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Lee Elbaz – the guilty verdict and its consequences for binary options scams, boiler rooms, and victims

The jury’s guilty verdict against the Israeli Lee Elbaz for binary options fraud will have a huge impact. Lee Elbaz was CEO of Israeli boiler room operator Yukom Communications via which the client-victims of the binary options scams BinaryBook and BigOption money was stolen. The Boiler Room agents have consistently lied to customers, using these lies to trick money. The U.S. prosecutors have proven the brutal and cynical approach in great details with internal papers and audio recordings. Previously, five Boiler Room employees had pleaded guilty to investment fraud with the BinaryBook and BigOption schemes. The international media from Reuters to the major Israeli media have reported on the high profile conviction.

Proceedings continue

The criminal proceedings around Yukom, however, will continue. In addition to Yossi Herzog and Kobi Cohen, shareholders of Yukom Communications, another 12 persons are allegedly accused. Parts of the indictment are currently still sealed. Lee Elbaz was thus only the prelude to this Israeli binary options fraud. The Yukom case is also a precedent for the entire brokerage industry as well as for law enforcement agencies worldwide.

It is currently unknown whether the beneficial owner behind the boiler room operator Numaris, Ronen Roytman, will also be indicted. According to FinTelegram’s documents, he has contributed massively to customers being cheated by BinaryBook and BigOption.

Barry J Pollack, Lee Elbaz’s defense counsel, told Reuters that the jury did not understand the matter. Elbaz would appeal the verdict. The trial for determining the penalty is scheduled for December 9, 2019. The maximum sentence for up to 80 years imprisonment.

Boiler Room agents and other villains

Every boiler room employee must be aware that he is part of a criminal organization that cheats retail investors. For this, they have to accept the possible criminal consequences as in the cases of Yukom and Lee Elbaz.

For many, it may have come as a surprise that the U.S. prosecutors focus on the boiler rooms and their people rather than focus on the operators of the BinaryBook or BigOption websites. In fact, this approach makes perfect sense to any interested observer or industry expert. As a matter of fact, the operators of the individual brand (schemes or scams) change frequently. Brands such as BinaryBook, BigOption, XTraderFX, SafeMarkets etc. are often only operated for a short time before a new brand is launched by the ultimate perpetrators. The official operators of the web pages are mostly so-called Monkeys. The ultimate perpetrators behind these scams are:

  • Boiler Rooms and Marketing Agencies (mostly identical)
  • Payment Services Provider (PSP)
  • White-Label Platform Provider

This “unholy villain trio” is producing new broker scams all the time. Investigators and prosecutors must, therefore, focus on the villains responsible for boiler rooms, marketing agencies, payment services provider, and white-label providers. In the Yukom case, for example, we heard that Lee Elbaz conspired with the white label provider SpotOption to manipulate the accounts of the client-victims. In this respect, we are curious as to whether this will also lead to the prosecution of evidently involved SpotOption people.

What about payment services providers?

In the area of payment transactions, we have already uncovered that the companies of Israelis Eyal Nachum, Tamir Zoltovski and Oded Jeremitsky knowingly and willfully facilitated the BinaryBook scheme. Both Payobin and Hermes Solution Podgorica DOO, which is registered in Montenegro, received funds from client-victims of these schemes and many other schemes. We are also curious to see whether the prosecutors have respective plans with the payment services providers in the Yukom case.

Tailwind for Prosecutors, Lawyers, and victims

The Yukom precedent is also good news for the victims of binary options scams worldwide. It is now court confirmed that the broker scams were designed for fraud. This also improves the victims’ chances of asserting their claims against everyone involved in these schemes – brand operators, boiler room operators, payment services providers, and white label operators.

The U.S. FBI and the prosecutors did a great job on the Yukom case. The lawyers of the victims of the many binary options scams as well as the prosecutors in various jurisdictions have been waiting for it and can work with it. A fundamental problem in criminal prosecution so far has been the lack of understanding of fraud with binary options, CFDs or crypto. In this respect, the trial against Lee Elbaz has contributed much to the knowledge of prosecutors.

This also applies to Israeli lawyers representing victims. Simona Weinglass in her Times of Israel article quotes the Israeli lawyer Nimrod Assif who believes that Lee Elbaz and Yukom’s methods have been applied throughout the Israeli binary options industry. He would hope that the Israeli investigating authorities would carefully study the work of US colleagues in the Yukom case.

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