FinTelegram has been taking action against the illegal broker schemes since early 2018 already. The US FBI estimates that retail investors were cheated with binary options as only one product of these illegal brokers by USD 10 billion per year. Binary options are now banned in most jurisdictions, but between 2010 and 2018 this segment was gigantic and left hundreds of thousands of harmed investors behind with dozens of billions of dollars lost. The legal proceedings have only just begun in Europe. According to legal experts, the payment transaction providers involved in these illegal broker schemes are to be qualified as co-conspirators and to be held liable accordingly.
Wirecard – Payment Services Partner To Illegal Broker Schemes
As part of the EFRI initiative, FinTelegram has discovered several regulated payment services providers (PSP) that have facilitated these illegal broker schemes. Among those PSPs was the German Wirecard, one of the leading public companies in Germany.
Wirecard was apparently involved on a large scale in the processing of the illegally obtained and hence illicit funds (fulfills the definition of Money Laundering) in this space of unauthorized brokers. Especially in the binary options segment which was a huge illegal industry between 2010 and 2018. Meanwhile, binary options are prohibited in most jurisdictional regimes. Financial regulators have recognized the fraudulent nature of the business.
As a matter of fact, 99% of binary options brokers have been illegally operating bucket shops, i.e. a (virtual) place for making bets on current exchange prices of securities or commodities, but without any actual buying or selling of the assets. The bucket shop operator (i.e. the binary options brokers) plays the bank as in casinos. The traders always play against the fictitious broker. Binary options are genetically prone to fraud and hence banned in most jurisdictions as a form of gambling.
As so-called acquirer for Visa and MasterCard, Wirecard accepted these illegal bucket shops as merchants in their network. FinTelegram and EFRI have so far been able to confirm Wirecard‘s involvement in two major illegal broker networks based on payment documents received from victims of these schemes.
Platform Providers And Brands
The German Wirecard was involved in the illegal broker network of the now arrested German Uwe Lenhoff and his Altair Entertainment, and on the other hand, it served the largest known binary options network around the Israeli SpotOption. This company was the leading developer of binary options trading software. Numerous illegal brokers were operated as so-called white label solutions with the SpotOption platform. Besides operating the software platform, the SpotOption guys operated their own illegal broker schemes using different labels.
These included, for example, GlobalTrader365 (www.globaltrader365.com), VaultOptions (www.vaultoptions.com), or VipBinary (www.vipbinary.com). In 2016, the U.S. Commodities Futures Trading Commission (CFTC) filed a lawsuit against these GlobalTrader365 and VaultOptions for illegal activities (link to the lawsuit). This and other important information has been provided by Fraser Perring who has been covering Wirecard for a while now.
CFTC investigations have shown that GlobalTrader365 and the VaultOption used the same bank accounts and payment service providers. Moreover, it was found that both companies have the same owners – the people and companies of Israeli SpotOption. It was S.O. SpotOption Limited registered in Cyprus.
SpotOption and Wirecard have also been involved with the illegal binary options scheme of Banc De Binary.
The CEO and three managers of Israeli Yukom Communication, which also operated with SpotOption, were accused of fraud and money laundering by U.S. prosecutors. Respective indictments have been filed with the trials expected for 2019. The U.S. prosecutors accuse the Israeli CEO Lee Elbaz and the three former Yukom employees Lissa Mel, Liora Welles and Shira Uzan of cheating U.S. investors Lee Elbaz here). U.S. authorities believe that the YUKOM sites have betrayed investors to the tune of tens of millions of dollars.
The list of enforcement actions and court cases around illegal binary options broker could be continued. The point is clear! Binary options has been a fraudulent industry. Let’s have a closer look at the numbers and players.
Binary Options – The Billion Dollar Gamification
Back in 2016, SpotOption claimed that two-thirds of the binary option dealers worldwide used its trading platform and generating some USD 5 billion annual trading volume. In 2016, 300 binary options brands operated on the SpotOptions platform. The SpotOption founder, the Israeli Pinchas Peterkazishvilli (aka Pini Peter) was convicted on money laundering charges in 2005 The Bureau of Investigative Journalism reported.
Besides SpotOption, Tradologic was the second largest software platform operating 240 binary options platforms. Tradologic was also run by Israeli citizens. Director and shareholder of Tradologic was the Israeli Gal Barak, who has been arrested recently in Bulgaria as a result of an enforcement action of Austrian, German, and Bulgarian authorities. In addition, Gery Shalon, an Israeli accused in the USA of money laundering, securities fraud, and illegal online gambling, is an investor and shareholder in Tradologic. And finally the Russian citizen Vladislav Smirnov. The latter is one of the most prominent spammers and hackers on this planet and is also known to the US courts in this regard.
Based on the Tradologic platform, the German Uwe Lenhoff operated his illegal broker sites like Option888. Lenhoff was also invested in Tradologic via its holding company Lensing Management Services. Like Gal Barak, Lenhoff has been arrested in the international enforcement action in February 2019.
Binary Options Payment Services
German Wirecard has been involved in this global network of illegal brokers as a payment transaction service provider. Moreover, the Wirecard group was a partner of SpotOptions own payment aggregator ChargeXP Investment Limited who served many of its 300 white label operators. Wirecard and ChargeXP also covered the Asian binary options markets with their payment services. Below the bank wire instructions of the Japanese binary options broker 60Trader (www.60trader.com) or SmartOptions. Just to name two of them.
We also know that Lenhoff and Barak were shareholders in the Montenegrin company Global Payment Solutions. It was founded in August 2015 together with partners from Serbia and Montenegro. The German axis with Lenhoff and Wirecard was demonstrably very closely interwoven with the Israeli axis around Barak and Tradologic.
Finally, we would like to point out at this point that Lenhoff comes from the field of online gambling. This market segment, banned in the USA, was the ground on which the binary options grew. In this respect, the involvement of Wirecard in the binary options is no longer surprising, but should rather be regarded as an evolutionary development.
(to be continued with additional input from partners and victims)