We have been covering the ongoing saga around one particular binary options sales and marketing operator for almost two years. Today, as the case against the former CEO of Yukom Communications, Lee Elbaz, continues in the US, the court published documents with the testimony of an FBI agent who has gathered in-depth knowledge about the industry.
In his statement to the court, FBI special agent Greg Fine in charge of investigating the alleged role of Lee Elbaz in a $145 million investment scam, shared that the company was internally very open about having questionable risks practices.
Over the years, a slew of binary options firms has become notorious for employing questionable tactics that pushed clients to lose money. As the FBI agent’s testimony to the District Court of Maryland states, they were, in fact, ensuring that the clients lose money.
Since binary options operators were traditionally splitting sales and marketing from risk management, the practice remained mostly concealed, until now.
Sales and “High Risk”
According to the testimony seen by Finance Magnates reporters, the FBI agent claims that Elbaz acted knowingly and encouraged her employees to reclassify clients making money as “high risk.”
Prosecutors in the case also claimed that customers had been systemically misled with inflated returns promises and the success records of the company when it comes to advising its clients. They also claim that Elbaz was conspiring with employees to drain liquid client accounts with surplus cash available for withdrawal.
Fine read out loud a series of emails in court in which Elbaz communicated with the risk-management department of the binary options operator. Every time a customer was scoring profitable trades of a significant size, the former CEO of Yukom Communications highlighted the client and urged the agent to switch the client into a so-called “high risk” category.
Risk Management for Businesses in Today’s WorldGo to article >>
“The customer has made a profit of $50,000 from $6,000 deposit! Friends, how did this happen? Please put on high-risk,” one of the emails reads. Elbaz denied that she was conspiring to facilitate client losses in any way.
According to a video interview presented in court, from around the time when Elbaz got arrested, Fine and another FBI agent were asking her if she was in contact with the trading platform provider to make sure that clients were not winning. She responded that client winnings were allegedly good for her.
The investigation carried out by prosecutors concluded that the success of the traders on-boarded by Yukom was in fact irrelevant, as the earnings of the firm’s personnel were tied to client deposits and not the outcomes of their trading.
According to Elbaz’s defense team, her actions do not necessarily constitute an intent to make the firm’s customers lose money. Instead, they claim that Elbaz instructed the company’s employees to keep clients engaged in trading.
Elbaz is not the only employee of the company charged with wire fraud. The firm’s owner, Yosef Herzog, is also alleged to havebeen aware of the dealings of the company.
Both the ESMA and the Israeli Securities Authority have banned the distribution of binary options products in their jurisdictions. The indictment against Herzog states that the firm caused losses for retail investors worldwide to the tune of $145 million.
Two sales reps working at Yukom have agreed to testify against Elbaz in exchange for more lenient sentences. The case is expected to run until August 2.