Germany Hunts for Cyber Criminals Amid Billion-Euro Scams

(Bloomberg) -- At the start, the job looked like a well-paid role in finance. It ended with a $10,000-a-month drug habit and a cell in a German prison.

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That’s the story of Tal-Jacki Z.F., who was involved in an online trading fraud and confessed in 2021 to his part in cheating victims in Germany, Austria and other European countries of almost €9 million ($9.8 million).

He was a cog in a machine, helping to set up and operate highly-professional call centers in Bulgaria, Serbia, Bosnia and Herzegovina and Georgia, with the aim of fleecing investors through slick online software that mimics the look and feel of legitimate trading.

Online trading fraud is a rapidly growing global problem. In the US, the Federal Bureau of Investigation estimates that such scams stole $3 billion last year; Equivalent amounts are being harvested in rich European nations. Tackling the gangs is difficult because they work across borders and change the forms of their deceptions frequently to evade detection.

But as the damage has grown and tens of thousands of individuals lost their savings, the law enforcement response is stepping up. As Europe’s largest economy, Germany is among the key targets in the region, with prosecutors estimating that some $1 billion a year is being stolen there.

At the heart of these operations are call centers, dubbed “boiler rooms.” They’re high-pressure environments where the staff rarely know what they are getting into when they are hired, Tal-Jacki said in an interview from his secure rehabilitation facility not far from the German city of Munich. His face reflects the years of alcohol and drug abuse he says he’s been through.

In these types of crimes, members of the public first click on enticing internet ads, which often borrow credibility from a well-known figure. A recent example targeted at Germany used fake news about Elon Musk quitting Tesla to run an AI investment firm.

They’re then pressured by phone and e-mail by boiler room workers to make an initial modest investment — around €250 or so – and increasing amounts after that. While investors may think they’re earning profits day by day, when they go to cash out, there’s no money.

“The client actually thought they had a real trade,” Tal-Jacki said. “It was legit. If you compared it to other websites, Bloomberg or whatever, you saw the same numbers.”

Many of Tal-Jacki’s former associates have been rounded up, but others are still very much in business and they’re being pursued by law-enforcement forces including German senior prosecutor Nino Goldbeck.

The 43-year-old has been spearheading cross-border efforts to catch the criminals and shut down scams.

In the past two years, he’s been on the road almost every other month to attend raids in countries like Albania, Bulgaria, Serbia and Kosovo. He’s notched up dozens of arrests, successes that have made a mark and helped to push the idea that a serious multi-national effort is needed to tackle adversaries who also work in a sophisticated manner across multiple nations.

One of the biggest centers uncovered by prosecutors had more than 400 operatives in Kosovo. It scammed German victims out of some €32 million in less than three years, according to court documents from the trial of one staff member in Saarbruecken, near the French border.

For mainstream finance, online trading scams are becoming a reputational risk that’s no longer confined to the sidelines. Scammers have mimicked Deutsche Bank’s trading-platform Xmarkets, borrowing the name and its solid appeal to middle-class German investors. Ralph Hamers, former chief executive of Dutch bank ING Groep NV, was burned by investments into a payments business that was investigated for links to money laundering.

The brains behind the network of gangs running the scams have, in the past, picked on some very high-profile targets.

One is Gery Shalon, the mastermind of one of the biggest-ever hacks on the US financial system. Court documents show he forfeited more than $400 million as part of a deal with the US. He subsequently returned to Israel, his father said earlier this year.

Shalon’s partners include fellow Israeli citizen Gal Barak, dubbed the “Wolf of Sofia” for building a scammer empire from the Bulgarian capital.

Tal-Jackie says Barak hired him to build out a call center. Initially, it wasn’t clear that the business was a criminal enterprise, so successful was the veneer of legitimacy.

Yet for Tal-Jacki, the atmosphere in the operation became more threatening over time, as Barak began moving around with armed bodyguards.

“One time the office didn’t bring the result that he expected,” Tal-Jacki said of Barak. “So he brought someone with the polygraph to check all the employees and check us if we are loyal to him.”

That triggered Tal-Jacki’s desire to get out of the business — of course provoking the ire of the boss. He began drinking two to three liters of whiskey and snorting two to three grams of cocaine every day, occasionally also using heroin, his lawyer said at his trial.

He’s now in a closed mental institution because of his addiction.

“I started taking drugs, a lot of drugs. From that moment it was like falling without a parachute.”

Office Job

The call centers are run with multi-layered management, processes and accounting. They can have shiny offices, pay local taxes and offer seemingly legitimate jobs. The one run by Barak used to have a big recruitment banner at Sofia airport.

The job of the operatives is to contact customers who log on to one of the many websites — with names like “Zoomtrader” or “Option888” — and talk them into investing a relatively small amount of cash, with the promise of quick and easy profits.

Clients are then handed over to other agents, who act as “investment advisers” and are trained to use techniques of psychological manipulation.

Customers are led to believe, through fake online software and the advisers, that their cash is invested in financial products ranging from currencies to stocks, bonds, crypto and even derivatives. Wins or losses can be generated on the website as needed, regardless of what the “real” markets are doing.

But their money is already gone.

Some of the artifices are so convincing that some investors don’t even realize they’ve lost their money in a scam. Just bad luck on the markets.

“In the end, the type of investment offered didn’t matter,” the Saarbruecken judges wrote. “The gang’s sole aim was to get as much customer money as possible to enrich themselves.”

There are multiple forms of the scams in operation worldwide. Gangs that German prosecutors believe operate out of Asia target vulnerable people in Europe through dating apps. One victim, who asked not to be identified to protect her identity, was a woman from Berlin who lost her life savings.

When the 45-year-old was diagnosed with breast cancer last year, her world broke down. Looking for some distraction, she signed up with an online dating platform.

She soon got to know what seemed to be a nice man of Asian descent and they started an intense chat relationship. The conversations were a comfort for her, she said.

She didn’t question his explanation why the two couldn’t meet. He said he was in the wine business and had to be in New York frequently.

When, at some point, they discussed a common future, he mentioned owning a house and suggested they invest in cryptocurrencies.

He introduced her to a trading platform, where she put in €100. She was soon rewarded with a payout of €200 — real money that landed in her bank account. Convinced by this success, she invested more and more, eventually borrowing €60,000.

In January, when her account showed more than €900,000, she asked to get the money. First she had to pay a fee, and after that she was told there was a backlog.

Then she couldn’t reach her friend and the platform was down. All in all, she lost €159,000.

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Her story is just one of many. Earlier this year, seven men and women were convicted in Koblenz of involvement in a cybertrading scam. After first announcing the jail terms, Judge Thomas Metzger then read out a list of the victims.

It ran to about sixty names, and with each the judge added the amount lost. For some, it was just a few thousand euros. Others took a much bigger hit. More than €500,000 was lost by a manager at a branch of Deutsche Bank.

Judge Metzger concluded: “Greed eats your brains.”

Goldbeck, at Bavaria’s cybercrime unit, is working to prevent more people falling victim.

“We get new complaints every day,” he said. “This area is booming and will remain a major threat in the coming years.”

In June, his unit won another conviction in the Bamberg Regional Court. Another trial started in July and one more is due in September. But to really make headway, Goldbeck says international cooperation is key.

“The perpetrators don’t know borders,” he said in June, when he received the “Bul le Mérite,” an award from Germany’s association of criminal investigators, to honor his achievements in fighting cybertrading. “They are simply ignoring them.”

--With assistance from Jody Megson.

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