A landmark federal trial is set to begin Tuesday for an Israeli woman charged in the US with directing a scheme to defraud tens of thousands of investors across the globe out of tens of millions of dollars.
Jury selection for Lee Elbaz’s trial is scheduled to start Tuesday in Maryland. She is one of 15 defendants charged in the case and the first to be tried. Five of them have pleaded guilty and agreed to cooperate with prosecutors.
Elbaz was CEO of an Israel-based company called Yukom Communications. She is accused of engaging in a scheme to dupe investors through the sale and marketing of financial instruments known as binary options.
A separate indictment against nine other defendants says the scheme cost investors more than $145 million worldwide. The fraudulent Israeli binary options industry is estimated to have fleeced victims worldwide out of billions of dollars.
Last week, in a “trial brief” filed ahead of the Elbaz prosecution, the US government set out in rare detail the process by which Israeli binary options fraudsters defrauded their victims.
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.
Many of the fraudulent operatives have since moved their operations abroad, or switched to other scams, though Israeli law-enforcement authorities have proved unwilling or unable to prosecute more than a handful of alleged offenders. By contrast, the US government is ratcheting up efforts to bring Israeli offenders to justice.
Elbaz 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. Each of these four charges carries a maximum penalty of 20 years in prison. Elbaz denies the charges.
Federal prosecutors in Maryland have filed related charges against three other Israeli women who worked for Yukom. Shira Uzan and Liora Welles were charged last December with conspiracy to commit wire fraud. The same charge was filed in November against another defendant, Lissa Mel. Welles and Uzan, both of whom worked under Elbaz as sales representatives, pleaded guilty to the conspiracy charges during separate hearings. Welles and Uzan acknowledged that they were “directly responsible” for approximately $2.4 million and $1.8 million in investor losses, respectively, according to court filings.
According to the indictment, Yukom provided investor “retention” services for the binary options websites BinaryBook and BigOption. The indictment also alleges that Elbaz, together with her co-conspirators and subordinates, misled investors by falsely claiming that the company earned profits when the investor earned profits, when in fact the opposite was true. Elbaz and her co-conspirators also allegedly misrepresented the return on investment from BinaryBook and BigOption, as well as allegedly using aliases and claiming that they were calling from London, when in fact they were calling from Israel.
The US Justice Department’s “trial brief” summarized the “legal and factual issues” relevant to the trial. 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 marks confirmation by the US government of much of the reporting by The Times of Israel over the past three-and-a-half years on the methods binary options fraudsters used to dupe their victims.
The “trial brief” names several co-conspirators, including Yossi Herzog, Yakov “Kobi” Cohen, Ori Maymon (aka “Patrick Accardo”), Elad Bigelman (aka “Michael Goldberg”), Nissim Alfasi (aka “Nick Onasis”), Ronen Roytman (aka “Alexander Goldman”), Liora Welles (aka “Lindsay Cole,” “Lindsay Taylor,” and “Lindsey Wells”), Yair Hadar (aka “Steven Gold”), Shira Uzan (aka “Emily Laski”), and Austin Smith (aka “John Reid”).
Herzog, Alfasi, and Bigelman were among nine alleged binary options operatives, indicted by the US in February, whose indictments were only made public last month, all of them associated with BinaryBook.com and BigOption.com. The US alleges that Herzog, who was questioned by the FBI in Israel in January 2018, was the owner of a Mauritius-based company called Linkopia, as well as Israel-based Yukom Communications; it alleges that Alfasi was an employee of Yukom Communications and brand manager for BinaryBook; and it alleges that Bigelman was an employee of Yukom Communications and brand manager for BigOption.
Herzog’s lawyer said in a statement last month that his client “has just learned of the charges filed against him in the US a few days ago. He denies the allegations and intends to fight them and any extradition procedure, if commenced. At no point in time was he involved in any fraudulent scheme.”
Yukom Communications employees pretended to be from other countries, lied about their professional qualifications and adopted “stage names,” US authorities say. They falsely guaranteed returns of up to 40 percent. And they didn’t tell investors that the company handling their “binary options” trades only made money if its customers lost money, according to the FBI.
BinaryBook received customer deposits totaling nearly $99 million from the second quarter of 2014 through the fourth quarter of 2016 and returned just under $20 million to its clients during that period, according to records cited in an FBI agent’s September 2017 affidavit.
An email instructed BinaryBook sales representatives to target retirees, Social Security recipients, pension holders and veterans as clients, according to a court filing. Elbaz’s indictment says three victims were residents of Gaithersburg, Laurel and Annapolis, Maryland.
The scheme’s victims also include Eugene and Penelope Timmons, of Kansas City, Missouri. They dipped into life savings to invest approximately $110,000 through BinaryBook over nearly two years. They lost everything. “It was all a mess and a scam,” said Eugene Timmons, 82.
The couple thought they were talking to experienced brokers in London. Penelope Timmons, 72, said BinaryBook’s website initially created the illusion they were making money. “We couldn’t get our money out. All they kept doing was hand us off to other people,” Penelope Timmons said. “Once you realize these people have taken you, it’s very demoralizing and discouraging.”
In 2011, the FBI’s Internet Crime Complaint Center received only four complaints from victims of binary options fraud, reporting losses of just over $20,000. In 2016, however, the center received hundreds of these complaints with millions of dollars in reported losses.
“This has been a worldwide problem,” Justice Department prosecutor Ankush Khardori said during a September 2017 detention hearing for Elbaz, according to a transcript.
Defense attorney Jonathan Lopez, who represented Elbaz at that hearing, said his client worked for a legitimate business. “They do a lot of things in this (FBI) complaint to make it (seem) like this is some Nigerian boiler room or some sort of lottery scam. That is none of these things,” he said.
Elbaz and other co-workers made commissions based on the amounts of clients’ deposits, not their profits, prosecutors say. Her 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.