Israeli Convicted in $145m Binary Options Fraud Case

Lee Elbaz was CEO of company offering binary options investments, since banned by Israel

Lee Elbaz, left, accompanied by her attorney Barry Pollack arrives at federal court on July 16, 2019.
AP Photo/Jose Luis Magana

Israeli Lee Elbaz was convicted Wednesday of orchestrating a scheme to defraud tens of thousands of investors across the globe of tens of millions of dollars with binary options investments.

Elbaz, 38, is scheduled to be sentenced on December 9 by a federal judge in Maryland following her conviction on three counts of wire fraud and one count of conspiracy to commit wire fraud, according to Justice Department spokesman Peter Carr. Each count carries a maximum sentence of 20 years in prison.

>> Read more: Ex-worker gives rare peek into Israel’s binary options industry: We’re selling dreams

Elbaz had been free on bail and living with a relative in San Francisco while awaiting trial. U.S. District Judge George Hazel ordered her taken into custody immediately after the jury’s verdict, according to her attorney.

Elbaz was CEO of Yukom Communications, an Israel-based company that operated in the binary options industry. Elbaz trained employees to lie to investors and rigged the odds against them making and recouping any money, Justice Department prosecutor Rush Atkinson said during the trial’s closing arguments last week.

“There is no way this fraud happened without Lee Elbaz,” Atkinson said. “Everybody told the exact same lies because that is what Ms. Elbaz trained them to do.”

Elbaz is the first of 15 defendants to be tried. Five have pleaded guilty and agreed to cooperate with prosecutors. A February indictment against nine other defendants, including Yukom owner Yosef Herzog, says the scheme involving names like BinaryBook and BigOption cost investors more than $145 million worldwide, including thousands in the U.S.

Jurors began deliberating last Thursday. On Tuesday, a judge replaced one of the 12 jurors with an alternate after the dismissed juror had said he overhead somebody making disparaging remarks about Elbaz while visiting an unspecified “local establishment” on Sunday. U.S. District Judge George Hazel denied a request by Elbaz’s attorney to declare a mistrial. The judge instructed jurors to start their deliberations “from scratch.”

“Obviously the jury struggled to reach this verdict,” said defense attorney Barry Pollack. “We respectfully believe that they got it wrong.”

At the close of the trial, Pollack said Elbaz didn’t condone any of the fraudulent tactics used by employees who worked under her supervision at a call center in Caesarea, Israel. Elbaz urged her employees in writing to “work clean,” her attorney said.

“The employees that were defrauding clients were also defrauding Ms. Elbaz,” Pollack said. “She was trying to prevent [fraud].”

FBI agents arrested Elbaz in September 2017 after she traveled to New York.

The binary options market largely operates outside the U.S. through unregulated websites. The payout on a binary option typically is linked to whether the price of a particular asset, such as a stock, rises above or falls below a specified amount at a particular time, at which point the investor receives either a pre-determined amount of cash or nothing. Israel gradually banned the business in 2016 and 2017 but before that it had been a major center for the industry.

Yukom employees pretended to be from other countries, lied about their professional qualifications and adopted “stage names.” Elbaz used the alias “Lena Green” while interacting with investors, according to prosecutors.

Yucom employees also falsely guaranteed profits, lied about their historical rates of return and didn’t tell investors that they only made money if their customers lost money, prosecutors said.

An email instructed BinaryBook sales representatives to target retirees, Social Security recipients, pension holders and veterans as clients, according to court filings accompanying guilty pleas by former employees.