As Israel turns blind eye to vast binary options fraud, French investigators step in
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The refusal of the Israeli authorities to tackle the crime means Israel is serving as 'a shelter' for massive theft

As Israel turns blind eye to vast binary options fraud, French investigators step in

Tens of thousands of French victims have lost some 4 billion euros to online investment scams in the past six years. Much of the cynical theft originates -- and is still flourishing -- in Israel

When French-Israeli lawyer Deborah Abitbol filed suit on behalf of French victims, it set off a French criminal investigation (Courtesy)
When French-Israeli lawyer Deborah Abitbol filed suit on behalf of French victims, it set off a French criminal investigation (Courtesy)

Daniel and Italia, a retired couple from central France, dreamed of buying a camping van and driving it through Europe.

The couple had saved about 50,000 euros ($56,000) to that end and were hoping to increase the amount by investing in the stock market. After doing some research online, they got a call from an investment broker at Fxntrade, a company with a professional-looking website and a London address and phone number. The broker spent a lot of time talking to the couple, and gradually cajoled them into investing their €50,000 through the company’s online trading platform.

Then one day, Fxntrade disappeared without a trace.The website was gone, and so was Daniel and Italia’s money. The couple eventually learned they were among tens of thousands of victims in a wave of online forex and binary options fraud that has hit France over the last five years. According to a joint survey by several French government bodies, 28 percent of people living in France have been canvassed by such companies.

“It’s a predatory business and destroying people’s lives,” Daniel said, tearing up.

Daniel and Italia (Screenshot France 2)
Daniel and Italia (Screenshot France 2)

Daniel and Italia’s story is the opening scene of “La ruine à portée de clic” (“Financial ruin at the click of a mouse”), an investigative report that was aired on the French prime-time television magazine “Envoyé Spécial” last September. According to the report, tens of thousands of French citizens have fallen victim to binary options and forex fraud in the past half decade, and the numbers are exploding. In 2011, the Autorité des marchés financiers (AMF), France’s securities authority, received a hundred phone calls concerning forex and binary options. In 2014 the number of calls was 5,000 and in 2015, 6,000. Forty percent of calls to the AMF’s investor hotline concern forex and binary options solicitations, according to Claire Castanet, the AMF’s director of investor relations. In 2010, the AMF’s blacklist of unauthorized trading websites contained four names. Today it has 360.

In a March 31 press conference, the Paris prosecutor estimated that binary options and forex fraud against French citizens amounted to €4 billion over the last six years. Camilla Parisot, a lawyer for AVEN (Association de victimes d’escroqueries à la nigériane, the association for victims of Nigerian-style scams), told The Times of Israel there are 25,000 French victims who have come forward, and many more who have not.

Deborah Abitbol, a French-Israeli lawyer who acts on behalf of French forex and binary options victims from her office in downtown Jerusalem, states that much, though not all, of this colossus of fraud originates in Israel. She describes the actions of this Israeli industry as “theft” and a hilul Hashem, or “desecration of God’s name” — a term that refers to behavior that brings shame or disrepute upon the Jewish people and religion.

Abitbol is currently acting for 15 clients, some of whom lost their life savings and are “truly in despair,” she relates. Most of them were approached by French speakers sitting in call centers in Israel who falsely said they were calling from somewhere else. At least one of Abitbol’s clients was defrauded by telephone from the UK.

Each victim has a similar story: At first, their broker was friendly, knowledgeable and highly attentive. After they made their initial deposit, they would experience a series of successful trades, and seeing how easy it was, keep adding funds to their investment account. Until one morning they woke up to see a large portion of their balance wiped out. When they complained, their broker turned cold and unresponsive or, alternatively, tried to persuade them to invest more to try to recover what they’d lost. Eventually, the losses piled on and the client gave up, or had their account closed against their will, while the fraudsters disappeared with the cash.

The AMF told The Times of Israel by phone that even among forex companies overseen by “serious” regulators like the AMF or the British FCA, 90 percent of clients lose their money due to the highly speculative nature of such financial products. As for unregulated binary options and forex companies, 100 percent of investors lose their money. The companies regulated by Cyprus (which include many forex firms as well as almost all regulated binary options firms) tend to resemble the unregulated firms, Castanet, the AMF’s director of investor relations, told The Times of Israel.

Claire Castanet, Director of Investor Relations for the AMF (Courtesy)
Claire Castanet, director of Investor Relations for the AMF (Courtesy)

“According to our observers, the marketing techniques used by firms regulated in Cyprus are similar to those of the crooks. Regulation is not always respected and it is very difficult for customers to get their money out. Our inquiry reveals ties between these regulated sites (mainly regulated in Cyprus) and unregulated ones.”

The Times of Israel has been exposing and detailing the activity of fraudulent forex and binary options firms in a series of articles in recent weeks, beginning with an article entitled “The wolves of Tel Aviv.” Thousands of people work in the fraudulent industry here — including many immigrants and Israeli Arabs — duping and stealing from clients the world over.

Cumulatively, the Israeli binary options industry is estimated to turn over hundreds of millions of dollars a year, if not billions. A large portion of the industry engages in deceptive and fraudulent practices, from lying about their names and locations to allegedly rigging the trading platforms to refusing to allow customers to withdraw their money under any circumstances.

Asked how much of the binary options and forex fraud targeting French citizens comes from Israel, Laurent Combourieu, director of investigations for the AMF, responded, “a large part, but not all of it.”

Combourieu added that there is some overlap between French-Israeli citizens who were involved in carbon-VAT fraud in France and later escaped to Israel, and the perpetrators of the current wave of online trading fraud targeting French speakers.

A French judge investigates — in Israel

Abitbol, the Jerusalem lawyer, is licensed to practice in both France and Israel. As such, she has filed lawsuits in France against several Israeli forex companies on behalf of her clients. She plans to sue the same companies in Israel as well, but says that Israel Securities Law currently makes that path a difficult one.

France has what is called an inquisitorial legal system, Abitbol explains, which means that once you file a lawsuit, a judge can become actively involved in investigating the case, as opposed to just being an impartial referee as in the United States or United Kingdom.

In early March, an investigating judge from France accompanied by a public prosecutor visited Israel, where the pair questioned 15 suspects and witnesses in the cases initiated by Abitbol in addition to carrying out five searches. Abitbol is legally constrained from naming the suspects in the case, especially because an indictment has already been served, she says. But such rogatory commissions, in which a judge from one country comes to another and carries out investigations, are complex, and require the cooperation of local police.

Laurent Combourieu, Director of Investigations for the AMF (Courtesy)
Laurent Combourieu, director of investigations for the AMF (Courtesy)

Asked whether Israeli police have cooperated with their French counterparts, Abitbol said “sometimes yes and sometimes no.”

“The police could raid these companies tomorrow if they wanted to. I don’t know if the French judge has requested that. They could easily locate them and confiscate their computers.”

Following the visit to Israel, the Public Prosecutor of the High Court of Paris, along with the AMF, the Office of Fair Trading of the Economy Ministry and the Prudential Supervisory Authority of the Bank of France, held a joint press conference on March 31 that was described to The Times of Israel as a turning point in France’s determination to crack down on binary options and forex fraud. For the first time, all victims were urged to come forward. Victims who were allegedly defrauded by companies with Cypriot regulation were told they should go to the AMF while victims defrauded by unregulated companies should approach the police. As of March 31, the Paris prosecutor announced there had been 50 new cases, in addition to those filed by Abitbol, involving 500 victims. With €4 billion in alleged fraud in the past six years, this is clearly just the tip of the iceberg.

From London to Bulgaria

In the Envoyé Spécial investigative TV report from September, the reporters trace the victims’ money from France to Bulgaria, described in the report as an “accomplice” to binary options and forex fraud. In addition to low taxes and low-cost software developers, that country offers banks that serve as an intermediate step between reputable banks in Western Europe and offshore tax havens, Nicolas Gaiardo, a lawyer who specializes in forex fraud, told The Times of Israel. He pointed to a report by Bulgarian investigative news site Bivol that describes one Israeli-owned Bulgarian bank in particular as willing to launder money from binary options sites.

Abitbol, the French-Israeli lawyer from Jerusalem, says that she has followed her clients’ money trail to London, where credit card clearing companies transferred the stolen funds to bank accounts in the UK. From there it often gets wired to banks in Bulgaria or the country of Georgia. Abitbol wonders why supposedly reputable banks and credit card companies allow this transfer of funds to take place: “Credit card companies have an obligation to inform people if there is irregular activity in their account. I don’t understand it.”

Abitbol has repeatedly asked the the UK’s financial regulator, the FCA (Financial Conduct Authority), for help recovering her clients’ money, to no avail. She has approached Bulgarian banks, she says, and encountered a wall of silence. But she does note with satisfaction that on April 25, the City of London police seized 30 million pounds from the bank account of a British resident who is suspected of laundering money for forex websites.

‘Taking care’ of customer complaints

The reporters in the Envoyé Spécial report make an undercover visit to a software company in Bulgaria that sells a trading platform to binary options and forex companies. For a few thousand dollars anyone can buy the platform, customize it, and set themselves up as a binary options broker. The company’s CEO, an Israeli expat, explains in the TV report that the software company then takes a 14 percent cut of “investors’” losses.

“If a player deposits 1,000 and loses 1,000, this is the profit,” the CEO explains. “If he loses 500, then 500 is the profit. It’s like a casino: if you lose money then the casino wins.”

The software company’s CEO goes on to tell the journalists that if customers complain of being defrauded, the software company reviews the relevant paperwork and “takes care” of 90 percent of such complaints, although he does not elaborate precisely how this is done. Only in the 10 percent of cases where the complaint necessitates that a human being call the customer is the complaint referred back to the binary options company itself.

Nicolas Gaiardo, a lawyer and former trader whose Sofia-based business, Net and Law, helps defrauded binary options victims recover their funds, told The Times of Israel that Bulgaria has become an outpost of Israel’s forex and binary options industry in recent years.

Nicholas Gaiardo (Twitter)
Nicholas Gaiardo (Twitter)

Gaiardo says that many forex and binary options companies that started in Israel outsource their call center, software development, marketing and graphic design to Bulgaria.

Other countries where binary options companies operate, The Times of Israel has learned, include the UK, Cyprus, Malta, Serbia, Panama, India and the Philippines.

Gaiardo, who is trying to recover the funds of about 750 mainly French, Belgian and Swiss clients, says that in his experience fraudulent binary options and forex companies can be divided into two types.

The first involves unregulated companies that defraud “investors” out of money, then sometimes contact these same investors pretending to be a company that will help them recover their funds — for a fee. These schemes, he claims, are run by Israeli organized crime.

The second type of fraud involves companies that are ostensibly regulated in Cyprus but fail to comply with the regulator’s requirements of honesty and transparency. Rather, they engage in practices detailed in The Times of Israel’s coverage of the industry: requiring brokers to assume false identities, deceiving investors about the odds of earning money, rigging the trades and making it hard to withdraw money. Both types of fraud are dominated by Israelis, he says, and are often carried out from within Israel.

In total, Gaiardo estimates, there are 500,000 victims so far of these scams in Europe.

Israel as a ‘safe house’?

In another scene of the “Envoyé Spécial” report, the journalists jet off to Israel, which is described in the show as a “safe house” for forex and binary options fraudsters.

There, a hidden camera shows the party atmosphere inside one forex company, FXGM, where young French speakers — many of them new immigrants to Israel — spend all day at their desks calling people in France and Europe, trying to persuade them to “invest.”

The video shows employees dancing, and when a bell rings, signifying that someone –perhaps a French retiree — has “deposited” money in their platform, the employees cheer and applaud.

‘Israel must change the law’

According to Abitbol, the major sticking point in her ability to obtain justice vis-a-vis the Israeli government is Amendment 42 to Israel’s Securities Law of 1968.

The amendment, which went into effect on May 26, 2015, stipulates that for an online trading platform to receive a license in Israel, it needs to refrain from deceiving customers or taking advantage of their lack of knowledge of markets or the platform. Abitbol says that these conditions, if enforced, will protect Israeli investors. The problem, she says, is a March 1, 2015, position paper by the legal team of the Israel Securities Authority that says Amendment 42 does not apply to trading platforms that exclusively solicit investors abroad.

“Our position is that a platform that solicits customers solely outside of Israel, and does not allow access to customers in Israel,” wrote ISA lawyers Asaf Erez, Amit Timor and Guy Dvir, “is not subject to the law, even if it is fully or partially run from Israel.”

Abitbol said that this position taken by the Israel Securities Authority may not even be legal.

“There is a contradiction between the securities law and Israeli criminal law, which says that you are not allowed to steal, even if the victim is abroad.”

Nimrod Assif, an Israeli lawyer who has represented several Israelis who lost money to Israel-based online trading platforms, also thinks the ISA’s position is problematic.

Nimrod Assif (Facebook)
Nimrod Assif (Facebook)

“The Israeli criminal laws,” he said, “and that includes the rules set forth by Amendment 42, apply to any offense that is committed, in all or in part, within Israeli territory.”

Assif says that just as Israeli authorities are obliged to prevent someone standing in Israel from shooting across the border at people in Jordan, in the same way they must prevent wrongdoing by Israeli trading platforms that harm people abroad.

“The language of Amendment 42 is not restricted in any way to cases that affect customers in Israel only. There is nothing in the Israeli law to suggest that Israel may serve as a shelter for illegal activity.”

But that is in effect what is happening, said Abitbol.

At one point, Abitbol confronted officials in the Israel Securities Authority, asking them point-blank, “Are you allowing these forex companies working here with a call center to commit fraud and crimes against people in France?”

“They could not answer me,” she recalled.

Abitbol says it is urgent for the Israel Securities Authority to change its interpretation of the law, thereby paving the way for lawyers to sue and for law enforcement to crack down on binary options and forex fraudsters in Israel. She is hopeful, because in her discussions with the ISA she got the impression that its interpretation of Amendment 42 is subject to change. She also mentions that in the past, Israeli law enforcement has in fact cracked down on criminals committing crimes against residents of France.

“These are the savings of people’s entire lives that are lost, gone with a click of a mouse,” she says. “When you don’t have money left, the damage is irreparable. The Securities Authority and the police must act to stop this.”

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