investment fraud.

Segalovitz, a longtime cop who founded the police’s financial crimes division and the Lahav 433 major crimes unit, said he believed that in general, Israeli police had been starved of morale and funds in recent years as a result of political deadlocks and tensions under former prime minister Benjamin Netanyahu, who was under police investigation for corruption.

“For over two years we had no police chief, the police had no strategic vision,” he said.

At the time, Segalovitz vowed that if the so-called change coalition he is part of came to power, which it did in June, law enforcement would do better.

“If there is a different government that sees things differently, we’ll strengthen the police,” he said. “It’s vital to a democratic society. We need to give hope to the people who follow the law as opposed to giving hope to the criminals.”

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