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For feted adtech startup, a meteoric rise partly fueled by alleged fraudsters

11 30 27
31.08.2021

In 2017, the digital marketing company Webpals was a paragon of Israeli high-tech success. That year, leading business daily Globes chose Webpals CEO Inbal Lavi as one of its “40 most promising young Israelis.”

A year later Dun & Bradstreet ranked Webpals as the third-fastest-growing high-tech company in Israel. It also included Webpals in its much-discussed list of the 100 best high-tech companies to work for in Israel.

The company provided perks like gourmet coffee and massages, and employees spoke proudly of a corporate culture that supported advancing equality in the workplace and women’s rights.

In 2019, Lavi boasted about her company’s equal-opportunity hiring policies to the United Nations Commission on the Status of Women.

“Diversity, growth, opportunity, equality — these are not just buzzwords, they are the basis of a great company,” she said, seated next to Israel’s then-minister for social equality Gila Gamliel.

“And today I challenge all companies to treat diversity as a metric with which they measure their success.”

But a recent leak of US Treasury Department documents reveals that Webpals was also profiting from predatory businesses ranging from online gambling and porn to investment scams.

The documents, from what has been dubbed the FinCEN Files leak, reveal that between August 2011 and December 2015 the company’s bank accounts received payments from several firms involved in binary options, a now-outlawed industry largely fueled by sham investment vehicles designed to dupe innocent people out of their life savings.

The files also show that Webpals’s parent company XLMedia was paid by a shady offshore shell company that allegedly made money off online dating cons and has been accused on multiple consumer complaint websites of allegedly charging credit cards without permission. Another company doing businesses with XLMedia was Pernimus Limited, which owned the extramarital hookup site Ashley Madison and was reportedly associated with the escort industry.

A spokesperson for XLMedia described the relationships with companies engaged in forex, binary options or online dating as “peripheral” and no longer active.

Webpals is not the only Israeli tech startup with a shiny progressive veneer and loyal media following that has turned out under scrutiny to be involved in allegedly fraudulent, deceptive or unethical activity. Israeli companies show up again and again in the thousands of “suspicious activity reports,” or SARs, that make up the bulk of the FinCEN Files.

The documents open a window into the shadowy business relationships that often underpin what appear to be aboveboard, profitable enterprises.

On September 20, 2020, BuzzFeed News, together with the International Consortium of Investigative Journalists (ICIJ) and over 100 news organizations around the world, published a series of investigative reports based on a trove of over 2,500 leaked documents from the US Treasury’s Financial Crimes Enforcement Network, or FinCEN.

Most of the documents are “suspicious activity reports,” commonly called SARs, that 90 banks and other financial institutions submitted to FinCEN between 2011 and 2017. FinCEN’s mandate is to combat money laundering.

US banks and other financial institutions are required by law to submit SARs when they suspect that a transaction or series of transactions is implicated in money laundering. The 2,500 leaked documents are a small fraction of the 12 million SARs submitted to FinCEN in 2011-2017.

When Lavi joined Webpals in 2014, its parent company XLMedia had revenues of $50.7 million and profits before tax of $13.2 million. By 2017, its revenues were $137.6 million, and its profits had tripled to $39.3 million.

The company’s social media pages at the time showed its employees enjoying A-list musical entertainment, pool parties, and even a glitzy light show in the desert during which the company’s logo was projected onto the side of a mountain.

But in videos and written material, Lavi was vague about what the company did to earn so much money.

“We obtain high-quality traffic, whether on web or mobile,” she said in a 2015 presentation to a group called The Innovators and Investors Forum, “and we direct it to online businesses. We get paid according to our results. Once we direct a potential customer to an online business and he actually spends money, we share the revenue.”

(Lavi left the company in July 2019, citing changes in the company’s board of directors that restricted her autonomy and created workplace tension, according to a lawsuit she filed against the company. She now runs a startup called Woah Edutainment that teaches people to dance using their smartphones.)

An SAR filed on January 15, 2016, by the New York Branch of Barclays Bank PLC shone a light on some of the businesses Webpals and XLMedia were working with, expressing concern over a Barclays Corporate account in the name of “XLMedia PLC” and other bank accounts in the name of “WebPals.”

SARs are generally filed by bank compliance officers when they see a pattern of financial transactions that they suspect is indicative of money laundering. While regarded as potential red flags, the fact that a SAR has been submitted does not mean that the companies or individuals in question are guilty of any wrongdoing.

“Barclays NY is filing this Suspicious Activity Report (‘SAR’) as there are concerns that the USD wire activity involving XLMedia may contain illicit proceeds,” the report said. It stated that the bank was unsurprised to find payments to XLMedia from gambling sites, but had to lift an eyebrow at some of its other business partners.

“Given that........

© The Times of Israel


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