In rare move, Israel sends internet financial scammers to jail
Five men sentenced for ‘CEO fraud’ against companies abroad, highlighting Israel’s attractiveness as a hub for transnational organized crime
Simona Weinglass is an investigative reporter at The Times of Israel.
Israel has handed down sentences to five men — two Italian immigrants to Israel, an American-Israeli, an Israeli with French and Canadian citizenship, and an Arab citizen of Israel — for their involvement in what is known as the “CEO scam” against companies abroad.
The cases, in which sentencing was handed down last month, underline the growing blight of global criminality, and Israel’s attractiveness as a hub for transnational organized crime.
Freddy Hazan, a 50-year-old French-Canadian-Israeli former building contractor, and Ben Hoffman, a 28-year-old new immigrant to Israel from California, will serve nine months in prison each. Sami Das, a 39-year-old from the city of Tira, will serve four months in prison. Enzo Bondi and Yitzhak Sonino, both 33-year-olds who recently immigrated to Israel from Italy and reside in Netanya, will each do six months of community service and pay a fine of NIS 30,000 ($8,700) each.
The first three men were arrested in a police sweep in November 2016 against 15 residents of Ashdod and Ashkelon, most of them native French speakers, who were allegedly operating a secret call center from a residential apartment in Ashkelon. Those arrested also included Freddy Hazan’s two sons, Patrick and David, as well as Simon Dov Chikli, the brother of Gilbert Chikli, a world-famous Franco-Israeli con artist who is currently serving a prison term in France following his extradition from Ukraine. In January 2017, an indictment was filed against three of the fifteen: Freddy Hazan, Ben Hoffman and Sami Das.
The three men pled guilty to aggravated fraud, conspiracy to commit a crime, impersonation, forgery and other violations. They were sentenced on December 19, 2017.
According to the indictment against them, the three tried to cheat 75 companies abroad out of millions of euros beginning in April 2016 and over a period of eight months by assuming false identities. Hoffman had previously worked for a year and a half as an employee of Das’s, selling forex and other products from secret boiler rooms operating from residential apartments. During this time, Hoffman had seen other employees of the boiler rooms carrying out the CEO scam — in which employees of a company are targeted by false emails ostensibly coming from their firm’s higher-ups and tricked into wiring funds to the scammers — but was unwilling to do it himself. One day, the indictment alleged, Das again asked Hoffman to carry out the CEO scam, and Hoffman agreed.
Soon afterwards, Hoffman made the acquaintance of Freddy Hazan and in April 2016 Das rented a room in Netanya where the pair could work together. They acquired fake email addresses that appeared to belong to senior executives in various companies abroad, and even created counterfeit invoices and a letterhead for a fictional lawyer they had created. Hoffman and Hazan contacted employees of companies like Medis Pharma in Australia, Pfizer in Ireland, Affecto in Norway and others all over the world asking employees to wire hundreds of thousands of dollars to bank accounts that belonged to themselves. In several cases, the employees did as instructed. However, in each instance the fraud was eventually discovered.
The Italian speakers
Also, on December 19, two Italian speakers, Enzo Bondi and Yitzhak Sonino, were sentenced to a fine and six months of community service for a separate but related scam that began in November 2015.
Bondi and Sonino were not the ringleaders of the scam, but rather were employees hired for their ability to speak Italian. The four alleged main co-conspirators, Henri Oumissi, Daniel Alon, Jeremy Laloum, and Mordecai Lalouche, were indicted in June of 2016, and their trial is ongoing. The four native French speakers are accused of pretending to be suppliers of various companies in Europe, and contacting the companies to inform them that the bank account details for sending payments had been changed. Among the companies they attempted to defraud were Kia Motors Paris, Diners Club Italy and Diadora.
Bondi Enzo and Yitzhak Sonino were tasked by their French-speaking bosses with gathering information about companies in Italy, including the names of executives and mid-level employees and their contact information. One one occasion they accomplished this by phoning a company and pretending to represent a charity that wanted to invite the CFO to an event. By this ruse, they obtained the name of the CFO and then impersonated him, using authentic-looking fake email addresses, forged documents with company logos and false bank documents to persuade companies in Europe to wire them money.
The conviction and sentencing of these five men represent just two of several cases of alleged CEO fraud that are making their way through the Israeli justice system.
Also in November 2016, Israeli police arrested a separate ring of alleged CEO scammers, this one allegedly involving Eli Revivo, Harry Amar and members of the Jarushi organized crime family, a family with alleged ties to former coalition whip MK David Bitan. Other suspects arrested include Fabiana Suissa, Dvir Suissa, Yakov Malcolm Cohen, Yoav Melvin Cohen, Jessica Atlan, Nathaniel Nakache and Esther Bensimon.
According to a court document from June 2016, in which police sought to extend their ability to hold onto suspects’s confiscated belongings, police alleged the Amar-Revivo organized gang was carrying out several scams at once: the CEO scam, forex, binary options and diamond investment fraud. Amar was recently extradited to the United States to stand trial for conducting CEO scams between January 2014 and March 2015, which he allegedly conducted from safe houses throughout Israel and Europe together with partners in Romania, Germany and elsewhere.
Police also said regarding the Amar-Revivo gang’s binary options activities that “as far as we can see from the evidence to date, once the money was transferred to the gang, it never returned to its owners, even if they appeared to earn money on the site.”
Added the police, “It also emerges from the evidence that the suspects were able to intervene in the outcome of trades and in this way they caused their customers to lose and fraudulently appropriated their money.”
The police said that the gang’s money was “transferred to offshore bank accounts, then repatriated to Israel through various methods, but mainly through money service providers tied to known criminal syndicates.”
Germany seeks extradition
In yet another case of alleged CEO fraud, Germany is requesting the extradition of a French tourist in Israel, Christopher Koehren, who was arrested, along with a French-Israeli citizen named Jeremy Tuill, by Israeli police in May 2017 at the behest of the German government.
Koehren, a French citizen with German roots, is suspected of carrying out CEO fraud against companies in Germany. Koehren, who has no prior connection to Israel, told authorities that he had come to Israel specifically to work in a “call center” and that Tuill was his contact person here.
The Times of Israel has been told of other illegal immigrants seeking employment in “call centers” selling fraudulent products. One Russian-speaking immigrant to Israel who worked for a short time in a Russian-speaking binary options company said that many of her co-workers were illegal immigrants from the former Soviet Union who had come to Israel as tourists and overstayed their visit.
Transnational organized crime
According to Belgian-Israeli journalist Serge Dumont, the author of the 650-page French volume “La criminalité organisée en Israël (Organized Crime in Israel, 2016)” there are between 80,000 and 90,000 French Jews living in Israel. The vast majority are law-abiding.
A minority, however, may have moved to Israel to avoid taxes, to avoid criminal prosecution in France or to pursue criminal activities here, he writes. These criminal elements have benefited enormously from a 2008 Israeli law that exempts new immigrants to Israel from paying taxes on or reporting their income abroad. Since many individuals involved in fraudulent industries register their companies in tax havens abroad, the immigrants among them are not required to report that revenue to Israeli authorities.
According to Dumont, the French call centers of Israel have their origins in a large-scale fraud that took place in the Sentier garment district of Paris in the late 1990s. The Sentier was home to a population of Jews from Morocco and Tunisia who immigrated to France in the 1960s.
In a scheme that was exposed in May 1997, clothing shop owners in the Sentier tried to get loans from French banks but were told that in order to be approved they had to prove their businesses were growing. Some of these shop owners turned to friends and family who signed contracts to buy a large amount of goods — without, it turns out, ever intending to honor their contracts. When the time came to pay off the loan, a shopkeeper would seek another loan from a different bank, and sign another such bogus contract, in what turned into a Ponzi scheme.
At one point, many of the shopkeepers began to default on their loans. French banks were said to have lost about $80 million. One hundred and twenty individuals were eventually accused of criminal conduct and 12 of the accused fled to Israel. Several years later it was discovered that French Jews from the Sentier neighborhood had laundered about $109 million through Israel in the late 1990s. One hundred and forty individuals were named as participants in the scheme at a 2008 trial in France.
Meanwhile, in the same year, Israeli police busted a ring of about 30 French-speakers who were calling people in France and selling false advertising contracts.
The next scandal to hit the French-Israeli community was significantly bigger. In the years 2008 and 2009, multiple groups of fraudsters took advantage of differing tax rules in different EU countries to buy and sell carbon credits, or permission to emit carbon dioxide, on exchanges in Europe. The fraudsters would buy the credits in a country with no value-added tax, and quickly sell them in France or other countries that did charge VAT. Generally, merchants have 90 days to remit the VAT they collect to the French government. The fraudsters took advantage of this time window to divert the money offshore and transfer it through a series of shell companies until it effectively vanished.
The French government has estimated it lost €1.6 billion ($1.7 billion) in unpaid VAT taxes this way and the total loss to all European countries is estimated at €5-10 billion.
According to Marius Christian-Frunza, a lecturer at the Sorbonne and author of the book “Fraud and Carbon Markets,” multiple organized criminal groups from throughout Europe masterminded and engaged in the fraud, each trying to get a piece of the action before European regulators figured out what was happening and shut it down in 2009. Thus Georgian-Russian mafia operating in Spain were likely involved, as were Russian mafia from St. Petersburg, and German, Polish, Bulgarian and other organized crime groups.
In France, where an estimated €1.6 billion was stolen, many of the suspects were French Jews who either had or later obtained Israeli citizenship. One such network, headed by Arnaud Mimran and Marco Mouly, stole €283 million in VAT taxes. Much of this crime, according to a Haaretz newspaper investigative report, was carried out from the perpetrators’ computers in offices in Tel Aviv.
Mimran and Mouly were each sentenced to eight years in prison by a French court in July 2016. However, several of their co-conspirators were sentenced in absentia and are believed to be living freely in Israel.
In the transcript of Mimran’s first interrogation by French police in the case, he said explicitly that he financed Prime Minister Benjamin Netanyahu’s 2009 re-election campaign to the tune of $200,000. Netanyahu has said Mimran only gave him $40,000 in 2001. This claim is contradicted by the French police record.
From carbon to cryptocurrencies
According to Dumont and other sources, there is significant overlap between the perpetrators of the Sentier Ponzi scheme, the carbon-VAT scammers, the CEO scammers and the French-speaking call centers hawking everything from fake insurance to fake solar panels to diamond investments, forex, cryptocurrencies etc.
Several sources told The Times of Israel that the number of French career criminals who migrated to Israel is probably in the hundreds. However, some sources also estimate that the number of new immigrants from France that these individuals employ may be in the thousands.
The new BBC television series “McMafia” dramatizes the ways in which during the 1990s, Israel became an operating theater for the Russian mafia which in turn helped the homegrown Israeli mafia become stronger and more sophisticated. French-speaking con artists constitute a second wave of foreign influence that has cross-pollinated with Israel’s local crime bosses.
TV’s “McMafia,” along with the book on which it is based, has highlighted a global problem that has metastasized over the last few decades, not just in Israel but throughout the world. Criminals have adapted to globalization much more adroitly than the law enforcement bodies whose job it is to stop them.
In 2013 the US Department of Defense published a book called “Convergence: Illicit Networks and National Security in the Age of Globalization” that noted that the illicit economy – which encompasses everything from terrorism, the drug trade and organ trafficking to money laundering and large-scale internet scams like those found in Israel — is estimated by some to constitute from 8 to 15 percent of global gross domestic product.
According to Dumont, most French Israelis are deeply ashamed of the criminal element within their community and bewildered at the seeming indifference of the Israeli police, whose sporadic arrests of a small number of perpetrators do little to dampen the phenomenon.
“In private,” he writes, “influential rabbis of French origin and responsible community leaders do not mince words when they speak of these ‘parasites.’ But only in private; they will not speak out publicly on the issue for fear of inflaming anti-Semitism.”
