United States District Court, D. Maryland
THEODORE D. CHUANG UNITED STATES DISTRICT JUDGE.
Lee Elbaz is charged with one count of conspiracy to commit
wire fraud, in violation of 18 U.S.C. § 1349, and three
counts of wire fraud, in violation of 18 U.S.C. § 1343
and 2. Presently pending before the Court are four Motions to
Dismiss filed by Elbaz in which she argues that the
Indictment fails to state an offense, the charged offenses
are improperly based on extraterritorial conduct, the
conspiracy charge exceeds Congress's power under the
Commerce Clause to criminalize a foreign conspiracy, and the
Indictment fails to allege proper venue in the District of
Maryland. Elbaz has also filed a Motion to Strike Paragraph
10 of the Indictment and a Motion, in the Alternative, for a
Bill of Particulars. After briefing, the Court held a hearing
on all six Motions on July 30, 2018. For the reasons set
forth below, the Motions to Dismiss are denied, the Motion to
Strike is denied, and the Motion for a Bill of Particulars is
granted in part and denied in part.
Indictment alleges the following facts, which the Court
accepts as true for purposes of the Motions.
a resident of Israel, was the Chief Executive Officer of
Yukom Communications, an Israel-based business that provided
sales and marketing services for two internet-based
businesses with the brand names BinaryBook and BigOption
("the Companies"). BinaryBook and BigOption sell
financial instruments known as "binary options,"
consisting of bets on the outcome of a particular event, that
result in the payment of either a pre-determined amount of
money or nothing. Indictment ¶ 9, ECF No. 37. Elbaz
identified herself as the "Trading Floor Manager"
for BinaryBook and BigOption. Id. ¶ 7.
One of the Indictment charges Elbaz with conspiracy to commit
wire fraud. The fraud was allegedly perpetrated in several
ways. Sales representatives of the Companies
("Representatives") would misrepresent their
personal financial incentives to investors by stating that
they were paid a commission based on investor profit, when in
fact they were paid a commission based on investor deposits.
The Indictment alleges that Elbaz trained and encouraged
Representatives to make such claims.
also misrepresented the average investment return on binary
options. Representatives were given a script that included
false statements such as that investor returns averaged 15-25
percent per month and that there was an average success rate
of 70 percent. Elbaz allegedly trained and encouraged
employees of the Companies to make such misrepresentations.
Representatives, following scripts provided by Elbaz, made
false statements about their educational backgrounds,
claiming to have a master's degree in economics; their
location, stating that they were in London; and their names,
using "stage names" or other aliases. Elbaz
allegedly trained and encouraged Representatives to make such
statements and personally approved the stage names.
Indictment also alleges that Representatives misstated to
investors how easy it was for investors to withdraw their
funds. When an investor sought to withdraw funds, the
Representatives instead offered the investor an
"Academy" class that was purportedly designed to
improve trading performance, but did not, in fact, do so.
Id. ¶ 34. Elbaz allegedly trained and
encouraged employees to make misrepresentations that funds
could be withdrawn easily.
Representatives did not disclose material information about
various proposed investment terms, including
"bonuses," "risk free trades," and
"insured trades." Id. ¶¶ 36-39.
Although these terms implied that investors would receive
additional money or decreased risk, these tools were actually
mechanisms used to make it more difficult to withdraw
deposits. Elbaz allegedly trained and encouraged employees to
make misrepresentations about the ability to withdraw funds
invested in these instruments.
Two, Three, and Four charge Elbaz with three counts of wire
fraud. In these counts, the Indictment charges that on three
separate occasions, Elbaz caused, or aided and abetted, the
sending of wire transmissions from Representatives to victims
in Maryland for the purpose of executing a scheme to defraud.
The Indictment identifies three Maryland victims through
pseudonyms as Victims A, B, and C, and it provides specific
dates on which a Representative of BinaryBook or BigOption
communicated with the victim through a wire transmission.
Court will first address Elbaz's Motions to Dismiss, then
consider the Motion to Strike, and finally examine the Motion
for a Bill of Particulars.
Motions to Dismiss
has been charged in Counts Two, Three, and Four with
substantive counts of wire fraud in violation of 18 U.S.C.
§ 1343, which states:
Whoever, having devised or intending to devise any scheme or
artifice to defraud, or for obtaining money or property by
means of false or fraudulent pretenses, representations, or
promises, transmits or causes to be transmitted by means of
wire, radio, or television communication in interstate or
foreign commerce, any writings, signs, signals, pictures, or
sounds for the purpose of executing such scheme or artifice,
shall be fined under this title or imprisoned not more than
20 years, or both.
18 U.S.C. § 1343 (2012). Elbaz is also charged with
aiding and abetting these offenses under 18 U.S.C. § 2,
which provides that anyone who "commits an offense
against the United States or aids, abets, counsels, commands,
induces or procures its commission, is punishable as a
principal." 18 U.S.C. §2.
is charged in Count One with conspiracy to commit wire fraud,
in violation of 18 U.S.C. § 1349, which states:
"Any person who attempts or conspires to commit any
offense under this chapter shall be subject to the same
penalties as those prescribed for the offense, the commission
of which was the object of the attempt or conspiracy."
18 U.S.C. § 1349.
has filed her Motions to Dismiss under Federal Rule of
Criminal Procedure 12, which states that "[a] party may
raise by pretrial motion any defense, objection, or request
that the court can determine without a trial on the
merits" and includes challenges of failure to state an
offense and improper venue. Fed. R. Crim. P. 12(b)(1),
(3)(A)(i), (3)(B)(v). Under United States v. Engle,
676 F.3d 405 (4th Cir. 2012), a court may dismiss an
indictment "where there is an infirmity of law in the
prosecution." Id. at 415. It may not do so
based on a "determination of facts that should have been
developed at trial." Id. Thus, when evaluating
a challenge to an indictment under Rule 12, the Court must
base its determination solely on the facts contained in the
indictment and must accept all facts in the indictment as
Failure to State an Offense
seeks dismissal of the Indictment for failing to state an
offense. According to Elbaz, the Indictment does not set
forth the essential facts that would fairly inform her of the
conduct forming the offense charged in Count One. In her
view, the Indictment fails to allege any facts that link her
to the perpetrators of the fraud, or that show that she was
aware of the fraud at all. Elbaz further argues that Counts
Two, Three, and Four are deficient because there is no
factual allegation that she made or caused to be made a
materially false statement, or that the individuals who
communicated with the Maryland victims were connected to
Elbaz. Finally, she argues that there are no facts that
support the charge that she aided and abetted wire fraud.
defendant challenges the sufficiency of an indictment, courts
apply a "heightened scrutiny to ensure that every
essential element of an offense has been charged."
United States v. Perry, 757 F.3d 166, 171 (4th Cir.
2014). "An indictment must contain the elements of the
offense charged, fairly inform a defendant of the charge, and
enable the defendant to plead double jeopardy as a defense in
a future prosecution for the same offense." Id.
(quoting United States v. Kingrea, 573 F.3d 186, 191
(4th Cir. 2009)). An indictment is allowed to set forth the
offense in the words of the statute itself, so long as it
includes all of the necessary elements of the offense, but
the statutory language must also be accompanied by a
"statement of the essential facts constituting the
offense charged." Perry, 757 F.3d at 171
(quoting United States v. Quinn, 359 F.3d 666, 673
(4th Cir. 2004)). However, while an indictment is intended to
be "concise," Fed. R. Crim. P. 7(c), there is no
requirement that it "include every fact to be alleged by
the government," United States v. Moyer, 674
F.3d l92, 203 (3d Cir. 2012).
the charged crime is conspiracy, "all that is necessary
in the indictment is that the object of the conspiracy be set
forth sufficiently to identify the offense which the
defendant is charged with conspiring to commit."
United States v. Matzkin, 14 F.3d 1014, 1019 (4th
Cir. 1994). The sufficiency of the indictment is determined
by "practical, as opposed to purely technical
considerations," with the key question being whether it
tells the defendant all that is needed to show for his
defense, and whether it provides enough information that the
defendant will not be placed in double jeopardy. Id.
Count One, the elements of conspiracy to commit wire fraud
are "(1) two or more persons made an agreement to commit
wire fraud; (2) the defendant knew the unlawful purpose of
the agreement; and (3) the defendant joined in the agreement
willfully." United States v. Kuhrt, 788 F.3d
403, 414 (5th Cir. 2015). The Indictment clearly states these
elements. In paragraph 17, the Indictment alleges that Elbaz
"and others known and unknown to the Grand Jury, did
knowingly and willfully combine, conspire, confederate, and
agree with each other and others ... to commit wire
fraud." Indictment ¶ 17. The object of the
conspiracy was explicitly identified as the commission of the
federal crime of wire fraud, which was described as
"knowingly and with the intent to defraud, having
devised ... a scheme and artifice to defraud binary options
investors in BinaryBook and Big Option, . . . knowingly
transmit and cause to be transmitted by means of wire
communication in interstate and foreign commerce, writings,
signs, pictures, and sounds for the purpose of executing the
scheme and artifice in violation of Title 18, United States
Code, Section 1343." Id Thus, each element of
conspiracy, as well as the object of the conspiracy, is
fairly stated. See Perry, 757 F.3d at 171;
Matzkin, 14 F.3d at 1019. Although this description
largely tracks the statute, the Indictment is not limited to
the statutory language. It also includes the "essential
facts constituting the offense charged," including the
dates of the offense (from May 2014 to June 2017) and the
location (the District of Maryland and elsewhere). Indictment
¶ 17. It describes the object of the conspiracy as wire
fraud relating to a scheme to defraud "binary options
investors in BinaryBook and Big Option." Id.
those basic facts, which are typically sufficient to state a
conspiracy charge, the Indictment sets forth a detailed
description of the manner and means of the conspiracy,
including that Elbaz and her co-conspirators induced
investors to deposit funds based on four different categories
of misrepresentations made by BinaryBook and BigOption
personnel, specifically misrepresentations that
Representatives were paid based on total investor profits,
when in fact they were paid based on total investor deposits,
misrepresentations about the profitability of their accounts,
misrepresentations about the location and education of
particular Representatives, and misrepresentations about
investors' ability to withdraw their funds. These
additional facts are more than enough to identify the offense
Elbaz is charged with conspiring to commit and to allow Elbaz
to understand whether she is being subjected to double
claims that the Indictment does not provide sufficient facts
to connect her to the perpetrators of the fraud or to show
that she was aware of the actual acts of wire fraud. Elbaz
further claims that the Indictment "must contain factual
allegations from which a reasonabl[e] jury could conclude
that the defendant made or caused to be made a materially
false statement." Mot. Dismiss (Failure to State an
Offense) at 9, ECF No. 58. First, these claims misunderstand
the purpose of an indictment, which is to put the defendant
on notice of the charge against her, not to demonstrate that
the Government has sufficient facts to convict the
defendants. Unlike for a civil complaint, there is no
requirement that an indictment offer sufficient facts, which
if true, would establish the offense. Rather, an indictment