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The Forex Fraud: A wolf or a scapegoat?

The Forex Fraud: A wolf or a scapegoat?

Gal Barak from Herzliya was convicted in Austria for taking millions of Euros from European retirees. So why does the man nicknamed “the wolf of Sofia” insist he is only a fall guy?

Amir Kurtz  | 14:09  22.08.2021
In December 2018, Alexander Ignjatovic, a German-born Serb, called the German police and said he had information about a fraud network that had been operating for several years, fraudulently obtaining hundreds of millions of euros from thousands of innocent Europeans. "I am part of the network and know the details well," he said, "and I am willing to testify in exchange for immunity."

Gal Barak in Bulgarian court in March 2019 Photo: Dimitar Kyosemarliev Gal Barak in Bulgarian court in March 2019 Photo: Dimitar Kyosemarliev Gal Barak in Bulgarian court in March 2019 Photo: Dimitar Kyosemarliev

The surprising witness was granted immunity and told investigators in detail how a network of Forex investments operated from various cities in Eastern Europe, using manipulative trading software and call centers, which operated from Belgrade, the capital of Serbia, and Sofia, the capital of Bulgaria. The victims were mostly innocent citizens, mostly from Western Europe, many of them retirees with minimal understanding of trading. As more details were gathered, the resemblance to the activity of Jordan Belfort, "The Wolf of Wall Street", grew, at least as it was shown in the successful Hollywood movie.

The investigation soon led to a surprising major suspect, who had been charged at an early stage with a serious offense of setting up and running an international criminal organization. His name is Gal Barak, 34, who grew up in Herzliya and has lived in Sofia in recent years. Like the original wolf, Barak arrived "out of nowhere" and soon ran a worldwide fraudulent business, alongside partners from Germany, Russia, Bulgaria, Serbia, Kosovo, and Israel, and nicknamed in some circles "The Wolf of Sofia."

However, unlike Belfort, Barak and his partners did not run stocks. They did not run anything. Just made innocent people believe that the money they deposit in their Forex websites will make profits. But the funds could not generate profits, simply because the sites did not trade at all. A manipulative software made sure "the house will always win," as the sites were just a pipe through which the funds were transferred to Barak and his partners’ accounts using shell companies around the world.

Calcalist’s investigation traced the incarnations of the network that Barak and his associates webbed, and relied on confidential reports, transcripts of police investigations, legal documents, and publications in the foreign press. It unfolds how the fraud reaching hundreds of millions of Euros worked. The investigation began while Barak was still in an Austrian prison following his conviction in the affair, but he was surprisingly recently released and this investigation also includes for the first time his version of the events.

“Huge criminal energy invested in creating manipulation”

As a teen, Barak was considered a computer “freak.” He dropped out of high school at 16 and started his first business in the field of servers for computer games. After his military service, he opened a supermarket in Herzliya with a partner but did not find himself. "I have not seen how I am getting ahead in life," he told the Calcalist. “I met a few people who told me about the money moving around the Forex world, and I was interested.” His then-girlfriend was the one who connected him to the man who would introduce him to the coveted Forex world, Ilan Tzorya.

Tzorya, a former IDF intelligence officer who co-founded Tradologic in 2009, an online binary options trading platform. Tzorya was based in Sofia, and according to Barak, that is where they first met, and where Tzorya wowed Barak with a meeting at a hotel lobby, flashy car, and offices in a luxurious office building, “Ilan saw my reaction and told me, ‘you do not even understand the potential.”

Ilan Tzorya, Tradologic co-founder Photo: Austrian Police Ilan Tzorya, Tradologic co-founder Photo: Austrian Police Ilan Tzorya, Tradologic co-founder Photo: Austrian Police

According to Barak, "Ilan said that he has a lot of Israeli customers who have set up Forex brands. He provides you with everything you need, from A to Z - the trading software, internet advertising engines, and even licenses and legal opinions, which show everything is legal and orderly. He also connects you to his Israeli lawyer, who explains how to build companies. Ilan takes care of everything - 'Plug and Play' is what he calls it - and you are just the front. You need to start a call center and get reps who will call people, and he even provides you with the training.”

At the beginning of 2015, Barak moved to Sofia and was soon joined by other childhood friends from Herzliya and other Israelis looking for easy money. Together they began to weave a network of websites that encouraged investors to buy into speculative trading in binary options, foreign currencies, cryptocurrencies, and a variety of high-risk financial products. According to the authorities, call centers were launched in Bulgaria, Serbia, Bosnia, Kosovo, Ukraine among other places. In every center, Barak appointed a manager, and operators encouraged the victims first to invest, and then increase the investment more and more. Most customers found the sites following aggressive advertising on the internet and social networks, which guaranteed them quick returns on easy investment.

The Austrian court will later describe these actions as "huge criminal energy invested in creating manipulation on internet platforms and setting up call centers." Everything was done to entice investors to deposit an initial sum of 250 euro with the promise of easy profits. From that moment on, the trading and customer management platforms were transformed so that they would first present customers "winnings,” to instill trust in them, thus getting them into investing more money. This was part of what the court defined as the "marketing method".

And investors fell for the trap, one after another. "I took out a £50,000 (about $68,000) loan after being seduced by a man who introduced himself as a broker, and promised me a safe way to increase my savings," said a pensioner from Leicester, England, in an investigation published by Serbian website BIRN. “Later, I was told there was a hacking attack from China and all the money was lost. I felt devastated and helpless." A psychologist from London, who lost tens of thousands of euros, said: " You think you bet on currencies, but in fact, you are part of the deception, and what you see on your screen as trading is fraud."

“Serious acts of fraud and deception”

During the investigation, which originated in Austria but included international cooperation, investigators identified five key figures: Barak and Tzorya, another Israeli named Gary Shalon (who was previously extradited by Israel to the U.S. for fraudulent offenses and paid hundreds of millions of dollars in a deal with U.S. authorities), a Russian partner and a German partner. In addition, others involved in the fraud were identified, including Israeli managers and employees.

The network included a large number of websites, with Forex names such as OptionsStars, xTraderFX, OptionStarsGlobal, and GoldenMarkets. "But it was a façade - a specially created appearance with nothing behind it," Judge Christian Bohm ruled in the Vienna District Court. "There were no investment products sold ... there was no real possibility of earning or receiving income, and the investment advice given to clients only tried to get them to invest more money and did not really give them anything ... these are serious acts of fraud and deception over a long period."

Investment advice was provided through hundreds of callers, who sat in call centers that seemed like trading rooms. Agents introduced themselves to clients under false names as brokers and investment experts but were in fact professional crooks. "A young man who worked at one of the centers told me that their Israeli boss told them: 'It's okay to steal from Germans after what they did to us in World War II.' That is how they explained it to themselves,” BIRN’s Aleksandar Djordjevic told Calcalist.

Gal Barak (left), Rabbi Solomon and former Prime Minister of Bulgaria Boyko Borisov Photo: form Twitter Gal Barak (left), Rabbi Solomon and former Prime Minister of Bulgaria Boyko Borisov Photo: form Twitter Gal Barak (left), Rabbi Solomon and former Prime Minister of Bulgaria Boyko Borisov Photo: form Twitter

According to him, after the dubious forex companies were pushed out of Israel (currently trading in the country is subject to close regulatory supervision), they found refuge in Eastern Europe. First in Russia and Ukraine, and now mainly in the Balkans. "There are several groups that work the same way," Djordjevic said. "Gal Barak, too, in my estimation, eventually worked for other larger players."

The good life

Barak has become a known character in Sofia’s Jewish community since he moved there in 2015. He married a local girl, bought apartments, drove a Porsche, was close with the local Chabad house and its rabbi, helped to bring Israeli artists such as Rami Kleinstein and Kobi Aflalo to perform in Bulgaria, and gave donations and sponsorship for local causes. Through his activities, Barak even got a photo-op with the Bulgarian Prime Minister and met other politicians.

Barak claimed he made between EUR 50,000 to EUR 100,000 (about $58,000 to $116,000) a month at the time. “The money got to my head,” he admitted. “Barak and his friends lived the good life - parties, clubs, trips,” one Israeli acquaintance of Barak said. One of Barak’s friends posted a photo on Facebook of him hugging a girl while wearing an expensive suit and a fancy watch, with the caption “​​Jordan Belfort.” It was taken at an event the original wolf held in Tel Aviv. In his testimony, Ignjatovic also painted a picture resembling the movie - Alcohol, drugs, and prostitutes at the call centers. Barak denies these claims.

Dozens of shell companies around the world

The criminal investigation resulted in arrests in January 2019, with Barak arrested at the end of that month, as he tried to enter Serbia. However, due to his multiple sclerosis, he was released to house arrest in Sofia, as his lawyers battled extradition to Austria, which eventually happened at the end of 2019, while the investigation, raids, and arrests continued.

In September 2020, Barak pleaded guilty and was convicted for fraud and money laundering. He was sentenced to four years in prison. It is worth noting that Barak was tried for “minor” fraud amounting to EUR 2.5 million ($2.9 million) affecting 1,300 local victims. That is a fraction of a much bigger play, which Austrian police estimate at EUR 200 million (more than $230 million).

According to the Austrian court, Barak was responsible for the fraud that was committed through his call centers, and that was committed through Traidologic's software. He was at the Sofia call center almost every day, sat with the agents, gave them instructions, and encouraged them to deceive clients. His attempt to claim that the managers and employees under him were the ones who initiated the acts was rejected by the judge, who ruled that the fraud was "led from the top", adding: "The defendant was involved in a leading role and was fully aware of the events."

The materials revealed in the trial showed how Barak and his partners built a sophisticated system, which included dozens of shell companies around the world, with dozens of bank accounts, mostly in Bulgaria, and most of them at Investbank, which according to reports had a particularly easy approach to money transfers. The directors registered with the shell companies were mostly Eastern European citizens, and usually, power of attorney was also given in the accounts to Barak and his wife (she too was prosecuted in the case, but was acquitted about a month ago).

240 Forex brands, $710 million

One person not arrested is Tzorya, even though the software created by his company "allowed fraudsters to control the trading process in such a way that the decision to lose or win was in their hands, thus preventing profits from the victims," according to law enforcement. As early as January 2019, police raided Tradologic’s offices in Sofia and questioned employees and managers about the software. According to the police, Tradologic provided a kind of ecosystem - a complete package that included all the components required to manage the operation: from websites and trading software, through call centers to payment service providers and money laundering networks. The findings of the investigation showed that over the years, more than 240 Forex brands have used the software with a total trading volume of more than $710 million. Tzorya was questioned for two days by Austrian police this past October, but he was not arrested.

The investigation report was handed to the Austrian prosecutor at the end of January. It included hundreds of pages and was based on intercepted emails and text messages, surveillance and wiretapping, information from the Tradologic software, and incriminating testimonies from those involved. "Although the thousands of victims were presented with high chances of profit and return," the report said, "not a single customer actually made a profit and was paid."

"The smoking gun that the police found was the risk management carried out by the Tradologic platform," Barak claimed, "meaning that they changed prices and made investors always lose. Binary options are a trading arena, where the user buys an opportunity to profit if the price is so and so, but when the software mixes the numbers and can define in advance what will happen in the trade - it's problematic. It's like putting a magnet in a roulette, but it's not done by the sales centers, rather by the software operators."

You were a partner in that. You knew your employees were raising money for fraud.

"I realized that there was an issue with price change margins to maintain balance according to market volatility, but I did not think it was an illegal thing, that I was cheating someone. When I asked Ilan and the others, they would tell me 'it's okay, everyone works like this.' But in the end there was some trick, something rotten inside."

Rotten and delinquent

"I accept that there was something screwed up and immoral, which is now also defined as illegal following the verdict. My frustration is that this industry continues to run unhindered even now, and only I was convicted. All my money was confiscated - EUR 2.5 million ($2.9 million) - and my name was defamed, meanwhile industry leaders roam free like kings."

The highest price was eventually paid by Ignjatovic. The information he provided was valuable, but the immunity from prosecution he received in return did him no good. In February 2020, before he could testify in court and when he was only 34, he was found dead in a hotel in Sofia. The official cause of death was a heart attack, apparently after drug use.

Pointing fingers

This past January, Barak was up for release from prison thanks to the customary early parole in Austria. It was delayed due to extradition proceedings conducted against Barak by the German government for the fraud of thousands of German victims. At first, it was decided to extradite him, but his lawyers managed to appeal the decision and at the end of May the courts ruled that the same offenses could not be prosecuted in Germany as well, and Barak was released from prison.

One month ago, on July 14, an indictment was filed in Vienna against Tzorya for fraud and money laundering, after allegedly defrauding 4,500 victims in Austria alone for about EUR 10 million (close to $12 million). Authorities in Europe are continuing to investigate the affair, arresting and filing indictments against members of the network.

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In a conversation with the Calcalist, Tzorya denied the allegations against him: "A few months ago I came to Austria at the request of the authorities, I was questioned, I cooperated as a law-abiding citizen and went on with my life. My lawyers do not understand why I was charged. They claim that there was no real trading on the platform and we played with the spreads. But all platforms in the industry work that way. The risk management tool that allows these spreads to be made exists in any software on the market, and no broker can work without it. We will bring experts to explain how it works on hundreds of platforms."

Tzorya points the accusing finger in Barak's direction: "At the beginning of the investigation we cooperated and gave a lot of information to the police that helped them prosecute him, and the fact that he is blaming this platform is being done as revenge to shift responsibility on those who brought him down, in attempt to bring us down with him, simply absurd.”

Barak of course claims the complete opposite: "I'm not the wolf of Sofia, not even the cat from Sofia. I'm actually a monkey - Ilan's monkey (a common term for a front man for organized crime businesses). He is the real wolf who built this whole machine. I was just a little cog in this huge industry, flooded with Israelis. The Europeans needed a conviction to end this story and my case helped them understand the method. From the first moment I did not deny or hide anything and I also accepted the conviction. But I feel like a scapegoat. After all, this industry lives and kicks in every corner even today, and some of the unicorns that we hear about, under a shiny high-tech coat, were born out of it. "

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