FBI gains search warrant from Google to review emails, and series of witnesses claim SpotOption is complicit in assisting several brands conduct binary options fraud. Here is the full litigation, with more to follow later as US government begins its swoop
Since the failure of the State of Israel to have addressed the massive and largely fraudulent binary options underworld that has permeated the public arena and created tremendous discourse over recent years, the United States has begun to pick up the baton.
Last week, FinanceFeeds reported that Lee Elbaz, CEO of Yukom which operated the BinaryBook brand, had been arrested by the FBI at John F Kennedy Airport in New York and is now under house arrest until she is put before the court, facing over 20 years in jail.
It is clear that most of the purpetrators of binary options fraud are linked to very high level organized crime gangs in Israel, and some have links with the government, hence their nonchalant and relaxed stance when the Israel Securities Authority and Knesset Finance Committee attempted to bring them to justice, a long, drawn out procedure which was eventually scuppered by the corrupt higher levels in Israel.
In terms of structure, most binary options brands are simply sales floors which take their entire solution from market makers, all of which are Israeli firms, and all of which are operated by vicious leaders that have no background in the financial markets sector, instead using binary options as a ruse to steal money from people globally.
As the criminal case against Lee Elbaz mounts, the United States law enforcement authorities have begun to look closely at witness statements, one of which, as described in the court proceedings, signed by Roanne L Mann, Chief United States Magistrate Judge for the Eastern District of New York and FBI Special Agent Jeremy Desor, that the FBI has interivewed two individuals, both of whom formerly worked for the retention department at BinaryBook, owned by Yossi Herzog and led by Lee Elbaz.
Confirming FinanceFeeds research, both witnesses told the FBI that the retention departments, for BinaryBook and BigOption were in Caesarea, Israel (also the home town of 4XP, a defunct brand that made off with client money, also operated by Yossi Herzog, and at which Lee Elbaz was employed).
Both witnesses stated to the FBI that sales people were instructed by management to lie about their location bu claiming to be in other parts of the world other than Israel, a common practice in binary options firms.
In the court papers, both witnesses stated that BinaryBook and SpotOption worked together to increase the likelihood that customers would lose money on trades.
FinanceFeeds has conducted extensive research into the binary options sector, and deduces that no live market exists at all, and that binary options market makers which supply the trading solution and market making system to brands do not have liquidity feeds connected to any bank or aggregated price feed, instead weighting the ‘odds’ so that customers lose their money.
This is why it is illegal in the United States, however FinanceFeeds understands that most brands and their market makers have been actively soliciting in the US, with disregard for the law that marks this activity as a felony.
Witnesses 1 and two advised the FBI that BinaryBook and SpotOption worked together as needed to increase the likelihood that particular customers would lose money on trades.
Other former industry insiders have also informed the FBI that SpotOption and its respective binary options brands have worked together to ensure that clients who were having a high success rate of winning trades would lose future trades.
The FBI has learned through interviews and a review of emails produced by Google persuant to a search warrant issued on June 28, 2017 by the Honorable Laurel Beeler of the United States District Court for the Northern District of California, that this was done through the adjustment of risk settings by SpotOption.
The email review confirmed to the FBI that this conduct took place with respect to BinaryBook and other binary options brands.
For example, on July 15, 2016, a BinaryBook representative emailed email@example.com and wrote “Please check the 2 customers below. Check their risk and make modifications to promise the risk is stable.”
The email listed their email addresses and customer ID numbers. The response from SpotOption with regard to the second customer was “We look after him and changed the risk level to high.”
The Yukom Brands sales people and managers received, as is commonplace within binary options brands, commission based on the amount of deposits obtained. The witnesses testified to the FBI that this incentivized sales staff to do everything possible to prevent withdrawals.
The court case also explains how, for clients who had high deposits and wished to effect a withdrawal, a form was sent to customers to authorize the brand to trade for the client, at which point the broker would execute trades to ensure the investor lost all of his or her money.
SpotOption tracked financial data for brands operating on its platform to calculate the amount of fees the brands had to pay SpotOption on an ongoing basis.
SpotOption has produced certain records to the US government, including account details relating to BinaryBook.
According to the SpotOption records, BinaryBook received customer deposits totaling $98.9 million from the second quarter of 2014 to the fourth quarter of 2016, making its P&L position $80.9 million.
This practice is common, and the US authorities are now making a precedent in this case, ready to take the baton where Israel failed.
Whilst SpotOption is not yet implicated in this case, it is clear that the FBI has taken this matter very seriously, and FinanceFeeds will report the full outcome once this becomes part of the litigation.
Our full report from this morning can be read here
We attach the full court documentation below.