US Court nixes Lee Elbaz’s attempt to dismiss Indictment due to disclosure of privileged materials

Maria Nikolova

Judge Theodore D. Chuang of the Maryland District Court says a set of emails and messages exchanged between Elbaz and individuals affiliated with Yukom Communications and Linkopia Mauritius provide no basis to dismiss the Indictment.

The criminal case targeting Lee Elbaz, the ex-CEO of Yukom Communications, who stands accused of binary options fraud, gathers pace, with the latest attempt by the defendant to dismiss the Indictment against her suffering a heavy blow.

On June 20, 2019, Judge Theodore D. Chuang of the Maryland District Court issued an Order which puts an end to Elbaz’s efforts to dismiss the Indictment or, in the Alternative, to Disqualify the Prosecution Team due to disclosure of privileged information.

Lee Elbaz is charged with one count of conspiracy to commit wire fraud and three counts of wire fraud.

What is the privileged information dispute about? In January 2018, the Government received one hard drive containing documents produced by the Google pursuant to a search warrant (the so-called “Google Hard Drive”). In the same time frame, it also received materials seized from the onsite execution of a search warrant at SpotOption in Israel, including the contents of a laptop belonging to the Chief Financial Officer of BinaryBook and related entities (the so-called “Spot Option Hard Drive”).

The Google Hard Drive was subjected to the standard protocol of applying search terms and uploading nonprivileged documents onto the FBI database. However, in June 2018, the Prosecution Team requested that the original Google Hard Drive, which contained the original documents prior to any filtering for privilege, be sent to the Prosecution Team to be processed for production to Elbaz and to be uploaded to the Relativity database. This transfer occurred at the direction of one of the trial attorneys on the Prosecution Team, who understood that an FBI review of the Google Hard Drive contents would not be complete before the agreed-upon discovery deadline and sought the original materials so they could be produced to Elbaz by that date.

Although the FBI informed the Prosecution Team in an email that the materials were unfiltered and could contain potentially privileged materials, the attorney failed to review the email carefully enough to recognize that fact.

As for the Spot Option Hard Drive, although most of the contents were subjected to the filter process, the contents of the BinaryBook laptop (“the Laptop Image”) were not, because the Prosecution Team inferred, based on information received from the FBI, that it contained only financial information. Thus, in order for the Laptop Image to be produced in discovery before the agreed-upon discovery deadline, the Prosecution Team did not request that it undergo filtering before it was made available to the Prosecution Team in the Relativity database and to Elbaz.

As a result, the unfiltered contents of the Google Hard Drive and the Laptop Image, consisting of approximately 20,000 documents, were uploaded to the Relativity database, with the result that the Prosecution Team had access to potentially privileged documents from the Google Hard Drive beginning in July 2018 and from the Laptop Image beginning in September 2018. Because relevant documents from these sources were copied and forwarded to Elbaz’s counsel in discovery, Elbaz had access to the same potentially privileged documents, even though she did not hold a privilege in all of them. This mistake – uploading unfiltered materials to the Relativity database – occurred out of an effort to provide Rule 16 discovery in accordance with the agreed-upon schedule and out of a belief that the Laptop Image did not contain potentially privileged communications.

The Government did not realize that the Prosecution Team had access to these thousands of potentially privileged materials until approximately December 6, 2018. When it did, the Filter Team immediately informed Elbaz’s counsel and suspended the Prosecution Team’s access to the potentially privileged documents. The potentially privileged materials, however, had been accessible to the Prosecution Team for a period of approximately five months.

Elbaz sought dismissal or disqualification based on the disclosure of the Yukom/Linkopia Documents, which reference attorneys for one of those companies or legal advice provided by such attorneys. These documents which include emails and attachments from 2015 and 2016 that were circulated among Elbaz and other individuals affiliated with Yukom Communications and Linkopia Mauritius, Ltd., two companies alleged to be involved in the fraudulent scheme, and, occasionally, counsel for those companies.

Elbaz contends that their disclosure to the Prosecution Team breached the attorney- client privilege because she entered into a joint defense agreement with Yukom, Linkopia, and Yossi Herzog, the Chief Executive Officer of Yukom, after her initial appearance in this case, those parties considered these emails as relevant to their joint defense, and the documents were thus shared with Elbaz in conjunction with the joint defense.

The Court, however, nixed Elbaz’s arguments. The Judge said that even assuming that there was a joint defense agreement such that Elbaz can assert the common interest privilege over the Yukom/Linkopia documents, Elbaz has failed to establish that the attorney-client privilege applied and was not waived as to most of the Yukom/Linkopia Documents. Elbaz, the Judge said, has provided no specific argument to establish the applicability of the attorney-client privilege to those documents.

Let’s take a look at a couple of the documents in question. For instance, the list includes six emails and one WhatsApp text thread. The WhatsApp document contains a text chain between Elbaz and Herzog in which they discuss whether to respond to an allegation made by a journalist about Yukom, and if so, how. At the end of the text chain, Elbaz mentions a person called “Dudu,” whom Elbaz asserts is Yukom’s attorney. Although the conversation suggests that Elbaz may speak to the attorney and respond to the matter based on the attorney’s advice, the exchange does not reflect whether she or Herzog did so or what the attorney advised. Where there was no communication with an attorney reflected in the WhatsApp document, the privilege does not apply.

Regarding the emails, the list includes (inter alia) an email and attachment Elbaz received from a Yukom lawyer, which Elbaz forwarded to Herzog, that reflect a proposed letter to customers dissatisfied with Yukom. The Filter Team, in their Opposition to the Motion, submitted a virtually identical version of that document sent by Elbaz to a person outside of Yukom. Thus, although this communication was exchanged between an attorney and a client, it was not privileged because it was intended to be shared with those outside the privilege and thus was not meant to be confidential.

Hence, the Judge concluded, the Yukom/Linkopia Documents provide no basis to require dismissal of the Indictment or disqualification of the Prosecution Team.

Read this next

Digital Assets

Point72 invests $77.5 million in Bitcoin, Morgan Stanley holds $269.9 million

Point72, the $34 billion hedge fund owned by billionaire and New York Mets owner Steven Cohen, held $77.5 million in the Fidelity Wise Origin Bitcoin Fund (FBTC) at the end of the first quarter, according to a recent filing.

Digital Assets

Binance claims Nigerian officials sought $150 million bribe

A Nigerian court has ruled that Tigran Gambaryan, a Binance executive detained on charges of tax evasion and money laundering, can stand trial on behalf of the world’s largest cryptocurrency exchange.

Digital Assets

Kraken reviews Tether listing in Europe ahead of MiCA adoption

Cryptocurrency exchange Kraken is “actively reviewing” whether to delist the stablecoin Tether (USDT) from its European platform, according to a report by Bloomberg.


Discover How MoonBag Coin Presale Stacks Up Against Dogecoin & Litecoin

Discover how the MoonBag Coin presale compares to Dogecoin and Litecoin, with unique features, a robust presale structure, and new opportunities in 2024.

Fundamental Analysis, Market News, Tech and Fundamental

Global FX Market Summary: Federal Reserve Policy, USD, May 17 ,2024

Overall, both the Federal Reserve’s policy and the US dollar’s outlook are shrouded in some degree of uncertainty.

Market News, Tech and Fundamental, Technical Analysis

Ethereum Technical Analysis Report 17 May, 2024

Ethereum cryptocurrency can be expected to rise further toward the next resistance level 3200.00, which is the top of the previous impulse wave i.

Digital Assets

Hong Kong adopts digital yuan payments through Chinese banks

Hong Kong has launched a pilot program enabling digital yuan payments through major Chinese banks, marking the first instance of China’s digital currency project being deployed outside the mainland.

Retail FX

Saxo Bank increases client assets five-fold to $116 billion

Copenhagen-based broker Saxo Bank has achieved a major milestone, surpassing $116 billion (DKK 800 billion) in client assets.

Inside View

ISDA says US Basel III “endgame” to heighten market risk capital

ISDA further explained that, by requiring banks to hold additional capital that is misaligned with levels of risk, the proposal would significantly reduce capital market access for US end users and businesses, restrict the ability of businesses to hedge exposures to changes in commodity prices, and increase the cost of everyday consumer goods, including food and gasoline.