by Melanie Newman, The Bureau of Investigative Journalism
‘Killers having lunch’: The real life Wolves of Wall Street was originally published by The Bureau of Investigative Journalism
London-based nurse Hiba Ali hoped to make some money when she opened a £250 account with a company called BinaryBook, which promised big returns on investments known as binary options. Just months later she had lost more than £13,000.
The day after she opened her account most of the £250 was gone. But a phone salesman assured her she could get it all back and more if she invested in BinaryBook’s “risk-free platform which will give 75% profit,” she said.
She agreed to put £5,000 in, and over the course of high-pressure phone calls and emails went on to invest £14,000 in total. The salesman told her that a set of trades were “100% insured by BinaryBook bonus money management system,” and that her money would be returned to her account within an hour if the trades were lost.
But a few months later she says she was told all her trades had “expired”. While her account showed a balance of £14,689, only £689 was hers to withdraw.
The other £14,000 was “bonus” money and could not be accessed until she had traded at 30 times that amount.
“I feel stupid being fooled to this extent,” she told the Bureau. “But they are very professional”. Ali was later left unable to work after being hit by a car in February, and pleaded with BinaryBook that she was desperate for money – but to no avail.
She complained to her bank that she believed she had been defrauded and £10,000 was refunded. But BinaryBook succcessfully disputed a further £4,000 refund, arguing that she had not met the conditions required to withdraw the “bonus” money. “The stress and pain this [has] caused me is indescribable,” she said.
Ali is just one of thousands of people who believe they have been ripped off by companies and websites offering binary options trading – a scheme sold as an investment opportunity that in reality is a gamble or straight-up scam.
Binary options investments involve betting on whether the price of certain assets, such as shares, currencies or commodities, will go up or down within a specific time period.
Scores of websites like BinaryBook offer these deals to British customers, who often forge a relationship with a personal broker – or ‘expert trader’ – who will place the bets for them.
One of the biggest frauds in the UK
Even when the bets are legitimately placed they are hugely risky, but police say the industry is rife with fraudulent brokers.
While other countries have banned this business, a regulatory loophole has left UK victims completely unprotected, despite police saying binary options trading has become one of the biggest frauds in the UK.
Read the Bureau’s investigation: How Brits are losing millions to the UK’s biggest scam while the government stands by
The National Fraud Intelligence Bureau’s head of crime, Detective Chief Inspector Andy Fyfe, said police receive an average of two reports of binary trading fraud a day, with the average investor losing £16,000. “This is just the tip of the iceberg,” he said, but to date there have been no convictions because the fraudsters are usually located abroad.
Binary options trading is not overseen by the Financial Conduct Authority (FCA) because it is classed as gambling rather than a form of investment. But it is not overseen by the Gambling Commission either, because that institution only regulates operators that have equipment based in Britain.
The Treasury issued a consultation paper a year ago which proposed bringing binary options trading under the FCA’s remit. Since then, no action has been taken.
Legal action in Britain
A group of binary options investors including Ali is now taking legal action in Britain against BinaryBook, claiming the company has misled them and refused to release their money when requested. If successful the case could open the floodgates to thousands of claimants who say they have been ripped off by binary options websites around the world.
Richard Howlett of London-based law firm Selachii LLP is representing the investors. He was approached in 2015 by a US client who said BinaryBook shut down his account after he threatened to sue the broker for denying his withdrawal requests.
The client, a 64-year old cabinet maker from Virginia, claims he accumulated $47,000 from investments with BinaryBook but when he tried to cash out he was unable to.
BinaryBook uses the name of a UK-registered marketing company, WSB Investment Ltd, in various publicity materials – so Howlett made an application with British authorities for that company to be wound up.
A winding up order was granted in March 2016 and Howlett was appointed by the liquidators to act for all the company’s creditors – wherever they might be.
“We have since been contacted by people from all over the world, who have lost a few hundred pounds to over a million dollars,” he said.
Many of the creditors say they have been denied access to their money.
Some have come forward from as far afield as Tasmania, Australia, where the country’s police say a 77-year old man was “scammed” out of $250,000 by BinaryBook.
Selachii and the liquidators are still seeking creditors. Howlett said: “I suspect a lot of people are being naive and do not want to believe they have lost their money. I would encourage anyone who thinks they have an outstanding investment held by BinaryBook to contact my firm or the joint liquidators to register their interest.”
“Pre-determined profits” and “easy withdrawals”
John Price a 69-year-old from Rutland who has cancer, says he also fell victim to BinaryBook’s sales tactics. He says he made an initial investment of £250 after being cold-called in January 2015, and went on to invest about £8,000 more.
BinaryBook sent him documents promising “pre-determined profits” and “easy withdrawals”. He withdrew about £2,500 earlier this year but his remaining investment did not do what he hoped. When he saw his account balance stood at just £3,500 last month, he tried to cash out.
Emails seen by the Bureau show Price’s account manager, who called himself a “senior broker and trading group manager” refused to let Price withdraw his money unless he accepted his call. When the pair finally spoke the broker persuaded Price to continue trading.
“I told him that I couldn’t afford to lose the £3,500 but he assured me that the trades were safe and that there was a 700% profit due to me,” Price said. “I am not normally a naïve person but they were so persuasive.”
But BinaryBook.com is still operating and is challenging the liquidators’ actions. It has asked for the winding up to be halted and numerous bank accounts associated with WSB Investment – some of which hold large offshore funds – to be unfrozen.
A spokesman for BinaryBook told the Bureau the winding up was due to “confusion”. He said BinaryBook was not operated by WSB Investment Ltd but by a parent company of the same name: a firm incorporated in St Vincent and the Grenadines.
“The UK company has never held or operated BinaryBook’s brand or website or engaged with any end user,” he said.
“The winding up you refer to is a result of confusion made by one of the clients and we are working on solving the matter in the court of law.”
The corporate structures behind unregulated binary options outfits usually involve several international jurisdictions, including secretive tax havens, meaning the identity of the companies which actually own them is often totally obscured.
But one aspect of the sector’s operations is more visible. Sales are usually outsourced to third party call centres, which often tend to be based in Israel – the capital of the global binary options industry – and Romania.
Telesales in Mauritius
The Bureau has established that BinaryBook has at least two centres of sales operations.
Initial approaches by salespeople to potential clients are made from a Mauritius-based call centre run by a company called Linkopia. Some clients are then passed on to a company named Yukom based in Israel. Both Linkopia and Yukom are owned by Yossi Herzog, a 51-year old Israeli. The two companies provide call centre services for several other binary option brands besides BinaryBook.
Herzog’s lawyer told the Bureau that the staff in the Linkopia “conversion centre” in Mauritius call names from lists of possible investors and try to persuade them to put money into BinaryBook.
He accepts that the companies convert leads into clients for BinaryBook. But he denies that the company acts as a broker itself and says staff do not manage customer accounts and have never prevented customer withdrawals.
Earlier this year Wealth Recovery International, an asset recovery firm run by former binary options industry insiders, assisted in recovering US $1.5 million in BinaryBook client funds from Herzog, Yukom and WSB Investment Ltd.
The Bureau has spoken to a former Linkopia staff member who says he worked on BinaryBook and another controversial binary options brand.
Haji*, the ex-employee, told us he worked as a telesales agent with a job title of “account manager” at Linkopia between July and September 2015.
Linkopia obtains customer numbers via third party marketing companies, and through videos showing binary options traders making $10,000 from a single deposit of $250 in 24 hours, Haji explained. Customers would leave their phone numbers after watching the videos online.
Linkopia’s young Mauritian employees – “19 to 21-year-olds who don’t know much” according to Haji – would then persuade the customers to deposit $250 in BinaryBook.
“$250 does not sound like a lot but some of the money was coming from people with small savings and from third world countries,” he said. “Some Africans lost all the money they had saved.”
High wages and company perks
Clients who were thought to have deep pockets were passed to “retention agents” – more aggressive salespeople who would try to convince them to deposit sums up to $100,000.
“The really good salespeople would be sent to work in Israel,” Haji said.
Withdrawal requests were referred on to another team, he claimed, and in his experience many were refused.
Despite high wages and company perks such as a trip to South Africa, Haji left Linkopia after three months.
“I don’t believe the Mauritian authorities know what is going on,” he said. “They think Linkopia is just an IT company.”
A spokesman for Linkopia said: “Linkopia (Mauritius) Ltd is not familiar with, and does not advocate any … questionable practices or activities.”
The Bureau spoke to another whistleblower, David*, who says the big money “retention” work was done by Herzog’s other company Yukom. He says he worked on sales for Yukom, and estimated that in 2015 BinaryBook and another unnamed binary options website got people to invest $5 to $7 million a month.
“One month (…) a single salesman brought in more than $1 million,” David told the Bureau.
Herzog’s lawyer denied the claims. He said Yukom’s monthly income was “not close to 10%” of the sum claimed by the insider and that other companies around the world provided services to BinaryBook in competition with Yukom.
Responsibility for day-to-day running of Yukom lies with its CEO, an Israeli woman named Lee Elbaz who joined the company in May 2014.
“While Lee tries to encourage people to think Yukom is one big family, she is feared,” David said. “She stays 12-16 hours a day in the office.”
‘Killers having lunch’
A Yukom corporate video shows top-performing staff receiving BMWs tied up with ribbons last summer, and in November 2015 Yukom flew some 30 employees to the Greek island of Rhodes for a holiday. Yukom says the cars were leased, not given, to “excellent and ethical employees”.
In March this year Lee Elbaz took 10 of her Yukom team to see Jordan Belfort – the man convicted of a $100 million fraud who the film Wolf of Wall Street was based on – give a talk in Tel Aviv.
One salesman posted pictures on Facebook of the Yukom team at a restaurant with the caption “killers having lunch” – a phrase used in the film. Another Yukom salesman is currently advertising on Facebook for new English-speaking Yukom staff who “love money more than anything”.
David said Yukom staff advised clients on trading strategy, carried out trades on their customers’ behalf, and managed customer accounts. He also claimed the employees decided whether or not to allow clients to withdraw their money when they asked to.
“When a client places a withdrawal your job as a rep is to prevent that happening,” David said. “If the client is really difficult they get forwarded to the brand manager.” The brand managers got bigger salaries if they persuaded clients to stay, he claimed.
Yukom’s company lawyer denied this, insisting the companies which owned the binary options websites were the ones which managed customer accounts and made the decisions on withdrawals.
David also claimed it was the job of one Yukom staff member to persuade banks and credit card companies not to refund money to customers who claimed to have been defrauded.
Herzog’s lawyer told the Bureau “The employees of Linkopia and Yukom have never prevented a client’s withdrawal and will not provide services to any broker who does so”. Binarybook has “performed over 19,500 withdrawal requests in the last 12 months,” he said, adding that “[they] are processed within 24 hours; any other claim is untrue.”
US authorities have banned binary options call centres targeting their citizens. Earlier this year one operator, Banc de Binary, paid $11 million to US authorities to settle claims of illegal activities in the country.
But both Haji and David claim some BinaryBook personnel sought US clients in breach of American law. Haji says he personally called clients in the USA when he was at Linkopia. David says the night shift in his call centre was known as the “money shift” because that was when rich US clients could be targeted.
BinaryBook features on a US government list of organisations that authorities have “reason to believe are soliciting and accepting funds from U.S. residents” illegally.
Herzog’s lawyer said Yukom had never solicited US clients and that the brokers the company worked with did not allow people with US binary options accounts to access their websites.
“If a person places a trade, and loses, he needs to take responsibility for placing the trade,” he said. “People enjoy learning the capital markets and perform[ing] trading; The platform provider cannot be accountable for their losses and is not the clients’ “insurance company”.”