Jury hears closing arguments in fraud trial of Israeli binary options operative

GREENBELT, Maryland — An Israeli company executive who proudly called herself a “money-making machine” was at the heart of a scheme that defrauded tens of thousands of investors out of tens of millions of dollars, a federal prosecutor told jurors Thursday at the close of the woman’s trial.

Lee Elbaz, 38, was charged in Maryland with conspiring with employees under her supervision to bilk investors across the globe through the sale and marketing of financial instruments known as binary options.

She trained employees to lie to investors and rigged the odds against them making and recouping any money, Justice Department prosecutor Rush Atkinson said during the trial’s closing arguments.

“There is no way this fraud happened without Lee Elbaz,” Atkinson said. “Everybody told the exact same lies because that is what Ms. Elbaz trained them to do.”

Elbaz’s defense attorney, Barry Pollack, told jurors that his client never crossed a line between “selling” and committing fraud.

“She drew the line exactly where she believed the company’s lawyer told her was the proper place to draw the line,” Pollack said.

Jurors began deliberating after hearing two hours of closing arguments and 10 days of testimony for the case against Elbaz, who is charged with three counts of wire fraud and one count of conspiracy to commit wire fraud.

The jury deliberated for nearly three hours on Thursday before going home. The jurors will return on Friday.

Elbaz was CEO of Israel-based Yukom Communications. She is one of 15 defendants in the case and the first to be tried. Five have pleaded guilty and agreed to cooperate with prosecutors. Nine others were indicted in February.

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 the industry’s height, hundreds of companies in Israel were engaged in the fraud, employing thousands of Israelis.

Pollack said other employees who worked under Elbaz’s supervision at a call center in Caesarea, Israel, did engage in fraudulent activity without her knowledge or consent. He said his client knew she couldn’t lie about the product her company was selling. “Everything else is permissible,” he said.

Four former Yukom employees who worked under Elbaz testified at her trial. “Each of those cooperators has zero credibility,” Pollack said. “Four times zero is still zero.”

Elbaz, who also testified, wiped away tears as her attorney delivered his closing arguments.

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.” 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.

Yukom provided sales and marketing services for BinaryBook and BigOption, the brand names for internet-based businesses that purportedly sold and marketed binary options.

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 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.

A separate indictment against nine other defendants, including Yukom owner Yosef Herzog, says the scheme involving BinaryBook and BigOption cost investors more than $145 million worldwide, including thousands of victims in the US.

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.

Yukom employees pretended to be from other countries, lied about their professional qualifications and adopted “stage names.” Elbaz used the alias “Lena Green” while interacting with investors, according to prosecutors.

Yukom employees also falsely guaranteed profits, lied about their historical rates of return, and didn’t tell investors that they only made money if their customers lost money, prosecutors said.

“No one here was interested in helping clients,” Atkinson said. “It was all a plan to steal money.”

An email instructed BinaryBook sales representatives to target retirees, Social Security recipients, pension holders and veterans as clients, according to court filings accompanying guilty pleas by former employees.

Elbaz’s indictment cites a September 2015 email from one employee to co-workers about a sales “marathon,” a competition to obtain deposits from investors. “This is not a cemetery here! It’s a boiler room!” the employee wrote.

Atkinson said it was impossible for Elbaz to miss the rampant fraud in the office she ran. “You could not have missed the lies that were being told daily from where Ms. Elbaz sat,” the prosecutor said.

Elbaz urged her employees in writing to “work clean,” her attorney said. “The employees that were defrauding clients were also defrauding Ms. Elbaz,” Pollack said. “She was trying to prevent (fraud).”

Earlier in the trial, the prosecution 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 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.

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.

In a trial brief filed shortly before the Elbaz trial began, the US government set 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 provides confirmation by 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.

Times of Israel staff contributed to this report.