American-Israeli binary options operative Liora Welles was reportedly sentenced to 14 months in prison on Friday for participating in a $145 million fraudulent scheme carried out by the Israel-based company Yukom Communications and related companies.
The US federal court system has not yet made the sentencing documents public, but Anne Cullen, a reporter for Law360.com who attended the September 20 sentencing, reported that Welles burst into tears when the judge read out her sentence, presumably because she had been hoping for greater leniency.
US District Judge Theodore D. Chuang reportedly acknowledged that Welles was young, only 23, when she got involved in the binary options industry. He also reportedly acknowledged that she had helped prosecutors by testifying against her former boss, Lee Elbaz. However, he said the scam “literally cheated senior citizens out of their savings,” and that Welles had been one of the company’s most successful sales agents and gone beyond the duties of a regular sales agent by composing sales scripts for other employees to use.
Welles personally defrauded investors out of $2.2 million and was ordered to pay that money back, Law360.com also reported.
According to the report, prosecutors told the judge at the hearing that their investigation into the binary options industry is ongoing. US Department of Justice attorney Rush Atkinson reportedly said that the scam has changed its name but likely continues to operate in Israel and definitely continues to operate worldwide. Atkinson reportedly told the judge that he was not “comfortable” going into detail.
Welles pleaded guilty to conspiracy to commit wire fraud in December 2018, and as part of her plea deal agreed to cooperate with US prosecutors. On July 22 and 23, Welles testified on behalf of the prosecution at the trial of Yukom Communications CEO Elbaz. Welles and Elbaz are two of 15 Israeli binary options operatives indicted in the United States in connection with the allegedly fraudulent websites BigOption.com and BinaryBook.com. Five have pleaded guilty, while Elbaz was convicted by a Maryland jury on August 7. A further nine were indicted in February, with six of those names under seal.
Welles is the second of the fifteen to be sentenced. Her co-conspirator Lissa Mel was sentenced in August to a year in prison. Yair Hadar is scheduled for sentencing on Monday while Austin Smith and Shira Uzan are scheduled to be sentenced in October.
Earlier this month, a 28-year-old French-Israeli citizen was arrested in Hungary in connection with the Yukom case and awaits extradition to the United States, according to an AFP news agency report. His name has not been made public.
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 binary options operatives continue to operate from Israel and abroad, some of them offering fraudulent forex, cryptocurrency or other financial products as opposed to binary options.
Perpetrators have enriched themselves at the expense of victims around the world while enjoying impunity and suffering little social stigma here. 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 first Israeli parliamentarian to take action against Israel’s binary options industry was Karine Elharar, formerly of the opposition Yesh Atid party and now of Blue and White.
In January 2017, she convened the Knesset’s State Control Committee to address the widespread fraud. The legislation that eventually emerged from the process she initiated was ultimately watered down, after it had left her committee, from an original draft law that would have prohibited Israeli trading websites from operating in any country where they lack a license.
Blue and White emerged as the largest party in nationwide elections last Tuesday, narrowly edging out the Likud party, which has dominated Israeli politics for the past decade. Blue and White campaigned on a platform of preserving Israeli democracy, upholding the rule of law and combating corruption.
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.
“The Elbaz case really shocked everyone,” Finance Magnates quoted a source as saying “A lot of people are canceling trips outside of Israel and especially to the US.”