Israeli state prosecutors have filed their first ever indictment against binary options operatives, although the indictment only addresses crimes allegedly perpetrated against Israeli investors while remaining silent on the defendants’ activities vis-a-vis investors outside of Israel.
On December 26, state prosecutors from the Tel Aviv district indicted three alleged binary options fraudsters, Aviv Talmor, Roy Cuzin, and Valerio (Vali) Megai.
Talmor was the director and owner of an Israeli company called Utrade Premium Services Ltd. that purportedly offered Israeli investors the ability to carry out algorithmic trading on contracts for differences. He is charged with embezzlement, fraud, money laundering, investment advising without a license, and obstruction of justice.
Cuzin was a senior analyst for Utrade from 2012-2015 and built the company’s trading and investment strategy, according to the indictment. Cuzin was also involved in recruiting investors for the company among the general public, and in retaining those investors who complained or sought to withdraw their money, the indictment states. Cuzin is charged with embezzlement and fraud.
Megai was Utrade’s CTO starting in 2014 and is charged with obstruction of justice.
According to the indictment, between 2012-2015, Utrade attracted investments from about 600 Israeli investors totaling about 100 million shekels ($26.5 million) with the promise that the company possessed a special algorithmic trading program that could make profits for investors. It promised investors that they could withdraw their funds within 7-10 days of requesting to do so.
However, instead of actually trading with investors’ funds, as it had promised to do, Talmor’s company used more than half of investors’ money to expand and cover operating expenses for his growing forex and binary options business, a business that largely targeted investors abroad, the indictment alleges. At least 21 million shekels of investors’ money was transferred to the bank account of an Israeli company called “Binary Call Center Ltd.,” the indictment alleges.
Binary Call Center, according Israel’s corporate registry, was established in 2013 by executives of the Israeli binary options platform company SpotOption, and later transferred to the control of Talmor. Court filings in a bankruptcy case related to Utrade reveal that Binary Call Center helped operate the binary options and forex websites CapitalOption, SkyFX, Forex TG Pty Ltd (FXTG), Algobank, PlusFN, OneBinary, OptioNow, Zluti Marketing, and affiliatekey.com.
The December 26 indictment against Talmor and his employees only addresses losses to Israeli investors through Utrade. It does not consider by what means the above websites, allegedly created using funds from the Israeli investors, were able to obtain money from foreign investors, and how much money was obtained.
According to the temporary receiver of Utrade, all the brands operated as a single company, and employees of Utrade Premium worked for other brands as well. Much of the money allegedly stolen by Utrade Premium was pumped into Binary Call Center to finance its activities, the receiver said.
According to the December 26 indictment, Utrade Premium attracted hundreds of Israeli investors with false promises of high profits. By 2015 investors who tried to withdraw their money were having trouble doing so, states the indictment. The company then entered into agreements with some of these investors to release their money in small amounts over a period of several months. According to the indictment, as of the end of 2015 Utrade still owed 42 million shekels to investors, while the bank account that was dedicated to holding investors’ funds was nearly empty.
According to the indictment, Talmor was questioned by Israeli police on several occasions in February 2014 after Utrade investors filed complaints with the police. In March 2015, the Israel Securities Authority ordered Utrade to stop recruiting new investors, the indictment states, but the company failed to comply.
On September 1, 2015, Talmor left the country. From his location abroad, Talmor took steps to try to dissociate himself from one of the brands he controlled, PlusFN, and instructed an employee to close the company’s bank accounts and payment processing accounts as well as to forge a phony contract that made it look as if PlusFN had been sold to a third party a year earlier, the indictment charges. During his time abroad, Talmor was ordered to appear before the Israel Securities Authority for questioning but failed to show up. Talmor eventually returned to Israel in February 2016.
The indictment also alleges that in December 2015, when the Israel Securities Authority conducted a search of Utrade’s offices in Ramat Gan and Tel Aviv, the ISA investigator realized that copying employees’ email correspondence would take a long time, and left Utrade’s CTO Vali Megai in charge of telling the ISA when the copying process had finished. Megai allegedly took advantage of the situation to get in touch with Talmor and to erase key emails that the company did not want investigators to see. This explains why Megai has been indicted on charges of obstruction of justice.
A fictitious transfer?
Soon after this raid, both Utrade Premium Services and Binary Call Center went into receivership. Elad Afari, the receiver for both companies, whose job it was to collect funds to repay creditors, began to complain in multiple court filings that Talmor was illegally transferring assets to a British company called Plustocks Ltd., a Cypriot company called K-DNA Financial Services Ltd., and an Israeli company known as Tracking Partners Ltd., all of them allegedly owned by Israeli businessman Daniel Azougy or his business partner attorney Asher Afriat.
These assets, the receiver claimed, were international forex and binary options companies, most of them operating from Israel but registered all over the world, that were still earning income that could be used to repay the Utrade creditors, he wrote.
Among the “international” assets the receiver identified was a Cypriot company called Trademarker (which operated the brands SkyFX and CapitalOption), an Australian company called Forex TG Pty Ltd. (FXTG), an Anguilla based company called Yamix Marketing Ltd. (PlusFN and AlgoBank), Algo Plus Ltd. of Anguilla, Utrade Marketing Services Ltd. in the Seychelles, Nacolini Ltd. in Cyprus, Capsula Marketing Ltd. in the Seychelles, and Algo Trade FX in the Seychelles.
The receiver also questioned whether this transfer of assets was genuine, since Plustocks et al did not pay money for any of these companies, but instead received payments of hundreds of thousands of dollars from several of them.
Azougy responded to the allegations in a February 2016 court filing by saying that the various companies had been bought before Utrade and Binary Call Center went into receivership and that he did not own Plustocks or Tracking Partners but merely brokered a deal between Talmor and the owners of those companies.
In fact, Tracking Partners is owned by a man named Moshe Azougy while Plustocks was owned by a British Virgin Islands company called Otterswick Limited that appears to be associated with Azougy’s late business partner Yoram Yossifoff. The website Plustocks.com was registered by Glendore Systems Limited, a British company owned by Yossifoff.
In July 2016, the Manitoba Securities Commission issued a warning against Plustocks.com after three residents of the Canadian province lost their savings when trading with the website.
Poets, oligarchs, and politicians
Aviv Talmor is a former poet, filmmaker, and teacher who became frustrated by his penniless lifestyle, according to a 2016 profile in the Hebrew business daily Globes, and launched a new career as a forex and binary options entrepreneur.
In 2012, he released a film, “I am Bialik,” a mockumentary that won the fringe award at the Haifa Film Festival. It was about a frustrated poet and teacher named Aviv Talmor whose father had disowned him and cut him out of his will. The movie documents Aviv Talmor’s quest for a father figure through an obsession with the Israeli poet Haim Nahman Bialik. According to the Globes profile, Talmor eventually did manage to find a father figure, in the form of a mentor who was teaching him to make money in the world of finance.
“I started to hear that he had an economic mentor, a kind of life coach,” an actor who had played a key role Talmor’s film told Globes. “It was after we had shot the film but before it came out. He started sending everyone invitations to meet with the coach. I didn’t really talk to him about it but I heard that he was making money.”
The actor recalled how a few years later, Talmor and his wife had a baby. “He seemed to be successful, happy, on the winning side of life. I was happy for him.”
The actor did not know the identity of Talmor’s new mentor. Court documents reveal that Talmor spent time working as a salesman at Forex Place, a now-defunct forex company, many of whose former employees went on to launch their own binary options brands.
Daniel Azougy, the man who helped Talmor transfer his assets, is an Israeli lawyer who was disbarred for 14 years by Israel’s Supreme Court in 2002 after being convicted for fraud and breaking and entering. In 2010, he reportedly briefly served as a financial director to the Portsmouth football club in the United Kingdom after recently jailed Russian oligarch Arcadi Gaydamak’s son reportedly sold the soccer team to a group of Israeli and foreign investors in an attempt to pay off his father’s creditors.
Azougy’s business partner Yoram Yossifoff died suddenly of a heart attack in October 2016 at the age of 63. After his death, he was discovered to be millions of dollars in debt to various Israeli underworld figures, according to Israeli media reports. Prior to his death, Yossifoff had been thought to be one of Israel’s wealthiest lawyers, with business interests in both Israel and the UK.
In the UK, several businesses owned by Yossifoff were plagued by scandal. He owned several care homes, together with international military dealmaker Aharon Frenkel, that became embroiled in the 2011 Southern Cross care home collapse.
Yossiffof was also the proprietor, through Otterswick Ltd., of Tangerine Investment Management Ltd., a company that has been the subject of a series of exposes by the publication Offshore Alert.
Until 2013, Yossifoff also owned the Park Lane Club, a London casino that catered to wealthy Russian emigres in the British capital. Yossifoff sold the casino to Vassilijs Melniks, a Latvian businessman who in August 2018 reportedly had some of his assets seized by the Ukrainian government because he is suspected of the embezzlement and laundering of 54 million euros on behalf of ousted pro-Russian Ukrainian president Viktor Yanukovych.
According to testimony given by Daniel Azougy to the Israeli receiver for Yosifoff’s estate, Yossifoff did not sell his shares in the casino willingly but was subject to “pressure” including a grenade thrown at him, although Azougy did not know if Russians or Israelis were behind the grenade incident.
In the mid-2000s, Yossifoff was in the habit of buying expensive shirts for then finance-minister Benjamin Netanyahu, Globes reported in 2017, based on the first-hand account of an unnamed former employee of Yossifoff who said he was dispatched on multiple occasions to buy the luxurious shirts and then deliver them to Netanyahu’s driver. Netanyahu told Globes that the account was completely untrue.
A banned industry
A binary option is an option contract whose payoff depends on the price of another asset, like gold, wheat, or Apple stocks. If the holders of the options guess correctly about the direction that the price has moved at the time of expiry, they earn a predetermined amount of money, and, if not, they lose the money “invested” in a particular trade.
In the case of the Israeli binary options industry, companies offering these contracts were largely fraudulent. They would dupe victims worldwide 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.
The industry, which employed thousands of Israelis, is estimated to have stolen billions of dollars from victims worldwide over a period of 10 years with little to no interference from law enforcement. Since Israel banned the entire industry with a Knesset law passed in October 2017, many former binary options operatives have pivoted to other financial products, including initial coin offerings or ICOs.
While US law enforcement has been devoting considerable resources and attention to Israeli binary options criminals, has made a number of arrests and issued several indictments, the December 26 Tel Aviv indictments mark the first time Israel’s state prosecution has charged alleged Israeli binary options criminals.