Five days after binary options CEO Lee Elbaz was criminally convicted of wire fraud and conspiracy to commit wire fraud by a Maryland jury, she and her former bosses have been slapped with a civil enforcement action by the US Commodities Future Trading Commission (CFTC).
On August 12, the CFTC filed suit in the Northern District of Illinois against companies and individuals associated with the binary options websites BigOption, BinaryBook and BinaryOnline charging them with “fraud relating to a global retail binary options enterprise that targeted and victimized US residents.”
The defendants in the complaint are Yakov Cohen, Yossi Herzog, Lee Elbaz, Shalom Peretz, Yukom Communications Ltd., Linkopia Mauritius Ltd., Wirestech Limited, WSB Investments Ltd., and Zolarex Ltd.
The CFTC complaint parallels and rests on many of the same facts as the criminal indictments against Yukom Communications CEO Lee Elbaz, who was convicted on August 7, and Yukom Communications and Linkopia owner Yossi Herzog, who was indicted by a Maryland grand jury in February. But the CFTC complaint also reveals some tantalizing new details about the five companies that the CFTC has collectively dubbed the “Yukom Enterprise.”
According to the complaint, Yossi Herzog’s partner in the Yukom enterprise was a man named Yakov (Kobi) Cohen.
Shockingly, the complaint alleges that the two business partners allegedly continue to solicit customers even after Herzog was indicted by the US government.
“Upon information and belief,” states the complaint, “the Yukom Enterprise continues to solicit customers, including customers in the United States, through the BinaryOnline website.”
Herzog lives in Israel. The US government is preparing to request his extradition. He denies any wrongdoing.
Binary options trading became illegal in Israel in January 2018. Nevertheless, according to the complaint, “at least as recently as September 24, 2018, the BinaryBook and BinaryOnline websites remained online and accessible to US customers.” A source told The Times of Israel that BinaryOnline’s call center was located in Sofia, Bulgaria.
The complaint further alleges that Herzog and Cohen continue to operate in the online trading space to this day.
“Upon information and belief, Cohen and Herzog, along with other members of the Yukom Enterprise, are now soliciting customers, including customers in the United States, to enter into transactions involving forex, crypto-currencies, contracts for difference and other financial products under the Commission’s jurisdiction and are likely engaging in similar fraudulent conduct in connection with that activity.”
The complaint further reveals that despite these suspicions on the part of the US government, Kobi Cohen owns an Israeli forex company called First Index Ltd.
Herzog and Cohen became partners in First Index in February 2016, according to documents seen by The Times of Israel, and the company received a license to work with Israeli clients from the Israel Securities Authority in October 2016.
Binary options fraud flourished in Israel for about a decade before the entire industry was outlawed via Knesset legislation in October 2017. 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.
The CFTC complaint names Shalom Peretz as one of the defendants, claiming he “has had an ownership interest in Wirestech, WSB and Zolarex at various times between March 2014 and the present.”
According to the complaint, Herzog and Cohen founded the Israeli company Yukom Communications prior to 2014 and have been its primary beneficial owners since.
The company, which operated the websites BigOption, BinaryBook, and BinaryOnline, described itself in marketing materials as having over 500 employees, according to the complaint, including in Israel, Australia, Ukraine, Turkey and Mauritius.
The companies allegedly used over 100 offshore bank accounts, including in the Czech Republic, Dubai, Israel, Lithuania, Malaysia and Taiwan.
The complaint also alleges that the binary options offered and sold by the defendants “are not actual transactions, but rather book entries that give the appearance of actual transactions. No funds actually change hands at the conclusion of any given transaction with the Yukom Enterprise.”
Unlike the Department of Justice, the CFTC does not have the power to put people in jail, but it does have the ability to trace and recover funds as well as bar people from CFTC-regulated markets. The Department of Justice, which has indicted 15 people associated with the Yukom Enterprise, also has the authority to recover funds.
In its press release, the CFTC cautioned that it may not be able to recover victims’ money.
“The CFTC cautions victims that restitution orders may not result in the recovery of money lost, because the wrongdoers may not have sufficient funds or assets. The CFTC will continue to fight vigorously for the protection of customers to ensure wrongdoers are held accountable.”
The CFTC thanked the Australian Securities and Investments Commission, the Financial Supervision Commission of Bulgaria, the Central Bank of Hungary and the Israel Securities Authority for their assistance.