WHERE IT STARTED
FIRST SEEN: c. 2010 (Israel-based online platforms) · GOING FOR: About 16 years; peak 2013-2017
Grew in Israel from about 2010, when call centres began selling rigged online binary options platforms to foreign investors; the first US prosecution was of Yukom's Lee Elbaz, arrested at JFK in September 2017.
Binary options, all-or-nothing bets on whether an asset will rise or fall in minutes, were listed on US exchanges in 2008 but the fraud industry grew from about 2010 in Israel, where call centres sold rigged online 'trading platforms' to investors worldwide. Investigations by The Times of Israel from 2016 exposed an industry estimated at $5-10 billion a year; Israel banned the sale of binary options abroad in October 2017, and the FBI arrested Yukom Communications CEO Lee Elbaz at JFK the month before. Many operators later shifted to forex, CFD and crypto boiler rooms.
HOW IT WORKS
Online ads promise easy trading profits; a 'broker' with a false name and location calls, opens an account and pushes the investor to deposit more, offering 'bonuses' that lock funds in. The platform's odds and prices are manipulated so clients lose, and 'retention' agents refuse or delay withdrawals with invented conditions. When the client stops paying, the firm disappears and sells the client's details to recovery scammers. Companies used layered shells in Israel, Cyprus, the UK and the Caribbean.
Guaranteed or near-guaranteed returns from minute-long tradesBroker refuses to give real name, licence or physical addressDeposit 'bonus' that blocks withdrawals until huge trading volumeWithdrawal requests met with new fees or verification demandsFirm licensed, if at all, only in a small offshore jurisdiction
HOW USEFUL IT IS TO CRIMINALS
At its peak a boiler room could take millions a month from investors who could not see that the platform was rigged, with staff on commission and layered offshore companies. Estimated at $5-10 billion a year, the industry produced only a handful of convictions; the two Yukom owners remain fugitives and Israel's own prosecutions have been minimal.
THE DAMAGE IT HAS CAUSED
$5-10 billion a year
Estimated peak annual revenue of Israel-based binary options fraud — Times of Israel investigation; TBIJ, 2019
The Israel-based industry was estimated at $5-10 billion a year at its peak (Times of Israel/FBI, 2016-2019); no regulator publishes a verified global total. The largest prosecuted case is Yukom's $145 million. Many victims were retirees who lost everything, and their details were resold to recovery scammers.
$5-10 billion a year Estimated revenue of the Israel-based binary options industry at its peak (Times of Israel investigation; TBIJ, 2019)
$145 million Losses in the Yukom Communications fraud that led to Lee Elbaz's 22-year sentence (Times of Israel, Aug 2019)
22 years Elbaz's sentence, the longest in any binary options case (TBIJ, 20 Dec 2019)
WHO USES IT MOST
MOST OF ALL: 🇮🇱 Israel ▸
The Times of Israel and the FBI put the Israel-based industry at $5-10 billion a year at its 2016-2017 peak, and every major US prosecution (Yukom) involved Israeli firms (Times of Israel; TBIJ, 2019).
Israel (call centres and platforms)United States (prosecutions, victims)United Kingdom (victims; FCA ban 2019)Australia (ASIC ban 2021)Cyprus (licensing and shell companies)
GOVERNMENTS LINKED TO IT
No government is documented as using this method.
NOTABLE PEOPLE WHO USED IT — RANKED BY PROFILE ORDER (NOT BY AMOUNT)
#1 Lee Elbaz CONVICTEDREPORT PENDING
$145M scheme; $28M restitution · 2014-2017
CEO of Israel's Yukom Communications (BinaryBook, BigOption); convicted in Maryland of wire fraud and sentenced to 22 years, the first Israeli binary options executive tried in the US.
SOURCE: Times of Israel, Dec 2019; The Bureau of Investigative Journalism, 20 Dec 2019
#2 Yossi Herzog and Yakov (Kobi) Cohen FUGITIVEREPORT PENDING
$140M scheme · 2014-2017
Owners of Yukom indicted in 2019 with 13 employees in the $140M fraud; never arrested, and US prosecutors took out newspaper ads to try to serve them.
SOURCE: Times of Israel; CFTC press release 8962-24 (Herzog ordered to disgorge $7M)
#3 Jared J. Davis CONVICTEDREPORT PENDING
$561,000 CFTC restitution · 2012-2016
Co-owner of Sandusky, Ohio binary options operation trading as OptionMint, OptionKing and OptionQueen; sentenced to 30 months for tax evasion and ordered by the CFTC to pay $561,000.
SOURCE: US Attorney N.D. Ohio, Jan 2023; CFTC press release 8698-23
SOURCES
Times of Israel, 'US jails Israeli binary options crook Lee Elbaz for 22 years', Dec 2019
The Bureau of Investigative Journalism, 'Binary options boss exposed by Bureau jailed for 22 years', 20 Dec 2019
Times of Israel, 'Unable to locate binary options defendants, US publishes ad'
CFTC press release 8962-24, Herzog disgorgement
CFTC press release 8698-23, Jared Davis restitution
US Attorney N.D. Ohio, 'Co-Owner of Binary Options Company Sentenced to Prison for Tax Evasion', Jan 2023
Globes, 'Elbaz the first Israeli binary options fraudster to fall'