DOJ and binary options fraudster Lee Elbaz clash over loss calculation
The Government argues that the appropriate calculation for both loss and restitution is $137 million, whereas Elbaz argues the amount should be more than 10 times smaller.
The sentencing of binary options fraudster Lee Elbaz, the former CEO of Yukom Communications which provided investor “retention” services to binary options firms like BinaryBook and BigOption, is just days away, and the parties in the case have clashed over the amount of losses the defendant should be held liable for.
Let’s recall that, the Maryland District Court where the criminal proceedings against Elbaz continue, has ordered the parties to provide it with more information about the loss amount. On December 12, 2019, the parties submitted a joint status report, which shows their rather diverging views on the matter.
The Department of Justice (DOJ) says that it has conducted a loss analysis based on data provided by Elbaz, which reflects losses incurred by investor victims between May 2014 and June 2017. The Department submits that the appropriate calculation for both loss and restitution is $137,057,353. The government argues that this figure, which is based on Spot Option data provided by Elbaz, is the appropriate calculation for several reasons.
First, by using the data set previously submitted by the defendant, the calculation now includes only amounts for investors for the period between May 2014 and June 2017.
Second, the calculation is for losses limited to “Yukom, Numaris, and Linkopia,” as evidence at trial established that nearly all investor victims were funneled through Linkopia before being distributed as “leads” to other offices. Thus including all BinaryBook and BigOption investor victims – which is the data set used for the government’s revised calculation – is appropriate.
Third, in any event, the defendant oversaw and conducted training for the branches of the fraudulent enterprise.
During the course of the conspiracy, Elbaz and her co-conspirators opened offices in Ukraine and Netanya, Israel. Elbaz and her co-conspirators also operated a small office in Turkey (which focused on Turkish investors) and a short-lived office in Australia. The evidence shows that these offices operated as one network overseen by Elbaz and other managerial co-conspirators, including Kobi Cohen and Yossi Herzog.
On one audio recording recovered from Elbaz’s cellular telephone, she describes traveling to the other offices:
“I did not have holidays, I did not have weekends, I did not have special days, I was all day long… in the craziness of life, on weekends I would travel abroad, to Romania, to Ukraine, doing trainings, to Turkey… I busted my ass, I busted my ass… and then, after, after working so hard, Kobi informed all the partners that I was to become a non-investing partner, meaning that no matter what, I receive money…”
Thus losses for investors who had contact with retention agents at all branches were reasonably foreseeable to Elbaz, the Department argues.
Accordingly, DOJ submits that $137,057,353 is an appropriate loss award in that it is limited to (1) losses suffered by BinaryBook and BigOption investor victims, the two brands the defendant oversaw, and for which nearly all investor victims flowed through Linkopia; (2) losses caused by retention agents working in branches that were known to the defendant, and where she had oversight and training responsibilities; and (3) losses incurred between May 2014 and June 2017.
Elbaz, however, has a different stance, although one has to note that her position is more of arguing against what the Government says rather than presenting her own affirmative arguments for a different loss estimate. Put bluntly, the defendant argues that there is no data in the record from which a calculation of net losses resulting from all activities of all retention agents of Yukom, Numaris, and Linkopia can be made. She says that, based on the SpotOption data that is in the record, the amount of net deposits during the period in which the Government contends Ms. Elbaz was a member of the conspiracy, regardless of whether the depositor was based in the United States , that resulted from the activities of the individuals found to be Ms. Elbaz’s co-conspirators is $11,671,461.
In August this year, Elbaz was convicted of conspiracy to commit wire fraud and three substantive counts of wire fraud. Each count implies a maximum sentence of 20 years in prison.
The government has estimated that Elbaz’s advisory sentence will be life imprisonment, which reflects not only the substantial losses caused by her scheme but also enhancements for her role as a leader of the scheme, using of sophisticated means to defraud investors, causing substantial financial hardship to victims, and targeting vulnerable victims.