The Fourth Circuit U.S. Court of Appeals today issued an opinion in the case regarding the prison sentence of binary options fraudster Lee Elbaz.

Based on Elbaz’s petition for panel rehearing, the panel granted panel rehearing, vacated the prior panel opinion, and issued a new panel opinion. While the result does not change, the panel said they appreciate Elbaz’s thoughtful petition.

Lee Elbaz and her confederates orchestrated a multimillion-dollar fraud scheme, operating from Israel and targeting unsophisticated victims worldwide. Posing as an investment firm, Elbaz and her partners solicited “investments” that cost fraud victims over $100 million, including millions from victims in the United States. While vacationing in New York, Elbaz was arrested and later convicted for conspiring to commit wire fraud and for substantive wire fraud itself. She was sentenced to 22 years in prison and required to pay $28 million in restitution.

Elbaz argued that the wire-fraud statute does not apply to her extraterritorial conduct, so she did not commit a crime under United States law. She also argued that the district court committed two procedural errors warranting a new trial: refusing to compel immunity for witnesses she planned to call and refusing to grant a mistrial after a juror overheard a disparaging remark about Elbaz. And, finally, she raises several challenges to her sentence.

The Appeals Court rejected most of these challenges. While the wire-fraud statute does not apply extraterritorially, the focus of the statute is on misuse of American wires. As her conduct misused American wires, she was properly prosecuted for a domestic offense. And the district judge properly refused to compel immunity to witnesses and denied a mistrial.

But while the Appeals Court reject most of Elbaz’s alleged sentencing errors, it agreed the district court erred in imposing broad restitution that went beyond victims of domestic wire fraud.

Elbaz and her partners’ fraud scheme involved so-called “binary options.”

The scheme operated in three layers. First, binary-option investments were marketed by two foreign companies, BinaryBook and BigOption. Second, when a customer responded to an advertisement, they would be contacted by a “conversion” agent from a company called Linktopia, who would persuade the customer to become a client by depositing at least $250. Third, once the customer was on the hook, responsibility for “retention” would transfer to Yukom Communications, based in Israel.

Elbaz worked for Yukom in Israel in various capacities, including as its Chief Executive Officer. Elbaz and others at Yukom made fraudulent representations to retain investors by convincing them to deposit more money, then stopping them from withdrawing their funds. Yukom’s retention agents used fake names and told investors significant lies about their education, work experience, compensation incentives, location, and investment performance.

And these lies supported their various techniques to “lock the client in,” obtaining more deposits and refusing to permit withdrawals. In total, the scheme netted more than $100 million in deposits, including millions from American victims.

A grand jury indicted Elbaz for conspiracy to commit wire fraud and for three substantive wire-fraud counts, based on the three wire transmissions sent to victims in Maryland. And when Elbaz traveled to New York on vacation, she was arrested.

Before trial, Elbaz sought to dismiss the indictment, asserting that the wire-fraud statute did not apply because her conduct was extraterritorial. The district court acknowledged that the wire-fraud statute does not apply extraterritorially but rejected Elbaz’s argument because it found that the charged wire frauds were domestic offenses based on the use of American wires to target American victims.

At trial, Elbaz planned to call four Israeli witnesses to testify. But before trial the United States informed the witnesses that three of them were under indictment and warned them about testifying. All four witnesses then declined to testify. Elbaz then sought to compel the government to grant immunity to these witnesses. The district court denied this extraordinary request.

During jury deliberations, one juror—Juror 9—overheard a negative conversation in Hebrew about Elbaz while standing in line at a drugstore. Juror 9 spoke enough Hebrew to generally understand but did not know the people speaking in this coincidental encounter. Juror 9 did not immediately disclose his encounter to the court. Instead, he continued deliberations for a day before informing the court, though without telling any other jurors about the incident.

Juror 9 said that what he had heard made him change his opinion, from leaning toward acquitting to leaning toward convicting. He was excused, but Elbaz sought a complete mistrial.

Overall, the Appeals Court agreed with the District Court. But the district court too broadly imposed restitution, so the Appeals Court said it must remand for a new restitution order. The conviction and sentence are therefore affirmed except for the restitution order.