In its latest enforcement action against the widely fraudulent Israel-based binary options industry, the United States Securities and Exchange Commission has charged two Israeli men with defrauding over 2,800 American investors out of more than $5 million.
The two men, Anton Senderov, 34, and Lior Babazara, 37, allegedly operated two binary options websites, Lbinary.com and IvoryOption.com, from a call center in Ramat Gan, according to the SEC’s complaint.
The alleged fraud took place from at least January 2014 through August 2017.
During this time, the two defendants owned an Israeli company known as LianTech Finance Marketing Ltd., which allegedly controlled and operated the two binary options trading websites. While Lbinary and Ivory Option solicited investors all over the world, the SEC complaint focuses only on $5 million alleged to have been stolen from Americans.
According to the complaint, call center employees lied and engaged in deceptive business practices. They often claimed to be older than they were, falsely claimed to be experienced investment professionals and claimed that investors could make large profits.
Call center employees also allegedly failed to disclose that they and their company made money when investors lost money.
According to the complaint, thousands of investors in the United States opened accounts. One investor was allegedly conned out of approximately $500,000.
Call center agents were allegedly required to make a minimum of 300 calls a day and to obtain a minimum of eight deposits a week. From 2014 to 2017, the company employed more than 100 people, according to the complaint.
The complaint describes testimony from a former LianTech employee who spoke to the SEC.
According to the complaint, “One former LianTech employee noted that Babazara occasionally gave ‘Wolf of Wall Street-like’ speeches at the call center in order to motivate the staff.”
From rags to riches?
Israeli court records show no evidence that LianTech or related companies have ever been investigated by Israeli authorities.
Court records indicate that one of the defendants, Lior Babazara, appeared to come from modest circumstances before founding LianTech in 2013. In 2010 Babazara was sued by his landlord in the relatively affordable Tel Aviv suburb of Holon after his rent checks repeatedly bounced. The monthly checks were for NIS 3,500 (about $900) each. Babazara claimed in his defense that the apartment had been uninhabitable and that he had been forced to make major plumbing and other repairs at his own expense, and had for this reason decided to withhold his rent payments.
The second defendant, Anton Senderov is the son of a Russian immigrant to Israel named Viktor Senderov, who himself founded an Israeli binary options call center, Stat Capital Ltd., in 2015. The elder Senderov has not been accused of any wrongdoing.
A 2012 Hebrew-language press release described a man named Viktor Senderov as the Israeli spokesman for Teletrade, a Russian-founded global forex company that had expanded its operations to Israel.
One prominent employee of Lbinary, according to his own LinkedIn profile, was Gia Janashvili, a nephew of Georgia’s former defense minister, Davit Kezerashvili. Janashvili’s LinkedIn profile shows him working as an “intern” at Lbinary from June 2014 to August 2014.
The SEC complaint also pointed a finger at the Israeli company SpotOption as the platform provider that allowed the Lbinary and Ivory Option websites to operate.
“Under these licensing agreements [with SpotOption], SpotOption provided Ivory Option and Lbinary with Internet software infrastructure, a website interface, a binary options trading platform and customer relationship management software (“CRM’). Defendants and LianTech simply put the Ivory Option and LBinary ‘branding’ on the SpotOption trading platform and embedded it on their website,” the complaint stated.
The SEC’s complaint was filed on October 9 in federal district court in the Eastern District of Washington and was conducted by Jason Anthony, Michael Fuchs, and Deborah Maisel and supervised by Jennifer Leete.
A culture of impunity
Lbinary and IvoryOption were two 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.”
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. The fraudulent firms would dupe victims worldwide into believing that they were successfully investing and earning money, encouraging them to deposit more and more into their accounts, until the company eventually cut off contact with the investor and disappeared with all or almost all of their money.
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.
Israeli law enforcement has proven unable or unwilling to effectively tackle the country’s internet scams, indicting only a handful of alleged operatives, despite the fact that for several years the scams have operated at an industrial scale.
US authorities are increasingly tackling the fraud, however. Thus far, 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.
Meanwhile, on September 30, the SEC charged two Israeli men, Gil Berserglik and his son Raz Beserglik, as well as a German man named Kai Peterson with alleged binary options fraud to the tune of $100 million through the websites Bloombex Options, Morton Finance and Starling Capital.
On September 30, the SEC also charged two U.S.-based affiliate marketers, David Sechovicz and Peter Szatmari, with selling binary options through false and misleading videos, websites and internet advertising.
On August 12, the CFTC charged several companies and individuals associated with Israel-based Yukom Communications with over $100 million in fraud.
In November 2018, Jason Scharf, the CEO of a binary options company called CiTrades, pleaded guilty in the United States to a criminal charge of conspiracy to commit wire fraud. He admitted to defrauding investors out of more than $8 million.
On October 4 of this year, Judge Theodore Chuang, who presided over the trial of Elbaz, described the challenges US prosecutors face in bringing Israeli binary options operatives to justice.
In arguing why Elbaz would be a flight risk should she be released on bail, Chuang wrote “while Elbaz could seek to flee to a third country, all that may be required is for Elbaz to find her way back to Israel. Where many of the defendants in related cases were based in Israel, the only ones that the Government has been able to bring before the Court are those who were based in the United States or who unwittingly or voluntarily traveled to the United States. The Government has yet to be able to extradite any individuals related to this scheme from Israel, or any other country, to the United States. There has been no showing that if Elbaz were to flee to Israel, she could be compelled to return.”
While the judge’s statement sounds like a criticism of Israel’s willingness to cooperate in extraditing its citizens, an American attorney told The Times of Israel on background that in his interpretation the judge may simply be referring to the fact that extradition, as a rule, is a difficult and time-consuming process and may not necessarily be suggesting that US prosecutors are having trouble obtaining the extradition of Israelis in this specific case.