The United States Securities and Exchange Commission on Thursday charged two Israeli men and a German man with binary options fraud to the tune of $100 million.
The three defendants were named as Gil Beserglik, 63, an Israeli citizen living in Germany, his son Raz Beserglik, 33, who lives in Israel, and Kai Christian Petersen, a resident of Germany.
According to the complaint, the three men scammed US and foreign investors out of more than $100 million through the websites Bloombex Options, Morton Finance and Starling Capital.
The men operated call centers in Germany and Israel. The largest call center, which operated from Israel, went by the name of Five Stones Monopoly Marketing Ltd. It has since changed its name to Silverpop Media Ltd.
The SEC’s complaint, which was filed in federal district court in central California, describes how one elderly American investor lost $600,000 to Bloombex Options after an aggressive employee “used fraudulent statements and deceptive devices” to induce her to invest.
According to the complaint, from 2012 through 2016, the website Bloombex Options received about $80 million from investors worldwide, including the United States. Morton Finance allegedly had more than 8,000 US investors who deposited more than $14,775,000. Starling Capital allegedly had more than 2,700 investors who deposited nearly 3 million.
Once the money was “invested,” the defendants usually refused to allow these clients to withdraw their money, the complaint alleges.
There is no evidence in publicly available court or police records that Israeli prosecutors or police have ever investigated the company or its executives for suspected wrongdoing.
According to the complaint, the defendants laundered millions of dollars of stolen money through the British Virgin Islands companies Shraga Holdings Ltd. and Lembex Global Investments Ltd., which are controlled by Gil Beserglik.
Deceptive websites and salespeople
According to the complaint, the alleged fraud began with the Bloombex Options website itself, which resembled a legitimate broker’s website but on which no real trading was taking place. Instead, investors were actually trading against the brokers behind the website, who made money when the investor lost money, the complaint alleges.
The money that appeared to be in investors’ accounts was not actually there, alleges the complaint.
“The Bloombex Brokers did not have the funds necessary to cover the liabilities they owed to investors because… they used investor money to cover their expenses.”
Among these liabilities were payments to affiliate marketers, who allegedly drove traffic to the website with videos and other promotions. According to a February 2019 investigation published on the website Finance Uncovered, which the Times of Israel also worked on, one affiliate marketer that promoted Bloombex Options was called Binaryaffilates.com and was owned in part by Ran Sheleg, the brother of Ehud Sheleg, the recently knighted treasurer of Britain’s governing Conservative Party.
According to the complaint, conversion agents in the call centers typically made up to 200 calls a day, reached 30-60 customers and got three to eight people to deposit daily. Call center employees allegedly lied about their names, location, titles, experience, and the fact that they made money when the client lost money. At their height, the three call centers employed 200 people altogether, the complaint claims.
Investors allegedly would often be lured into the website with the promise that they could use algorithmic trading software or a “bot” that would trade for them, but sales agents were allegedly instructed to dissuade investors from trading with the software and to encourage them to trade with a “financial adviser” instead.
One script instructed sales agents to say, “the problem with the software is that it doesn’t know when something is going on (ex: Brexit, NFP, elections) so it just keeps on placing trades all day and that’s what we would call unnecessary risk, wouldn’t you agree?”
Retention agents allegedly frequently told investors that if they invested in the five-to-six figure range they would receive “VIP,” “gold,” or “platinum” status which would supposedly give them access to more experienced brokers and bigger bonuses or payouts.
“In reality,” claims the complaint, “there were no real benefits to the so-called VIP status and it was merely a trick to lure more and larger deposits.”
The Bloombex brokers allegedly would cause investors to win trades in the beginning to boost their confidence, as well as withdraw small amounts of money, according to the complaint.
The company was allegedly in touch with SpotOption, the platform provider, and would change the investors’ “risk settings,” to allow them to win or lose trades, according to the complaint.
“In one email from July 2015, a Bloombex Options Call Center representative emailed SpotOption, its platform provider, saying, ‘Client won last 10 trades in a row in the 60 seconds platform. Please put this client on high risk,’” the complaint said.
The SEC’s complaint is civil as opposed to criminal, and seeks to require the defendants to return the money they allegedly stole as well as pay financial penalties and refrain from further solicitation of investments. If the United States Department of Justice were to follow up with charges of its own against the defendants, they would face possible prosecution and jail time.
Attorney for alleged victims: ‘A New Year’s gift’
Yoram Fay, an Israeli attorney who has filed lawsuits in Israeli court against the people allegedly behind Bloombex Options, SternOptions and related websites, told the Times of Israel that “this SEC lawsuit was a New Year’s gift for those of my clients who are in the midst of a trial.”
In a protocol dated July 3, Attorney David Biton, who is representing some of the defendants, argued that the plaintiffs, represented by Fay, could not prove that the employees and owners of the Israeli call center Five Stones Monopoly Marketing had anything to do with the money the plaintiffs claimed to have lost.
In addition to Raz Beserglik, Fay sued Gil Beserglik’s brother, Yishai Beserglik, a former director of the Israeli call center. He also sued Ati Bar Ilan, Raz Beserglik’s stepfather, who owns a company called Citrin Technologies Ltd. that Fay has alleged is also connected to the fraud. Ati Bar Ilan is a former coach of the Maccabi Petah Tikva soccer team.
All of the defendants in Fay’s lawsuit have rejected the charges against them.
Fay told the Times of Israel that in general, he has found Israeli judges to be very skeptical about the connection between the offshore companies that own binary options websites and Israeli executives and employees of local call centers. He described the attitude of both the binary options lawyers and, at times, the judges as “mocking.”
“This SEC action will force Israeli judges to see the truth. I think some judges prefer to deny the Israeli contribution to this scam industry. Now they cannot ignore the fact that Israel is the proper jurisdiction for these cases.”
Several members of the Beserglik family are involved in the real-estate industry. According to the SEC complaint, when Gil Beserglik opened a bank account for Shraga Holdings in October 2015, he told the bank “he now invests in real-estate and is the owner of Bloombex Options with his son Raz Beserglik.”
Public records show Gil Beserglik owns several real-estate related companies in Germany. Meanwhile, his brother, Yishai Beserglik, owns Beserland Properties, an Israeli company that advertises high-end luxury apartments in Tel Aviv.
The SEC’s investigation was conducted by Jason Anthony, Michael Fuchs and Deborah Maisel and supervised by Jennifer Leete.
Bloombex Options was one of hundreds of binary options websites run from Israel in recent years. 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.”
Many of the fraudulent operatives have since moved their operations abroad, or switched to other scams while continuing to operate from Israel. The vast majority of the perpetrators have enriched themselves at the expense of victims around the world while enjoying impunity and suffering little social stigma.
Lax Israeli law enforcement
Israeli law enforcement has proven unable or unwilling to effectively tackle the country’s Internet scams, despite the fact that for several years they have operated at an industrial scale.
The US authorities are increasingly tackling the fraud, however. Earlier this year, the US Justice Department indicted 15 Israeli binary options operatives in connection with the allegedly fraudulent websites BigOption.com and BinaryBook.com. Five of them have pleaded guilty, while another, Yukom Communications CEO Lee Elbaz was convicted by a Maryland jury on August 6 for her role in a $145 million fraud.
A recent article in Finance Magnates, a trade publication for Israel’s online trading industry that is read by many binary options and cryptocurrency operatives, claimed that as a consequence of the US Department of Justice prosecutions, many Israeli binary options executives are afraid to travel to the United States or even to travel abroad period.
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.
“Such an ongoing and vast illegality could have been made possible only by a systematic failure of law enforcement,” Nimrod Assif, a lawyer who has sued binary options companies, told The Times of Israel.
“While in many areas, like technology and the academy, Israel is at the forefront of the developed world, in this area Israel seems to be falling behind other developed countries, especially the United States. In taking more enforcement actions, the United States can help the state of Israel, not only by signaling to lawbreakers in Israel that they cannot act with impunity, but also in leading the way for Israeli enforcement agencies.”