Binary options fraud

Israeli woman on trial for fraud called herself a ‘f-cking money-making machine’

FBI reveals conversations in which binary options operative Lee Elbaz took credit for allegedly fraudulent firm’s success, dished about her bosses, worried about traveling to US

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

Lee Elbaz, an Israeli woman convicted in August 2019 for binary options fraud, enters the Greenbelt, Maryland courthouse on July 25, 2019. Behind her is Larry Burton, an American man who testified during the trial that he lost $140,000 to the Israeli-run website  (Photo credit: Times of Israel)
Lee Elbaz, an Israeli woman convicted in August 2019 for binary options fraud, enters the Greenbelt, Maryland courthouse on July 25, 2019. Behind her is Larry Burton, an American man who testified during the trial that he lost $140,000 to the Israeli-run website (Photo credit: Times of Israel)

GREENBELT, Maryland — Israeli binary options operative Lee Elbaz, who is currently on trial in the United States for wire fraud and conspiracy to commit wire fraud, described herself as a “f-cking money making machine” in an audio recording of a phone conversation presented at her trial.

In a conversation that the FBI retrieved from Elbaz’s phone shortly after her arrest in September 2017, she complained that while she had made millionaires of the owners of the companies she managed, she herself only earned about $500,000 during her three years overseeing the brands and

“I don’t want to sound arrogant, that’s not my thing, but I’m a fucking money-making machine,” she told a friend named Rami Regaim in a conversation presented during the July 24 testimony of Gregory Fine, one of the FBI agents who investigated the case.

“I started three years ago, when the company had six employees and was bringing in $30,000 a month,” she said in the recording from 2017. “I brought the company to 140 workers just in Israel and $12 million a month.”

Elbaz, 38, said in the recording that she had worked so hard at Yukom Communications and associated companies that she neglected her personal affairs.

“I gained 45 kilos [100 pounds]. I used to be a stunning woman. I worked from 9 a.m. till 4 a.m. I didn’t take weekends or holidays off.”

Elbaz described Yossi Herzog and Kobi Cohen as two of the owners in the binary options enterprise she had run. She mentioned that Cohen had recently obtained a license in the Congo to open a sports betting company and that she and other Yukom principals had become partners in that business.

“We were all partners in the company. I invested $100,000 to buy 3 percent.”

The binary options brands Elbaz oversaw, and, were run from at least three related companies: Yukom Communications in Caesarea, Numaris Communication in Tel Aviv, and Linkopia in Mauritius.

Yossi Herzog, seated third from right, at a July 31, 2018, Knesset Reforms Committee meeting to discuss legislation banning binary options (Times of Israel staff)

Altogether, the alleged conspiracy resulted in investor losses exceeding $145 million, according to a related February 2019 indictment against Elbaz’s boss, Yukom Communications owner Yossi Herzog and eight other defendants.

Herzog is presently in Israel and the US government is preparing to send an official request for his extradition. He denies all wrongdoing. Yukom Communications was one of over 100 binary options companies that operated from Israel in recent years.

In the recorded conversation, Elbaz hinted at even more locations where she conducted business, referring to offices in Ukraine and Turkey.

“I was in charge of all the company’s branches in the world,” she said.

Elbaz described her boss, Herzog, the owner of Yukom Communications in Caesarea, as “a marketing genius. He has unbelievably good ideas,” she said, but added that “it’s hard to get along with him.”

“He’s very impulsive,” she said.

She said that she had learned from Kobi Cohen everything she knew about the human side of the business and how to handle people.

Elbaz was arrested by the FBI on September 14, 2017, as she got off a plane at JFK airport in New York. She was indicted by a US federal grand jury in March 2018 for allegedly participating in a scheme to “defraud investors in the United States and across the world.” She has been charged in the District of Maryland with one count of conspiracy to commit wire fraud and three counts of wire fraud, according to a press release by the US Justice Department. The prosecution’s case was prepared by Department of Justice trial attorney Ankush Khardori along with Tracee Plowell. It was investigated by FBI special agents Jeremy Desor and Gregory Fine. Department of Justice attorneys Henry Van Dyck, Rush Atkinson and Caitlin Cottingham are representing the US government at trial.

Elbaz’s trial opened on July 16 and is expected to run until August 2. At the trial’s outset, her attorney Barry Pollack argued that employees acted on their own, without Elbaz’s authorization.

“Ms. Elbaz was not perfect,” he reportedly said.

“Ms. Elbaz had many failings as a manager. But she “did not authorize employees to do what they did.”

Five former employees of Yukom Communications Ltd. and Numaris Communication Ltd. in Israel — Lissa Mel, Shira Uzan, Liora Welles, Austin Smith and Yair Hadar — signed plea deals with the US government. All but Mel have testified at the trial on behalf of the prosecution, saying that Elbaz instructed them to lie to investors in order to get those investors to deposit as much money as possible, and to do everything possible to prevent them withdrawing their funds.

Lee Elbaz’s attorney Barry Pollack arrives at federal court for jury selection in her trial in Greenbelt, Maryland, July 16, 2019 (AP Photo/Jose Luis Magana)

Elbaz took an alert interest in the proceedings, frequently scribbling notes that she passed to her lawyer. Near the beginning of the trial, one of Elbaz’s family members sat down next to a juror in the courthouse cafeteria, The Times of Israel was told by others present, and was subsequently admonished by Judge Theodore Chuang.

Federal prosecutors alleged that far from being unaware of the fraud her employees were committing, Elbaz directed her sales agents to lie over the phone in addition to lying herself.

“The defendant lied to clients, lied to victims over and over again,” federal prosecutor Caitlin Cottingham reportedly said at the trial’s outset.

‘I’m flying to New York. Should I be afraid?’

On September 11, 2017, Elbaz had written a WhatsApp message to her boss, Herzog. The message was presented as evidence by the prosecution on July 24.

“Yossi,” she wrote. “I’m flying to New York, is there anything I should be afraid of?”

Herzog replied, “I just came back from ten days in the US. Go!”

Three days later, Elbaz was arrested at JFK airport. She signed a Hebrew-language document apprising her of her Miranda rights and was questioned by two special agents at the FBI office in JFK airport.

During the trial, the prosecution played snippets from the videotaped interview.

“The story we hear is always the same,” one of the FBI agents said to Elbaz in September 2017. “Investors try to get their money back and are unable to.”

“That’s really really really weird, really weird, really weird. I never heard of someone who asked to take his money and didn’t,” Elbaz replied.

In another snippet, Elbaz told the agents, “95 percent of clients lose money, I used to say it all the time. You need to know how to handle your account. Teach a client to trade properly and they can learn a lot, not be part of that 95 percent.”

The prosecution also played an audio recording of Lee Elbaz speaking to a Norwegian client named Thomas Christiansen while using the pseudonym Lena Green. She recorded the call and emailed it to her employees with the commentary “It’s my call to show you they all have money. Good luck.”

During the call, Elbaz persuaded an initially irate Christiansen to continue trading and even to deposit more money.

She began by apologizing for her poor English, claiming that her first language was Russian. She also said that she had three children and was 46 years old.

None of these descriptions are true of Lee Elbaz.

In the recording, Christiansen could be heard complaining, “I want to close my account. For a long time I tried to withdraw. I really need [the money]. Every time I try to withdraw I can’t.”

Elbaz, using the name Lena Green, expressed surprise. “Really? With us?”

Elbaz told Christiansen she was disappointed with the conduct of previous account managers and said that from now on she planned to work directly with him.

“Usually I don’t handle clients of less than 250,000,” she said. “We will build a plan to recover the 50,000 you lost.”

She added flirtatiously, “I like you. You must work with me. I need you to be my partner, my husband for the next six months.”

The prosecution also displayed an August 2016 email in which Elbaz sent an email to Yossi Herzog and Kobi Cohen containing links to four articles from The Times of Israel: “The Wolves of Tel Aviv,” “Israeli regulator: Binary options fraud disgusting, ruinous to our reputation,” “Sharansky to Israel’s regulators: Shut down ‘repugnant, immoral’ binary options” and “Though fearing closure, the Wolves of Tel Aviv enjoy the party ‘while it lasts.’

Next to the article about then-Israel Securities Authority chairman Shmuel Hauser seeking to shut down Israel’s binary options industry, Elbaz commented, “the most important one.”

The binary options industry was eventually outlawed by the Knesset in October 2017 but multiple sources have told The Times of Israel that it continues to operate under the guise of forex, CFD or cryptocurrency trading sites from both Israel and abroad. Shmuel Hauser stepped down unexpectedly from his post as Israel Securities Authority chairman in November 2017.

SpotOption’s website offered a range of tools and services for binary options companies including payment platforms and risk management. (Screen capture:

The prosecution also presented a series of emails in which Elbaz interacted with SpotOption, the company that provided the platform for BigOption and BinaryBook and claimed to do so for hundreds of binary options websites. In these emails Elbaz requested that SpotOption put a client on “high risk” or “low risk.” Witnesses for the prosecution claimed that this meant SpotOption could fraudulently manipulate the outcome of trades but Elbaz’s defense attorney argued that nowhere did Elbaz explicitly tell SpotOption she wanted to prevent clients from winning.

Pollack further argued in Elbaz’s defense that clients of BigOption and BinaryBook had agreed to terms and conditions that explicitly stated that binary options trading is high risk and clients could lose all their money.

FBI agent Fine also told Pollack during cross-examination that the FBI had obtained “hundreds of thousands” of pieces of evidence in connection with the Elbaz case.

Binary options fraud flourished in Israel for about a decade before the entire industry 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 were engaged in the fraud, employing thousands of Israelis.

In a “trial brief” filed shortly before the Elbaz trial began, the US government sets out how binary options fraud was generally perpetrated, describing how victims were approached, lured in, lied to, encouraged to make ever-greater deposits, and thwarted if and when they tried to withdraw their money. Setting out in detail the means by which Elbaz allegedly fleeced her victims, the prosecution document constitutes a devastating insight into the cynical practices by which the fraudulent industry stole immense amounts of money from trusting victims around the world. The document confirms on behalf of the US government much of the reporting by The Times of Israel over the past three-and-a-half years, regarding the methods by which binary options fraudsters duped their victims.

The trial continues. Elbaz denies the allegations against her.

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