US prosecutors: Israeli binary options scammer should pay back $28 million

Expert says sum is likely ‘a conservative estimate’ of losses for which convicted Yukom CEO Lee Elbaz, jailed in December for 22 years, was directly responsible

Lee Elbaz arrives at federal court for jury selection in her trial in Greenbelt, Maryland, July 16, 2019. (AP Photo/Jose Luis Magana)
Illustrative: Lee Elbaz arrives at federal court for jury selection in her trial in Greenbelt, Maryland, July 16, 2019. (AP Photo/Jose Luis Magana)

GREENBELT, Maryland — Federal prosecutors say an Israeli woman should be ordered to pay $28 million in restitution to thousands of investors who were defrauded in a scheme she orchestrated.

Lee Elbaz, 38, was sentenced in December to 22 years in prison, but US District Judge Theodore Chuang has not decided how much restitution Elbaz owes to her victims.

Before Elbaz was sentenced, prosecutors said the scheme involving her and other defendants cost investors more than $137 million between May 2014 and June 2017. But the judge calculated that $28 million was the loss that could be attributed to Elbaz’s role in the scheme.

Now prosecutors say their restitution calculations support the judge’s tally. In a court filing last Wednesday, a government expert said the $28 million calculation “likely represents a conservative estimate of loss and restitution.” Elbaz’s defense lawyer has not responded to prosecutors’ filing.

Elbaz is appealing her conviction and sentence. She is one of at least 21 defendants charged in the fraud case and was the first to be tried. Five pleaded guilty and agreed to cooperate with prosecutors.

In August, a federal jury in Greenbelt, Maryland, convicted Elbaz of three counts of wire fraud and one count of conspiracy to commit wire fraud.

Elbaz was CEO of Yukom Communications, an Israel-based company that operated in the “binary options” industry under the brand names BinaryBook and BigOption. A superseding indictment unsealed in November charged 15 people, including two former Yukom Communications company owners, with participating in the fraud scheme involving BinaryBook and BigOption.

Yukom employees pretended to be from other countries, lied about their professional qualifications and adopted “stage names.” Yukom employees also falsely guaranteed profits, lied about their historical rates of return and did not tell investors that they only made money if their customers lost money, prosecutors said.

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.

Times of Israel staff contributed to this report.

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