GREENBELT, Maryland — Deeming her a flight risk, a federal judge in Maryland has refused to free an Israeli woman on bail while she awaits sentencing for orchestrating a scheme to defraud tens of thousands of investors across the globe out of tens of millions of dollars.
US District Judge Theodore Chuang ruled Tuesday that Lee Elbaz hasn’t shown there are release conditions that will “reasonably assure” her appearance at a December sentencing hearing.
In August, Elbaz was taken into custody after a jury convicted her of three counts of wire fraud and one count of conspiracy to commit wire fraud. Each charge carries a 20-year maximum jail term, but experts say Elbaz is unlikely to face the maximum and that terms would be expected to run concurrently.
Elbaz was CEO of an Israeli company that operated in the sale and marketing of financial instruments known as “binary options.”
A prosecutor said Elbaz trained employees to lie to investors and rigged the odds against them making money.
Elbaz was convicted August 7 for her role in a vast scheme to defraud investors all over the world out of more than $145 million. As the jury foreman stood up and read out the words “guilty,” “guilty,” “guilty,” “guilty” on all four counts, Elbaz’s mother ran sobbing out of the courtroom while Elbaz sat in stony silence. Sentencing was set for December 9.
Elbaz had been free on bail and living with a relative in San Francisco while awaiting trial. District Judge George Hazel ordered her taken into custody immediately after the jury’s verdict.
Elbaz was the CEO of Yukom Communications Ltd., one of more than a hundred binary options companies that operated in Israel between the years 2008-2018.
Elbaz 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 is one of 15 defendants who worked for Yukom, which operated the websites BigOption and BinaryBook, and was the first to be tried. 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 participating in a scheme to “defraud investors in the United States and across the world.”
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.
Mel was jailed for a year on August 29. Welles was sentenced to 14 months in prison last month. Yair Hadar was sentenced on September 23 to eight months in prison.
Nine other defendants were indicted in February. The separate indictment against the 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.
The indictment against the nine additional defendants appears to have disappeared from the Pacer.gov website.
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.
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.
“No one here was interested in helping clients,” said prosecutor Atkinson. “It was all a plan to steal money.”
Defense attorney Barry Pollack argued that Elbaz didn’t condone any of the fraudulent tactics used by employees who worked under her supervision at a call center in Caesarea, Israel. 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].”
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 widely fraudulent industry, employing thousands of Israelis, allegedly fleecing billions out of victims worldwide.
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.