We have been covering the ongoing saga around one particular operator for almost two years. Today, as the 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 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 have 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 Lee Elbaz was acting knowingly and encouraging its employees to reclassify clients making money as “high risk”.
Prosecutors in the case also claimed that customers have 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.
Email Communications
Mr Fine has read out loud in court a series of emails in which Elbaz was communicating with the risk-management department of the binary options operator. Every time a customer was scoring profitable trades in significant size, the former CEO of Yukom Communications was highlighting the client and urging the agent to switch the client into a so-called “high risk” category.
“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 , 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 responds that client winnings are allegedly good for her.
The investigation carried out by prosecutors concluded that the success of the traders on-boarded by of Yukom was in fact irrelevant, as the earnings of the firm’s personnel was in fact tied to the deposits on part of clients and not on the outcomes from their trading.
Defense Thesis
According to the defendants of Elbaz, the actions on part of their client do not necessarily constitute intent to make the firm’s customers lose money. Instead the claim on part of the lawyers is 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 company’s owner, Yosef Herzog is also allegedly tied to the binary options industry and has been aware of the dealings at 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 2nd.
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