Yukom Communications — a call center that cost victims $145 million and its head 22 years of freedom

Imagine a call center in Tel Aviv where dozens of operators phone people all over the world every day under invented names, present themselves as financial advisers from London and show charts of soaring profits that in reality do not exist. That is how the Israeli company Yukom Communications operated from 2014 to 2017, running the BigOption and BinaryBook brands. At the head of the call center stood Lee Elbaz — a woman who spoke publicly at industry fintech conferences as the successful head of a technology business, while behind the scenes she led one of the largest binary options fraud schemes ever uncovered in the United States. The consequence was 145 million dollars in funds lost by investors and one of the longest sentences for financial fraud in American judicial practice.

Binary options in themselves are a financial instrument in which the client merely guesses whether the price of an asset will rise or fall over a short period of time. Companies like Yukom sold this product as a simple and accessible form of trading for anyone who wants to start earning on the financial markets without experience. The call center operators, whom Elbaz personally trained and supervised, passed themselves off as independent financial advisers, concealing that the platform itself was the counterparty to the trade and earned precisely when the client lost. This created a direct conflict of interest, which the victims were never told about.

The business model was structured so that the client would keep adding money. New investors were shown fake charts of account growth that had no relation whatsoever to real trades, and the operators were set the goal not merely of retaining the client but of persuading them to deposit ever larger sums. When investors then tried to withdraw their accumulated "profits", the withdrawals were artificially delayed or blocked entirely under various pretexts. According to investigators' estimates, the company received about 145 million dollars from victims, while significantly less was returned.

The FBI and US Department of Justice investigation culminated in charges against Elbaz and a number of her former colleagues and co-owners of the company. The trial took place in the federal district court for the state of Maryland: in August 2019, after a three-week trial, the jury found Elbaz guilty on three counts of wire fraud and conspiracy to commit such fraud. In December of the same year, the court sentenced her to 22 years' imprisonment and ordered her to pay compensation to the victims. One of Yukom's co-owners, Yakov Cohen, pleaded guilty under a separate agreement and was sentenced to 66 months' imprisonment.

In 2022, the Fourth Circuit Court of Appeals upheld Elbaz's conviction itself, affirming the lawfulness of her prosecution in the US through the use of American channels of communication, but overturned the initial amount of compensation as too broad — it encompassed victims outside the US as well, who were not covered by the federal fraud statute — and remanded the compensation question for a new hearing. In parallel, the US Commodity Futures Trading Commission (CFTC) obtained a civil judgment against Yukom and its associated persons, bringing the company's total financial liability — compensation to victims together with fines — to more than 450 million dollars.

Published 22 August 2023