‘Protect the public,’ Tel Aviv judge in forex fraud case urges state, is ignored

A judge hearing a civil lawsuit alleging forex fraud that has been winding its way through Tel Aviv District Court since 2015 has repeatedly asked law enforcement to investigate the case, but has been fobbed off by the state authorities with delayed and noncommittal responses, court documents show.

The standoff underlines the perplexing, years-long failure of Israeli law enforcement to prosecute alleged internet scammers who continue to operate freely from Israel and have stolen billions of dollars from victims at home and, especially, around the world.

Tel Aviv District Court Judge Magen Altuvia has for the past five years presided over a lawsuit against the forex website Trade-24.com. The plaintiffs, a middle-aged American-Israeli couple, claim that the Israeli men who allegedly ran the site, Israel Figa, Avraham Spielmann and others, defrauded them out of $241,519. Both Figa and Spielmann deny any wrongdoing.

In late 2018, defendants Figa and Spielmann had a falling out, leading Spielmann to take revenge by providing a cache of internal company documents to the plaintiffs. These documents, submitted to the court, not only provide a rare and startling glimpse into the inner workings of a secretive Israeli forex company, whose employees used fake names and often pretended to be based in London, Paris or Switzerland; the document leak and subsequent events also appear to have persuaded the judge, Magen Altuvia, to ask the attorney general to open a criminal inquiry into the company.

To no avail.

On June 2, 2019, Altuvia ruled that “the [office of the] attorney general will respond by September 5, 2019, as to whether it is of a mind to join the case. In addition, the appropriate people within the Justice Ministry and the Attorney General’s Office will examine whether it is fitting to inform regulators or the Israel Police about everything concerning this lawsuit, the conduct that arises from it, both before it was filed and during its conduct.”

But a year later, his demand is still being ignored: As of July 9, Altuvia said, he was still waiting for a substantive response.

“I am waiting for clarification from the attorney general as to why there shouldn’t be an investigation of the alleged facts that arise from this lawsuit. It reaches the level of a need to protect the public. The court secretary will pass on this ruling to the district prosecutor.”

A few days later, the court received a response from Merav Kenig Wallerstein, head of the Commercial Department of the Tel Aviv prosecutor’s office.

“We would like to reiterate the update we submitted on September 5, 2019, in which we said that material from the court case has been passed on to the relevant law enforcement entities. Law enforcement will act on the matter in accordance with their duties and judgement. When there is a decision on the matter we will send an update to the honorable court.”

Nimrod Assif, the attorney representing the plaintiffs, told The Times of Israel he was not impressed with the response of the Tel Aviv prosecutor’s office.

“As far as I know neither the police nor any other law enforcement authority has made an attempt to investigate this case. If they had done anything I think I would have known. The July 16 response that the government filed looks to me, it’s sad to say, like a brush-off.”

Divergent paths for Americans in Israel

One of the interesting aspects of the Trade-24 case is that many of the key players are American citizens. The plaintiffs, who devastatingly lost much of their savings, are a highly credentialed professional couple who immigrated to Israel and found employment in the high-tech industry.

Their broker at Trade-24, on the other hand, a man named Steve, was an American immigrant to Israel who struggled to find employment after a midlife divorce, then ended up, like many American immigrants, employed in a call center using a fake name and credentials.

Israel Figa, an ultra-Orthodox man from Bnei Brak and the alleged owner of Trade-24, is also an American citizen, according to court documents.

Even the platform provider of Trade-24.com, a company called Leverate, which took a percentage of Trade-24’s earnings, court filings show, has an American as its largest shareholder. A man named Simon Kukes, who owns 28 percent of the company, has been a shareholder in Leverate since December 2014. Kukes does not appear to have ever lived in Israel but is an American citizen with close ties to the Kremlin who has been in the news because he contributed generously to Donald Trump’s 2016 election campaign.

Moreover, Trade-24 targeted American investors, as evidenced by ads it placed in American news outlets catering to a religiously observant Jewish readership, like the Jewish Press, Yeshiva World News and VosIzNeias.com.

According to the complaint in the lawsuit, the plaintiffs began trading on the website in June 2014 and lost $241,519 within three months.

Much about Trade-24 resembled the conduct of Israel’s largely fraudulent binary options industry, including the use of call centers, the high-pressure sales tactics and the failure to disclose that the company made money when investors lost money. But Trade-24 did not offer binary options trading, where the platform provider could change the odds of an investor winning or losing trades. Instead, Trade-24 offered highly leveraged forex trading, where the customer almost always lost the money they invested through a mechanism called margin calls.

The plaintiffs in the Trade-24 case received leverage of 1:100 to 1:200. Leverage is a kind of loan that Trade-24 gave the investor. Thus, a client could invest $1,000 and enter a trade for $100,000 (1:100 leverage). Leverage increases the risk of a trade because small fluctuations in the price of a currency lead to huge movements in the amount gained or lost. Thus, with leverage of 1:100, if the value of a currency changed by 1 percent to the client’s disadvantage, they would lose the entire sum invested in a trade.

According to the complaint, the plaintiffs’ brokers allegedly failed to disclose to them the high-risk nature of leveraged trading, allegedly failed to disclose that Trade-24 made money when the client lost money, and allegedly failed to disclose that brokers earned a percentage of net deposits, meaning that they earned a percentage of the total amount of money an investor deposited minus the amount they withdrew.

The brokers also allegedly failed to disclose that they were financially incentivized by their employers to urge the clients to increase their trading volume as much as possible. In addition, the brokers allegedly represented themselves as expert investment advisers, often using fake names and biographies, when in fact they possessed no such credentials.

In their defense, the defendants claimed that the plaintiffs knew forex trading was high-risk and had entered into these investments willingly. They also denied that Israel Figa owned Trade-24.com but rather claimed that he was simply a vice president of business development for Bull Markets Investments Ltd., an Israeli company that provided marketing services to forex companies registered abroad.

Trade-24.com has been the subject of warnings from regulators around the world, including Italy’s CONSOB, the FCA, the Ontario Securities Commission and France’s AMF.

An unexpected breakthrough

By October 2018 the trial had reached the evidence stage. One day, the plaintiffs were sitting in the cafeteria at the Tel Aviv District Court when they were approached by an ultra-Orthodox man who identified himself as Mordechai Berl Daskal, a close associate of Spielmann. Spielmann and Figa had quarreled, the man told the plaintiffs, and it was his wish to provide them with documents that would incriminate Figa. Over the next three months, Spielmann and Daskal scanned a large number of internal company documents and emailed them to Nimrod Assif, the plaintiffs’ lawyer. Spielmann even testified against Figa in court in October 2018, but eventually changed his mind and stopped helping the plaintiffs. In later court hearings, Spielmann said vaguely that some of the documents he gave to the plaintiffs “may have been forged,” without pointing to specific documents.

The documents leaked by Spielmann and Daskal show how Trade-24.com did not operate in a vacuum but relied on a global ecosystem of call centers, lead providers, a platform provider, banks, payment processors, money service providers and gemachim (Orthodox Jewish free-loan societies) to get money from their clients all over the world to the company’s beneficiaries.

For instance, Trade-24.com was operated using companies in at least seven countries: Israel, Ukraine, Bulgaria, the UK , Hungary, Seychelles and the Marshall Islands. It had three call centers, one in Israel, one in Ukraine and one in Bulgaria. Trade-24 had bank accounts all over the world and worked with no fewer than 10 companies that allowed it to accept payments over the internet from investors. These were BSG, Counting House/Pacnet, Andaria/Intercash, Emerchantpay, Transact Europe, MoneynetInt, Skrill, Upaycard, Astech and GTS Payments.

Spielmann also gave the plaintiffs about two years’ worth of eye-opening WhatsApp chats between himself and Figa. Most of the conversations revolve around depositing and retrieving money, interspersed with gossip about other operatives in the forex and binary options industry, news items Figa shared about ultra-Orthodox alleged fraudsters getting caught, as well as divrei Torah or inspirational Torah lessons.

Throughout the WhatsApp exchanges, Spielmann describes withdrawing money, sometimes tens of thousands of dollars, from “changes” (extra-bank money service providers) and depositing money in gemachim.

“Call Berger, order the money for tomorrow,” Figa instructed Spielmannn in a message dated February 15, 2014.

Figa was referring to Reuven Zeev Berger, the owner of a “change” or extra-bank money service institution in Bnei Brak who was arrested [Hebrew link] by Israeli police in September 2014 for allegedly being part of an international money laundering network. In 2016, Israeli police recommended indicting Berger but the state prosecutor has not yet done so.

“I’m thinking of moving all the money to the Mir gemach,” Figa said a few days later.

“Okay,” responded Spielmannn.

“It’s a gemach of over 100 million dollars,” Figa remarked.

A gemach is run by volunteers and allows members of the community to deposit money and and others to receive loans interest-free. There are thousands of such free-loan societies in Israel’s one-million strong ultra-Orthodox, or Haredi, community, with total deposits estimated by one economist to be between NIS 5 billion ($1.4 billion) and tens of billions of shekels. But gemachim are believed by some observers to be a vehicle for tax evasion and/or money laundering.

Figa — who got his start working at Forex Place under the tutelage of Yossi Herzog, who is currently a fugitive from US justice — frequently gossiped about his colleagues in the forex and binary options businesses. In his messages to Spielmann, he mentioned meetings with Shalom Peretz, who has been associated with Yukom Communications, David Bitton, a lawyer who worked with Trade-24, and Ran Strauss, one of the shareholders of Leverate.

In one exchange, Figa described opening a call center in Bulgaria.

“Shimmy just landed in Bulgaria, he’s opening a company there with Yaakov,” he wrote in January 2015.

“It looks good, the average salary there is 400 Euros. The company that’s helping him there is opening up a binary options call center with 250 people! It’s all automatic there. There’s a robot that makes the sales calls. We have a bunch of old leads and this will be a call center that warms up the leads. Because it’s not worth paying an Israeli for old leads. We’ll dump the leads there and we’ll close here [in Israel]. It’s going to be like fire!” Figa wrote.

Where are the police?

When the plaintiffs first sued Trade-24.com, the judge asked them why they hadn’t checked if the company was licensed.

One of the plaintiffs told The Times of Israel, “I was bewildered by the question. It was operating in full public view out of a fancy building in Ramat Gan, not a back alley in a Tel Aviv slum. Where were the Israel Securities Authority, the Knesset, the police?”

Trade-24.com is no longer operational. Israeli court records show that Spielmann has since moved on to run a forex and cryptocurrency website called Marketscube.com, which has been the subject of regulator warnings from Belgium’s Financial Services and Markets Authority and Britain’s Financial Conduct Authority.

Israel’s forex industry was and remains a close cousin of the largely fraudulent binary options industry, which flourished in Israel for a decade before it 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 employed thousands of Israelis who allegedly fleeced billions out of victims worldwide. The fraudulent firms would dupe victims 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.

Israeli prosecutors have yet to indict a single binary options suspect on charges of fraud, while the United States has indicted about two dozen, with seven convictions of Israelis, and taken civil enforcement actions against many others.

Business is booming

Many former binary options companies are now selling forex and cryptocurrencies from call centers located in Israel and Eastern Europe. In recent months, these companies have once again begun advertising openly for sales agents on Facebook, after several years of keeping a relatively low profile.

Facebook groups like “Jobs for Multilinguals in Israel” are once again filled with help-wanted ads for “telemarketing” or “retention agents” to work in “global” or “financial” companies.

One such ad explains that this industry has, uniquely among industries in Israel, not taken a hit from the coronavirus.

“One million unemployed people have already signed up for the [unemployment benefits],” reads the Facebook ad. “In our company we are still recruiting and still succeeding in the financial field!”