Another aspect is due to the type of robot and the type of financial instrument. The evidence indicates that the defendant offered and marketed to his clients one specific robot for trading in a gold base asset. The format of the relationship between the parties was not one in which the defendant offered a variety of products for the customer to choose. His actions vis-à-vis customers were reduced to one robot. Moreover, for most of the clients, the defendant did not offer a variety of financial instruments, but only differences on gold (Second Notice, p. 174, paras. 13-18). In the case of two customers who invested considerable sums, the defendant first installed a robot for trading in gold and later installed another robot for trading in underlying assets of foreign currency differences. However, even in this case, the "variety" offered to the customers was no more than two robots, and this was only for two customers.
The defendant even set a minimum amount for the investment. The defendant conditioned the trading using the robot he provided on a minimum deposit of US$1,000 in the account. The minimum amount is not set by Pepperstone. This was a demand dictated by the defendant based on his own considerations. Indeed, some investment managers condition the relationship with the client on a minimum amount, and the restriction does not appear to be a problem. However, the situation before us is different. The client who turns to a "normative" investment manager has a variety of investment options, while the representation presented by the defendant before us is that the robot is a unique product and the defendant's trading method is unique and capable of achieving returns that are not guaranteed elsewhere. In addition, the marks of the "management" of the accounts can be identified in the fact that the defendant compiled information and data regarding the customers' accounts (P/107, p. 300).
- The defendant offered the customers three main trading routes. According to the first track, the customer purchases the robot for a one-time payment (the landing page states a total of $7,700). In this case, according to the defendant, the customer's responsibility is to set up the robot and operate it. According to the second track, the robot is rented to the customer for a monthly fee. Special emphasis is placed on the third track - "Managed Account Service". According to this track, the customer is passive. All that is required of him is to open a trading account and deposit the money. The defendant installs the robot in the account and defines it (confuses it), in exchange for a share of the profit. Alongside these tracks, it appears that the defendant proposed a "franchisee" track, i.e., allowing the client to recruit and manage additional accounts "under him", although the evidence placed beforehim does not indicate that there were such engagements. The aforementioned routes are documented in a number of pieces of evidence (P/166, pp. 5-8; P/156, pp. 2-4; P/150, pp. 2-4; see also the landing page, where slightly different routes are presented).
- Trading in a "managed" account, as its name implies , is managed . According to the defendant's own definition, the trading includes clear and distinct characteristics of the management of the case. According to this track, the defendant is in charge of installing the robot, determining the settings and characteristics of the trade (Knafog), managing the account, and monitoring the account (P/4 , pp. 20-22). The defendant explained the format well to one of the clients, as follows: "... As far as you are concerned, a managed account service is a live and forgotten person, the only thing is just opening an account and setting up an initial correction and that's it, we do the opening and setting up and from that moment on I already do all the service for you" (P/150, p. 23). The setting of the robot's settings is intended to enable it to operate within the framework of the account, or as the defendant put it, "I manage the robot and the robot does the work" (P/156, s. 6; P/150).
The defendant was aware of the difficulty that his conduct aroused, and therefore during his interrogation at the NAA he claimed that for marketing considerations he initially presented the matter in one way , but in his conversations with the customers he clarified things differently. This argument should not be accepted because it is inconsistent with the evidence and with his actual conduct in the framework of the accounts. The same applies to the claim that the things were presented in the manner in which they were presented only to the first customers and that things changed afterwards (P/4, pp. 21-24). The evidence regarding the manner in which the accounts were conducted contradicts these claims. Moreover, the fact that the defendant managed the accounts can also be learned from the manner in which the defendant marketed himself, as someone who could achieve a high rate of passive return.
- The defendant determined the characteristics according to which the robot would carry out the trading operations. It must be said that the defendant's actions were also in relation to an account that was not defined as a "managed account" (such as Harel and Buskila). The defendant did not dispute that he "programmed the manner in which the robot traded," but according to him, he did so "only after he clearly and fully presented the owners of the robot with the manner in which the robot operated, and they understood, approved and took upon themselves to manage their account using the robot and the parameters defined therein" (paragraph 77 of the response to the indictment). According to the defendant, when the customers approved the activity, "the discretion passes to those account holders" (paragraphs 77-78 of the response to the indictment). However, the evidence shows that the situation was different and that in fact the definition of the characteristics of the robot was done by the defendant, at his discretion, and he was the one who set the "tone" regarding the robot's performance.
The customers are not familiar with the robot, they are not aware of its features, and certainly not at the level at which the defendant is in control. All the customers were interested in was making a profit without being required to invest time and effort, and that was the reason why they contracted with the defendant. Even if the client had approved the parameters (and there are indications in the evidence that one client was a partner in the process), this does not take away the "discretion" given to him from the defendant . As noted earlier, the existence of discretion on the part of the defendant does not mean full control over what happens in the account. The determination of characteristics can be likened to "setting the investment policy" and coordinating expectations, which in the form of a normative relationship should also exist in the relationship between the client and the investment portfolio manager. In addition, we mentioned earlier that the defendant instructed the client to mark the desired leverage ratio in the account opening process, so that the leverage would suit the robot's activity.