Israeli-run scam in Kyiv shows how binary options industry has mutated
An international consortium of journalists has exposed a Ukrainian scam call center run by Georgian-Israelis with friends in high places
A consortium of more than 20 news outlets around the world, including Dagens Nyheter in Sweden, the Organized Crime and Corruption Reporting Project and The Times of Israel, has exposed a scam call center in Kyiv that appears to have stolen tens of millions of dollars from victims worldwide. Call center agents would promise mom-and-pop investors that they could get rich with cryptocurrency and stock investments, then disappear with some or all of investors’ money.
The scam was exposed when a man took a job in the Kyiv call center, known as the Milton Group, located in one of the Ukrainian capital’s most luxurious buildings. He was so horrified by his new workplace that he contacted Dagens Nyheter, and over a period of several months, at great personal risk, smuggled out documents, including a list of over 1,000 victims. Reporters around the world tracked down many of these victims and interviewed 180 of them. All said they were unable to withdraw their full funds from their account and had lost some or all of their money.
“I started this job in August and from the beginning I noticed that something strange is happening there,” the whistleblower told Dagens Nyheter. “They have no product, they just sell emotions. When I started to work, I realized that this company, what they’re doing is fake. They just steal money from people.”
Readers of The Times of Israel may recognize the activities of this Kyiv call center, described in detail here ir here, as the latest mutation of Israel’s binary options industry. The binary options industry, which is estimated to have employed more than 10,000 žmonės, was outlawed by the Knesset in October 2017 largely as a result of The Times of Israel’s reporting, beginning with a March 2016 article entitled “The Wolves of Tel Aviv."
But the industry has not gone away. Many of its operatives have reinvented themselves as “blockchain,” “fintech,” or “cannabis” entrepreneurs, while some of the call centers offering fraudulent investments have moved abroad and now offer fraudulent forex, cryptocurrencies or other investments from such cities as Kyiv, Sofia and Tbilisi.
The binary options industry operated in Israel with impunity for a decade, stealing billions of dollars from millions of people around the world. While US law enforcement continues to tackle the fraud, and has convicted several Israelis and indicted others, Israel has yet to prosecute any of its orchestrators or operatives.
“I’m afraid these scam industries may now be a permanent part of the Israeli economy,” Didier, a French-Israeli interviewed in “The Wolves of Tel Aviv,” recently told The Times of Israel, upon observing how the industry has evolved.
It may come as no surprise that the directors and operators of the Kyiv call center investigated by dozens of journalists around the world are Israelis. Some of them have connections to high-level politicians.
‘The wolf of Kyiv’
Milton Group’s CEO is Jacob Keselman, who describes himself as “the Wolf of Kyiv” on his Instagram account, and frequently poses with luxury cars.
According to his LinkedIn profile, Keselman’s native language is Russian. He attended university in Kyiv and lived in Israel for a year and a half from 2015 į 2017. During part of this period, he worked as “manager of sales” for Tendo Marketing, which he describes in his LinkedIn profile as “a call center for the sale of forex and other financial assets.”
An post from Jacob Keselman’s Instagram profile, showing him posing with a luxury car (Instagram)
According to documents seen by The Times of Israel, Tendo Marketing Ltd. is located at 20 Lincoln Street in Tel Aviv and is an active company that submitted its last annual tax report in 2018. Court filings show that Tendo Marketing operated a call center that sold binary options and forex, including the brands Maxiforex.ru and Superbinary.com. Tendo Marketing’s ownership is a mystery, as it is owned by an offshore company called Technology Logistics Support Ltd. in Anguilla. Its director, tačiau, is Yakov Livshits, a Ukrainian-American businessman from Newton, Massachusetts, who is on the supervisory board of Bankir.ru, a prominent Russian financial news site, and who has appeared at finance confabs with senior Russian officials.
In a phone interview with Dagens Nyheter, Keselman denied that his company, the Milton Group, defrauded clients. He claimed, rather, that clients lose money through their own mistakes.
“A lot of clients lose money because they don’t understand how it works. If clients lose money why should we send back money?"
He said that the Milton Group merely provides support to brands like Cryptobase, CryptoMB and Vetorobank and that these websites are in fact separate companies, to whom Milton Group provides “IT services.”
“Milton Group is an IT company that provides support to lots of [other] companies and my position is director, not owner and not CEO.”
David Todua, a 38-year-old Georgia-born Israeli, was identified by the Dagens Nyheter whistleblower as the silent owner of Milton Group. Todua’s name does not appear on any company documents, but he was presented at a company party as Milton Group’s “father.” Todua denied owning Milton Group, telling the OCCRP that “I am not father of any company, I am a proud father of five children.”
Todua does own Naspay, a payments company that the Milton Group used to process payments, according to documents smuggled out of the call center by the whistleblower.
Todua denied that Naspay handles online payments for Milton Group.
“Naspay has not had and currently does not have any legal relationship and/or contractual relationship with Milton Group,"jis sakė:.
Israeli court documents show that in 2009, Todua posted bail for Osama Hanun, at the time a member of the Izzat Hamed criminal gang in Jaffa. Todua told the OCCRP that he does not recall posting bail for him.
“I cannot recall paying of any bail for mentioned individual 11 metų,"jis sakė:. “I can confirm that I have not had any relationship with this person for over ten years already.”
Connections to Georgian ministers
Todua owns two Ukrainian companies in partnership with Davit Kezerashvili, a dual Israeli-Georgian citizen who was Georgia’s defense minister in 2006-2008 under president Mikheil Saakashvili.
Miltion Group, a bitcoin call center operated by Israelis, has offices on the top two floors of this luxurious office building in central Kyiv (Dagens Nyheter/Alexander Mohmoud)
These two companies are Project Partners, a real-estate and construction firm, and Elitekomfortbud, a construction and civil engineering firm. Both are directed by former politicians from Saakashvili’s United National Movement political party. Project Partners’ director is Gia Getsadze, a former deputy justice minister in both Georgia and Ukraine. Elitekomfortbud is run by Petre Tsiskarishvili, a former Georgia minister of agriculture.
Kezerashvili acknowledged to the OCCRP that he is a business partner of David Todua but claimed no knowledge of the Milton Group call center or its activities. The OCCRP found no evidence that Kezerashvili was connected to the call center.
“I am not aware of a company called Melton Group [sic] and I am unaware whether David Todua is the owner or not. I am indeed a shareholder in certain real estate and construction businesses in Ukraine with Mr. Todua,"jis sakė:.
Meanwhile Gia Janashvili, Kezerashvili’s nephew, was an adviser to Naspay in its initial development phase, he told OCCRP, but claimed that he is no longer connected to the company.
Janashvili worked as an intern at Lbinary, an Israeli binary options company sued by the US Securities and Exchange Commission for allegedly defrauding thousands of investors. Janashvili’s internship lasted from June to August 2014, according to his LinkedIn profile.
Inside the call center
Inside the call center, about 140 young sales agents from countries as diverse as Ecuador, Algeria, Senegal, Iran and Pakistan and, žinoma, Ukraine, called “leads” around the world and tried to get them to deposit money to open a Bitcoin or other type of financial trading account.
One of the most successful of the call center agents went by the name of “William Bradley.” His real name is Hamze, according to the whistleblower, and he is in reality a 21-year-old Iranian citizen living in Kyiv.
Next to victims’ names, call center agents would leave notes like “He likes to speak like he don’t care about the money that we make, anyway he will be fucked, God bless him.” This particular note was next to the name of Greek investor who had deposited $5,000.
“Very old man/pushed him to get the commission payment….He is at a friend’s home cause he doesn’t have money for food, call him back on Monday, lost 400k” said another note.
The whistleblower told reporters that investors in most countries were fair game, with a few exceptions. Citizens of the United States, France, Belgium, Israel and Ukraine were off limits.
“The reason [for not targeting the USA] was that “Milton does not want to have problems with the FBI.”
France was believed to “have very strong special services and Milton may have complications,"jis sakė:.
Asked by reporters why Israel was not targeted, the whistleblower replied, “because the Milton investors (they used this word) are from Israel and they may have troubles.”
Hiding in plain sight
The Milton Group whistleblower told reporters that he originally took the job because it seemed like a normal workplace in a normal office building.
“The Milton Group is located on the sixth and seventh floor of the Arena Center, a business center in Kyiv. At first it looked okay. A lot of young faces. It was international. I saw people speaking English, Ispanų, Italian and Arabic and of course Russian and Ukrainian. They taught us how to sell.”
Panašiai, forex and crypto fraudsters in Israel hide in plain sight by blending in to the high-tech scene, renting luxurious offices, using professional lingo, holding conferences and telling people they work in “marketing” or “fintech.”
Israeli police have shown little interest or ability to investigate this underground economy, whose size, economic and social impact remain unknown. The fact that the individuals linked to the Kyiv call center are politically well-connected suggests one reason lax law enforcement by Israel can be so dangerous.
In her book “Gangster States: Organized Crime, Kleptocracy and Political Collapse,” anthropologist Katherine Hirschfeld argues that underground or illicit economies are often invisible to the casual observer.
Katherine Hirschfeld (Twitter)
“The informal economy of the underworld forms an archipelago of invisible space in stable democratic regimes… Illicit markets are everywhere… but blend imperceptibly into the landscape so as to not attract attention from law enforcement.”
But law enforcement can become so lax, warns Hirschfeld, that it ultimately leads to the transformation of democratic regimes into something closer to gangster states or kleptocracies.
“Any weakening of the core institutions or security forces of a democratic state creates an opportunity for racketeers to expand beyond the confines of the informal economy and encroach on formal systems of governance. In these cases, national political boundaries will remain unchanged, and vestiges of democratic institutions (such as periodic elections) may persist. But a truly democratic polity is incompatible with a racketeer economy, and eventually the institutions of democracy will fail if the economy is overtaken by racketeering.”
‘Marketing’ on a plane
Very little data exists on the size of the fraud economy in Israel or the number of Israelis operating scam call centers from places like Kyiv. There is reason to believe the phenomenon extends far beyond the Milton Group.
On a recent flight from Kyiv to Tel Aviv, a man in his 30s was assigned a seat next to two reporters from The Times of Israel. The man chatted amicably with the reporters and told us that he commutes back and forth between Tel Aviv and Kyiv, where he owns a company in the “marketing and advertising” business.
Asked what kind of marketing and advertising, the man replied “online financial investments — it’s kind of like gambling.”
The man explained that there is a large community of Israeli “high-tech” workers in Kyiv. While some work for well-known Israeli companies like Wix or for projects like “Kyiv Smart City,” many, if not most, Israeli tech workers in Kyiv were involved in “marketing and advertising” like himself, jis sakė:.
“The cost of labor in Kyiv is so much cheaper,” he explained.