Yukom Trial – How the f*cking money machine made boiler room operators rich at the expense of retail investors

Simona Weinglass of The Times of Israel published a summarizing article to the first week of the trial against the Israeli Lee Elbaz and thus condensed the facts of the case. In particular, the documents and statements presented during the interrogation of the FBI agent at the trial on July 24, 2019, paint a brutal moral picture of the cynical rip-off mentality of the Israeli Boiler Room Operator Yukom Communications. Lee Elbaz was the company’s CEO. She has urged boiler room agents to perform at their best in ripping off retail investors and was proud of their success. While the operators and owners of Yukom became rich cheated retail investors from all over the world lost their savings.

In a conversation that the FBI retrieved from Lee Elbaz’s mobile she complained that while she had made millionaires of the owners of the companies she managed, she herself only earned about $500,000 during her three years as manager and CEO of boiler room operator Yukom Communications.

I don’t want to sound arrogant, that’s not my thing, but I’m a fucking money-making machine […] I started three years ago when the company had six employees and was bringing in $30,000 a month. I brought the company to 140 workers just in Israel and $12 million a month.”

Lee Elbaz statement presented to the jury in the trial on July 24, 2019

The prosecutors claim that Lee Elbaz was fully aware of the fraud against small investors and their illegal actions. She allegedly lied to clients, lied to victims over and over again.

On September 11, 2017, Elbaz asked Herzog via WhatsApp if it would be safe to go to the U.S.

“Yossi, I’m flying to New York, is there anything I should be afraid of?” Herzog replied, “I just came back from ten days in the US. Go!” Three days later, Elbaz was arrested at JFK airport.

The boiler room owners

According to the records presented in the trial, Lee Elbaz confirmed that the two owners of Yukom Communications were the two Israelis

• Yosef (Yossi) Herzog and
• Kobi Cohen.

Yossi Herzog is currently said to be in Israel and has also been charged by the US authorities. A request for extradition is currently being prepared. Herzog told FinTelegram that he would take full responsibility for his actions. But he couldn’t see any wrongdoing.

Elbaz described Herzog as a marketing genius with unbelievably good ideas. Allegedly it was hard to get along with him as he’s very impulsive. She said that she had learned from Kobi Cohen everything she knew about the human side of the business and how to handle people.

Involved boiler room operators

The two binary options platforms BinaryBook and BigOption were run from three related companies:

• Yukom Communications in Caesarea (Israel)
• Numaris Communication in Tel Aviv (Israel), and
• Linkopia in Mauritius.

These companies were controlled by Yossi Herzog and his partners. He himself has spent most of his time on Mauritius, he told FinTelegram.

Yukom Communications was one of over 100 binary options companies that operated from Israel in recent years. Yukom Communications was only one of over 100 binary options companies that operated from Israel until the Knesset banned the industry late 2017.

What about SpotOption, website operators, and payment facilitators?

Parts of the Yukom Case files are still sealed. It is therefore not clear who is actually charged. So far the US prosecutors have only indicted people from the boiler rooms behind the fraudulent binary options platforms BinaryBook and BigOption. But the platform owners, domain registrants, and website operators are other people (see FinTelegram Report here) and companies. But they knowingly and willingly contributed to this fraud scheme and should, therefore, be regarded as co-conspirators.

It is also still unclear whether the US prosecutors will also take action against the operators of the white label trading solution provider SpotOption. The statements and documents presented so far in the proceedings clearly show that Lee Elbaz communicated with SpotOption employees about the manipulation of client accounts. Customers who had too much money in their account were moved to a higher risk category by SpotOption at the request (instruction) of Elbaz and thus lost their money. According to our understanding, the people of SpotOption would have to be classified as co-conspirators.

Finally, it is also not clear whether the US authorities are also taking action against the payment transaction providers involved, such as Payobin or Fibonatix. Their participation in this fraud system made possible the theft of funds from retail investors in the first place.

The warning voice

Simona Weinglass started her series of articles on the wolves of Tel Aviv in 2016 to create public awareness about the vast fraudulent binary options industry in Israel. For this, she was also awarded was awarded an honorable mention on Monday in the international Trace Prize for Investigative Reporting competition in 2018. She is considered an insider about the situation in Tel Aviv.