New ways to notify Binary Options victims to be implemented by the DOJ

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Joining the likes of Madoff, alleged binary options fraudster to get DOJ website

Notorious distinction is because US government alleges Lee Elbaz, former CEO of Israeli binary options firm, may have ‘affected thousands’ of victims

Simona Weinglass is an investigative reporter at The Times of Israel.

Alleged binary options fraudster Lee Elbaz, who is awaiting a trial in Maryland District Court, will receive the notorious distinction of having a Department of Justice website devoted to her case and trial, placing her in a small category that includes disgraced financiers Bernie Madoff and Robert Allen Stanford, whose victims and alleged victims were too numerous for the government to notify individually.

Elbaz, who was arrested September 14, 2020 when she landed at JFK airport in New York for a planned vacation, is set to be tried in January 2020. The Department of Justice filed a motion on October 15 requesting that the government create a Department of Justice website to notify victims about the public court proceedings.

The reason for creating the website, the Department of Justice wrote, is because “the government believes that the alleged conduct may have affected thousands of individuals.”

Such websites are typically created when the number of victims is so large that it is impractical to notify them all personally of the progress of a case that may affect them. There are currently 26 such websites notifying victims. Many of these cases are related to securities fraud, stock manipulation and telemarketing scams.

Elbaz, the former CEO of Israeli binary options company Yukom Communications, was indicted by a US federal grand jury on March 22 for allegedly participating in a scheme to “defraud investors in the United States and across the world.”

Elbaz, 36, has been charged in the District of Maryland with one count of conspiracy to commit wire fraud and three counts of wire fraud, according to a Department of Justice press release. Each of these four charges carries a maximum penalty of 20 years in prison.

According to the indictment, Yukom provided investor “retention” services for the binary options websites BinaryBook and BigOption. The indictment also alleges that Elbaz, together with her co-conspirators and subordinates, misled investors by falsely claiming that the company earned profits when the investor earned profits, when in fact the opposite was true.

Elbaz and her co-conspirators also allegedly misrepresented the return on investment from BinaryBook and BigOption and allegedly used aliases and said they were calling from London when in fact they were calling from Israel. According to the US Justice Department, Elbaz’s co-conspirators are still “at large.”

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Yukom was but one of hundreds of such companies operating in Israel over the last decade.

A binary option is an option contract whose payoff depends on the price of another asset, like gold, wheat, or Apple stocks. If the holder of the option guesses correctly about the direction that the price has moved at the time of expiry, he earns a predetermined amount of money, and if not he loses the money “invested” in a particular trade.

In the case of the Israeli binary options industry, however, companies offering these contracts were largely fraudulent. They 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 investors and disappeared with all or almost all of their money.

At its peak, the Israeli industry featured hundreds of companies, employing thousands of Israelis, duping vast numbers of victims worldwide out of billions of dollars.

The Knesset outlawed the binary options industry in October 2020, in part as a result of enormous pressure experienced by representatives of the Israel Securities Authority at meetings of the International Organization of Securities Commissions (IOSCO). However, since the ban, Israeli law enforcement has failed to indict a single binary options fraudster. Many of the operatives continue to offer related fraudulent investment products both from Israel and overseas.

In its latest motion, the US government has proposed maintaining a public website (the website is not active as of this writing).

According to the motion, “the website would provide a summary of the case, information regarding the case’s status, and other significant case-related documents, such as the charging documents. The website also would contain an e-mail address and telephone number for a Victim Assistance Line through which individual potential crime victims could contact the Department of Justice with questions regarding the case.”

Cases proceeding through Israeli courts

The Times of Israel contacted an Israel Police spokesman and asked him, given the allegation that Lee Elbaz may have had thousands of victims, where the Israeli police were during the time the alleged fraud was taking place?

The police foreign press spokesman would not comment on the subject.

Meanwhile, several cases against binary options companies are making their way through Israeli courts.

Last month, lawyer Nimrod Assif brought a lawsuit for NIS 2.6 million ($710,000) against the people allegedly behind the website Option.fm — an Israeli company called Global App Technologies Ltd. as well as its owner, Oren Shabat. The plaintiffs are a British citizen and an Irish citizen. The defendants have yet to file a writ of defense.

On July 19, 2020, Israeli lawyers Haggai Carmon and Assif filed a lawsuit for NIS 5.4 million ($1.5 million) against the people they believe to be behind the website Beeoptions.com. The lawsuit, filed on behalf of a woman from Minnesota in the United States, is against the Israeli company Tracy P.A.I. and its owner David Israel Cartu.

In their writ of defense, the defendants claim that Tracy P.A.I. merely provided white label services to the website BeeOptions and did not have a direct relationship with the customer. They further claimed that David Israel Cartu only became an owner of Tracy P.A.I. in the middle of June 2020, after many of the events described in the complaint had already occurred. Prior to that, Cartu’s brother, Jonathan Cartu was the owner, according to Israel’s corporate registry.

In June of this year, lawyer Yoram Fay filed a lawsuit against the people he believes to be behind the website CFDStocks.com. The lawsuit, for over NIS 2 million ($550,000), was filed on behalf of eight plaintiffs, two from Australia, two from Holland, and one each from Belgium, Switzerland, Sweden and Chile.

The defendants in the lawsuit are Chen Revizada, Adar Revizada, Eli Darsa and B.A. Information Systems, a company in Tel Aviv. Chen Revizada and his wife Adar are the son and daughter-in-law of Benny Revizada, according to the lawsuit. Benny Revizada is the former “king of the gray market” (the extra-bank loan and money-service sector) who went to jail for four years over the Trade Bank affair, which has been described as “the greatest bank theft in Israel’s history.”

The defendants have not yet filed a defense claim.

US jails binary options fraudster, who then claimed to help victims, for a year

As former Israeli immigrant Austin Smith prepares to serve his term, ex-legal counsel for Wealth Recovery International says she’s helping US authorities track down clients’ money

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Simona Weinglass is an investigative reporter at The Times of Israel.

Austin Smith, a binary options sales agent turned owner of a company that claimed to recover victims’ lost funds, has been sentenced to 12 months and a day in US federal prison.

Smith, 35, pleaded guilty last March to one count of conspiracy to commit wire fraud for his role in a $140 million fraud scheme carried out by the Israeli-run binary options websites BinaryBook.com and BigOption.com.

But Smith is best known for his subsequent role as the founder and executive chairman of a company called Wealth Recovery International, which promised thousands of alleged victims of binary options fraud that it would help them to get their money back. Clients and former employees of the company told The Times of Israel that a large proportion of clients received only minimal help after paying an up-front fee which varied from hundreds to thousands of dollars per client.

Smith’s year-and-a-day sentence, handed down on November 22, is primarily for his activity at BinaryBook, before he founded Wealth Recovery International. He has also been ordered to repay almost half a million dollars to his victims.

As part of his March plea deal, Smith provided testimony for the US government during the July-August 2020 trial of Yukom Communications CEO Lee Elbaz. He testified against her, he told the court, in the hope of receiving a lighter sentence. The maximum sentence for the offense to which he pleaded guilty, conspiracy to commit wire fraud, is five years in prison.

Smith had initially worked as a retention agent for Numaris Communication in Tel Aviv, a sister company to Yukom Communications, the company at the heart of the $140 million fraud, from August 2020 till January 2020.

Before leaving the company, Smith and a few friends hacked into the Numaris Communication computer system, he said during his testimony during the Elbaz trial. He and his friends appropriated lists of clients and internal company emails, he said, which he and his associates then used to launch a company, in April 2020, called “Wealth Recovery International” whose stated purpose was to help victims of binary options fraud recover their money.

Smith used the information he had clandestinely acquired from Numaris Communication to contact former clients of BinaryBook.com and offer to help them recover their money. The US Justice Department found that while he did recover money for an unspecified number of clients, on at least one occasion he earned a hefty commission from a client he had previously participated in defrauding.

At its height, Smith’s company, Wealth Recovery International, had thousands of clients from all over the world hoping to get their money back from more than 100 binary options, forex and cryptocurrency websites, former employees told The Times of Israel.

Wealth Recovery International charged these clients an up-front fee, as well as a percentage of any proceeds recovered.

Reports are mixed as to how successful the company was in its stated mission. The Times of Israel received a number of emails over the past two years from people who said they had been clients of Wealth Recovery International and received no substantial assistance after paying the up-front fee.

The company’s former legal counsel Tamar Hamm told the Times of Israel in March that Wealth Recovery International had recovered $8.5 million for clients and that a large percentage of the company’s clients were satisfied.

But when contacted for this article, Hamm’s lawyer said that Hamm has since left the company, after taking notice of “irregularities in the company’s business practices.”

Hamm’s attorney, Albert Watkins of Kodner Watkins, LC, told the Times of Israel in an email that she is now helping the US Department of Justice track down clients’ funds.

“Through our firm,” her lawyer said, “proactive measures have been taken to share with US Department of Justice information regarding the location and amounts of funds advanced by Wealth Recovery International clients. Our client has diligently fought to maintain punctilious observance of her duties and has been compelled to endure significant personal and financial hardship navigating what might best be described as an otherworldly scheme and artifice which gave rise to the criminal proceedings being initiated against the formerВ principal.”

Smith’s attorney, Daniel Suleiman sent the following response to the Times of Israel: “While Mr.В Smith was at the helm, Wealth Recovery International recovered approximately $8.5 million for victims of binary options fraud. That remains a remarkable achievement, given the lengths the perpetrators of these vicious fraud schemes have gone to cover their tracks and conceal the money trail.”

On September 25, 2020, an Israeli judge ordered that Wealth Recovery Israel be liquidated.

Smith will be required to report to prison to serve his sentence before or by January 6. 2020. Judge Theodore D. Chuang recommended that he be incarcerated at Camp FCI-Otisville in New York State.

After his prison term he will be under “supervised release” for three years, meaning his whereabouts and activities will be monitored by a probation officer. During the supervised release period, Smith will also be required to undergo substance abuse testing, enroll in a mental health treatment program, enroll in a substance abuse treatment program and take all prescribed mental health medications.

In addition, he will be required to pay $486,199 in restitution to his binary options victims at a rate of $500 per month.

Smith’s binary options co-conspirator, Shira Uzan, who also pleaded guilty and also testified at the Lee Elbaz trial, was sentenced on November 21 to four months in prison followed by three years of supervised release. Uzan is required to pay restitution of $1,819,595.

A murky industry

In recent years, a cottage industry has sprouted up in Israel and elsewhere that offers to help victims of online trading scams recover their funds. Sometimes these money recovery operatives use fake names or hide behind shell companies. Some are former employees or associates of the same companies the alleged victims lost money to. Some don’t actually recover money on behalf of clients while others use unorthodox methods to do so.

For instance, in July 2020, Wealth Recovery International sued another wealth recovery company called “Recover Your Deposit” in Israel for NIS 365,000 ($105,289). In its complaint, Wealth Recovery accused “Recover Your Deposit” of being run by four former brokers from binary options firms who had stolen their companies’ databases and were now, Wealth Recovery alleged, contacting customers and offering to help them to get their money back.

The complaint in the lawsuit explained that Wealth Recovery had earlier confronted the people behind Recover Your Deposit, and threatened to sue them and expose their deeds to their former binary options employers. Wealth Recovery would refrain from doing so, it had said, if Recover Your Deposit met four conditions: First, it asked that Recover Your Deposit provide to Wealth Recovery the company’s bank statements for the past six months. Second, it asked that Recover Your Deposit hand over $100,000 in payments it had received from clients. Third, Wealth Recovery demanded that Recover Your Deposit provide information and affidavits about its staffers’ former binary options employers. And fourth, Wealth Recovery demanded that Recover Your Deposit retract slander the latter company had allegedly written about a lawyer named Veronica Birman who worked closely with Wealth Recovery International. According to Wealth Recovery’s complaint, the defendants originally signed the agreement, but then failed to uphold its terms.

Recover Your Deposit and the four individuals allegedly behind the company never defended themselves against the lawsuit.

The lawsuit sheds light on the murky Israeli money recovery industry where individuals whose background, affiliations and qualifications are not always apparent offer to retrieve money on behalf of victims of fraud. While it is impossible to know prima facie which money recovery businesses are well-intentioned and which set out to defraud victims a second time, some lawyers familiar with this cottage industry advise potential clients to be wary.

“Advising victims on which recovery method to follow, as well as sending demand letters on the victims’ behalf, would generally be considered legal services, and therefore require a license to practice law,” attorney Nimrod Assif told The Times of Israel.

“Victims should be wary of unlicensed individuals offering legal services. In addition, the fact that a recovery organization approached the victim, and not the other way around, is a red flag. First, lawyers are generally not allowed to solicit clients. Second, victims should ask themselves how that organization has found them, and whether it was in collaboration with some binary options entities. Furthermore, cases against binary options entities are complex, and it takes a considerable amount of time to pursue them. Therefore, victims should ask how many clients those recovery organizations already have, and whether they have the capacity to take more cases.”

When aliya goes downhill

During his July 25 and 26 testimony in the Greenbelt, Maryland trial of Lee Elbaz, Austin Smith told the court that starting in high school and throughout his 20s he struggled with drug addiction and that he moved to Israel in November 2020 with the help and encouragement of a rabbi. Smith had hoped to curtail his drug habit once in Israel, which he said he successfully did.

At first, Smith lived in Jerusalem, he said, but then he moved to Tel Aviv where he got a job, first with a binary options call center called Rushmore Marketing, and then with Numaris Communication.

Smith’s story is not unique, and highlights the situation of some young immigrants to Israel who made aliya (immigrated) to Israel to seek spiritual uplift or to start a new chapter in their lives only to end up working for criminal organizations. In many cases, these immigrants were actively, though often unwittingly, steered towards criminal companies by Jewish organizations whose purpose was to help new immigrants settle in Israel.

The binary options industry flourished in Israel for a decade before it was outlawed via Knesset legislation in October 2020. At its height, hundreds of companies in Israel employed thousands of Israelis who allegedly fleeced billions out of victims worldwide. The fraudulent firms would dupe victims 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.

Israeli prosecutors have yet to indict a single binary options suspect on charges of fraud, while the United States has indicted about two dozen.

Pending Criminal Division Cases

United States v. Lee Elbaz
Court Docket No.: 18-cr-00157 (D. Maryland)

Court Assigned: This case is assigned to the Honorable Theodore D. Chuang, U.S. District Court for the District of Maryland, United States Federal Building and Courthouse, 6500 Cherywood Lane, Greenbelt, MD 20770.

NOTICE: The Department of Justice (“DOJ”) and the Federal Bureau of Investigation (“FBI”) are alerting the public, especially individuals who sent funds to BinaryBook, BigOption, or other binary options companies, to be aware of scams in which individuals claim to be working to refund investor funds. The FBI and DOJ have recently learned that individuals claiming to be calling on behalf of the DOJ, the FBI, or accounting firms hired by law enforcement agencies have contacted investors falsely claiming that they are working to refund money to investors. Scammers appear to be targeting individuals who have previously sent money to binary options entities. These individuals request certain information from investor victims, such as drivers license and banking information, falsely promising that this information is necessary to process refunds.

The FBI and DOJ have not authorized any employees or affiliates of BigOption, BinaryBook, or any other entity to act on their behalf in contacting investors. The public is reminded that the FBI and DOJ do not call private citizens requesting money or bank account information and to never give out unsolicited requests for personal information to callers that you don’t know. Individuals receiving such calls can file a complaint through the FBl’s Internet Crime Complaint Center at www.IC3.gov or contact the DOJ at the email address below.

Criminal Charges: On March 22, 2020, Lee Elbaz, the former CEO of the Israel-based company, Yukon Communications, was charged in an indictment with one count of conspiracy to commit wire fraud and three counts of wire fraud for her alleged participation in a scheme to defraud investors in the United States and across the world in financial instruments known as “binary options.”

The indictment alleges that Yukom provided investor “retention” services for two websites, known as BinaryBook and BigOption, that were used to promote and market purported binary options, and that those binary options were fraudulently sold and marketed. The indictment further alleges that in her role as CEO of Yukom, Elbaz, along with her co-conspirators and subordinates, misled investors using BinaryBook and BigOption by falsely claiming to represent the interests of investors but that, in fact, the owners of BinaryBook and BigOption profited when investors lost money; by misrepresenting the suitability of and expected return on investments through BinaryBook and BigOption; by providing investors with false names and qualifications and falsely claiming to be working from London; and by misrepresenting whether and how investors could withdraw funds from their accounts. Representatives of BinaryBook and BigOption, working under Elbaz’s supervision, misrepresented the terms of so-called “bonuses,” “risk free trades” and “insured trades,” and deceptively used these supposed benefits in a manner that in fact harmed investors, according to the indictment.

For more information about the charges, please see below:
Indictment
Press Release –March 23, 2020

The information on this website will be updated as new developments arise in the case. If you have any questions, please call the Victim Assistance Line toll-free at (888) 549-3945 or email us at [email protected] (link sends e-mail).

Presumption of Innocence: It is important to keep in mind that an indictment contains allegations only, and that defendants are presumed innocent until proven guilty and that presumption requires both the court and our office to take certain steps to ensure that justice is served.

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