Illinois court issues $451.6 million judgment in binary options fraud case

Investing.com -- The U.S. District Court for Northern District of Illinois has issued a default judgment against five offshore entities and three individuals, finding them liable for fraud and other violations of the Commodity Exchange Act and Commodity Futures Trading Commission (CFTC) regulations. The judgment was announced today by the CFTC and pertains to a global retail binary options fraud that targeted U.S. residents. The fraudulent scheme was executed through internet websites using fictitious trade names like BigOption, BinaryBook, and BinaryOnline.

The entities and citizens of Israel found liable and prohibited from further fraud and other violations include Yukom Communications Ltd., Linkopia Mauritius Ltd., Wirestech Limited (also known as BigOption), WSB Investments Ltd. (also known as BinaryBook), Zolarex Ltd. (also known as BinaryOnline) and individuals Yossi Herzog, Lee Elbaz, and Shalom Peretz.

The court order mandates the defendants to pay, jointly and severally, $112.9 million in restitution and a $338.7 million civil monetary penalty. In addition, they are permanently barred from engaging in conduct that violates the Commodity Exchange Act and from registering with the CFTC or trading in any CFTC-regulated markets.

This judgment is the result of the CFTC’s complaint filed on August 12, 2019, accusing the defendants of fraud and other violations. The court found that from March 26, 2014, until the filing of the complaint, the defendants made numerous fraudulent claims to customers on websites and through email and telephone solicitations. They misrepresented that binary option transactions were profitable, when in reality, the majority of their customers lost money.

The court also found that the defendants misappropriated customer funds and made further misrepresentations to impede customers’ attempts to withdraw their funds. They manipulated their trading platform’s risk settings to limit or prevent customers from profiting from winning trades.

In a previous settlement, the court entered a consent order against another defendant, Yakov Cohen, involved in the fraud. Cohen was required to disgorge $7 million in ill-gotten gains from his participation in the fraudulent binary options scheme.

In parallel criminal actions, Lee Elbaz and Yakov Cohen faced convictions and prison sentences for wire fraud and conspiracy to commit wire fraud. Elbaz was sentenced to 20 years imprisonment and ordered to pay $28 million in restitution on August 7, 2019. Cohen, who pled guilty to a charge of conspiracy to commit wire fraud, was sentenced to 5.5 years in prison on August 15, 2024, and ordered to pay $7 million in restitution on January 22, 2025.

The CFTC acknowledged the assistance of the U.S. Attorney’s Office for the District of Maryland in this case. The Division of Enforcement staff responsible for this case includes Heather Dasso, Elizabeth N. Pendleton, Elizabeth Streit, Scott R. Williamson, and Robert T. Howell.

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