Israeli Woman Stands Trial for Defrauding U.S. Investors of Tens of Millions of Dollars

Prosecutor accuses Lee Elbaz of training employees to lie to investors and rigging odds against them

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

 An Israeli company executive who proudly called herself a “money-making machine” was at the heart of a scheme that defrauded tens of thousands of investors out of tens of millions of dollars, a federal prosecutor told jurors Thursday at the close of the woman’s trial.

Lee Elbaz, 38, is charged in Maryland with conspiring with employees under her supervision to bilk investors across the globe through the sale and marketing of financial instruments known as “binary options.” She 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.

“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’s defense attorney, Barry Pollack, told jurors that his client never crossed a line between “selling” and committing fraud.

“She drew the line exactly where she believed the company’s lawyer told her was the proper place to draw the line,” Pollack said.

Jurors began deliberating after hearing two hours of closing arguments and 10 days of testimony for the case against Elbaz, who is charged with three counts of wire fraud and one count of conspiracy to commit wire fraud.

The jury deliberated for nearly three hours on Thursday before going home. The jurors will return on Friday.

Elbaz was CEO of Israel-based Yukom Communications. She is one of 15 defendants in the case and the first to be tried. Five have pleaded guilty and agreed to cooperate with prosecutors. Nine others were indicted in February.

Pollack said other employees who worked under Elbaz’s supervision at a call center in Caesarea, Israel, did engage in fraudulent activity without her knowledge or consent. He said his client knew she couldn’t lie about the product her company was selling.

“Everything else is permissible,” he said.

Four former Yukom employees who worked under Elbaz testified at her trial.

“Each of those cooperators has zero credibility,” Pollack said. “Four times zero is still zero.”

Elbaz, who also testified, wiped away tears as her attorney delivered his closing arguments.

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.

Yukom provided sales and marketing services for BinaryBook and BigOption, the brand names for internet-based businesses that purportedly sold and marketed binary options.

A separate indictment against nine other defendants, including Yukom owner Yosef Herzog, says the scheme involving BinaryBook and BigOption cost investors more than $145 million worldwide, including thousands of victims in the U.S.

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.

“No one here was interested in helping clients,” Atkinson said. “It was all a plan to steal money.”

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.

Elbaz’s indictment cites a September 2015 email from one employee to co-workers about a sales “marathon,” a competition to obtain deposits from investors.

“This is not a cemetery here! It’s a boiler room!” the employee wrote.

Atkinson said it was impossible for Elbaz to miss the rampant fraud in the office she ran.

“You could not have missed the lies that were being told daily from where Ms. Elbaz sat,” the prosecutor said.

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).”