CFTC goes after Yossi Herzog, Lee Elbaz and Yukom Communications in binary options fraud case

Maria Nikolova

The lawsuit charges five entities and four individuals with fraud relating to a global retail binary options enterprise that victimized US residents.

Shortly after the criminal proceedings against Lee Elbaz, also known as Lena Green, culminated in her conviction of wire fraud, a related lawsuit was filed in the United States. The Commodity Futures Trading Commission (CFTC) has announced the filing of a civil enforcement action in the U.S. District Court for the Northern District of Illinois charging five entities and four individuals with fraud relating to a global retail binary options enterprise that victimized U.S. residents.

The list of defendants includes:

  • Yukom Communications Ltd., incorporated in Israel;
  • Linkopia Mauritius Ltd., incorporated in Mauritius;
  • Wirestech Limited d/b/a BigOption, incorporated in the Republic of the Marshall Islands;
  • WSB Investments Ltd. d/b/a BinaryBook, incorporated in Anguilla, the United Kingdom, St. Vincent and the Grenadines, and Gibraltar;
  • Zolarex Ltd. d/b/a BinaryOnline, incorporated in the Republic of the Marshall Islands;
  • Yakov Cohen;
  • Yossi Herzog;
  • Lee Elbaz;
  • Shalom Peretz.

According to the CFTC’s complaint, from March 2014 through the present, the defendants fraudulently solicited and accepted more than $103 million in connection with their binary options trading scheme. As alleged in the complaint, the defendants have solicited individuals located throughout the U.S. and elsewhere to trade binary options through internet trading websites. The complaint further charges that the defendants have falsely stated that the binary options offered by the five defendant entities are actual transactions subject to objective market conditions when, in fact, they are mere book entries whose outcomes can and have been manipulated to force customer losses.

The complaint also alleges that the defendants falsely state that the interests of the defendant entities are aligned with the interests of customers, when in fact the entities are on the opposite side of each binary option trade and therefore profit from customer losses. The complaint further alleged that the defendants falsely represent that the binary options being offered are profitable, when in fact approximately 95 percent of their customers lose money.

The complaint also alleges that the defendants misrepresent the financial expertise, physical location, and identity of the individual “brokers” who solicit and sell binary options and that the brokers have routinely and consistently used high pressure sales techniques when soliciting customers to deposit funds with the foreign entities. The complaint quotes an email from Elbaz, one of the defendants, to certain brokers: “We are the money makers and no one can stop us! I want to hear the noise on the floor! This is not a cemetery here! It is a boiler room! . . . Either you sell the client or he sells you a reason he can’t deposit! . . . Don’t leave the money! Just Take It!”

The complaint further charges that the defendants have engaged in various activities to conceal the true nature of their binary options enterprise, including setting up various foreign nominee entities to enter into agreements and open off-shore bank accounts through which customer funds are transferred, concealed, and ultimately misappropriated. Additionally, the defendants have utilized various manipulative or deceptive devices, including so-called “bonuses” and “risk free” trades, and artificially manipulated the results of binary option trades to force customer losses and ultimately prevent customers from withdrawing funds. The complaint also charges the defendants with acting as futures commission merchants without registering as such, as required by CFTC regulations.

In its continuing litigation against the defendants, the CFTC seeks disgorgement of ill-gotten gains, civil monetary penalties, restitution for the benefit of customers, permanent registration and trading bans, and a permanent injunction from future violations of the Commodity Exchange Act.

Yossi Herzog is also targeted in criminal proceedings in the Maryland District Court although the case is sealed at this point.

Read this next

Retail FX

eToro is latest platform to suspend Terra’s LUNA, Binance resumes trading

Israeli social trading network eToro has become the latest platform to suspend trading on the Terra (LUNA) cryptocurrency in light of a market-wide downturn.

Industry News

UK court allows ThinkMarkets’ “obscure” B-book claims against IS Prime

“The Judge added that “Think did need to address the concerns expressed” as its counterclaim “suffers from a lack of detail, obscurity and potential inconsistency”.

Retail FX

Brazilian Broker XP launches crypto trading to 3.5M users

XP Inc (XP.O) is set to launch a crypto trading platform, dubbed ‘XTAGE’, as Brazil’s largest broker is looking to tap into the growing interest in trading bitcoin and other digital assets.

Retail FX

easyMarkets adds MT5 as demand for platform continues to grow

easyMarkets has joined a growing group of brokers in switching over to MetaTrader 5 (MT5), becoming the latest retail platform to incorporate the platform into its live trading infrastructure.

Institutional FX

SGX’s FX volume shines in a largely lackluster April

The Singapore Exchange (SGX) notched a healthy gain in its FX and indices volumes, despite seeing a wavering performance across commodity and securities segments.

Industry News

Devexperts webinar: Attracting retail traders with fractional trading

Following the successful webinar on introducing crypto to retail investors, Devexperts is returning to host a new one about fractional trading. 

Digital Assets

Relai to launch bitcoin debit card to unlock BTC via every purchase

To attract more retail investors to the crowdfunding project, Relai has promised 0% fees on transactions on the Relai app for those who invest €5,000 or more.

Digital Assets

Amid crypto meltdown, Tether reduces corporate debts in USDT reserves

Tether, which is closely affiliated with crypto exchange Bitfinex, has drastically reduced its holdings of commercial debt in its reserves over the last six months. Instead, the stablecoin issuer allocated most of its non-fiat reserves to Treasury bills, almost doubling assets in short-term government securities.

Industry News

TrustPay launches SEPA instant payments

” Our clients will now be able to make instant transactions with the immediate settlement of funds, which makes business more effective in today’s fast world.”

<