While Israel has failed for a decade to tackle the widely fraudulent binary options industry now estimated to fleece $10 billion a year from victims worldwide, Jason Roy, the chairman of Canada’s newly formed Binary Options Task Force, is pleading with the Israeli government to shut down binary options “immediately.”
In the last year, Canadian securities regulators have received more than 800 complaints from Canadians who have been solicited or defrauded by binary options boiler rooms, Roy told The Times of Israel in a telephone interview this week. A boiler room refers to a room filled with telephones where salespeople engage in high-pressure sales, often of questionable or shady products. By using the term “boiler room,” Roy is referring to the widespread use by binary options companies of large staffs of telephone salespeople to sell their “investments.”
These Canadians were telephoned by people who identified themselves using fake names and fake locations. Upon further investigation, Roy, a senior fraud investigator with the Manitoba Securities Commission, discovered that most of these calls had originated in Israel.
“I am pleased to hear that the Israeli government and the Israel Securities Authority are trying to ban binary options not just for Israeli citizens but for the rest of the world,” he told The Times of Israel, referring to a draft law recently introduced by the Israel Securities Authority and the Justice Ministry that would shut down the entire industry. But he cautioned that action needed to be taken to stop the fraudsters right away.
“These are outright frauds. Given that the Israeli government has decided to implement this new law, I think that there should be a moratorium immediately on all binary options.”
Israel’s binary options industry was founded in 2007-8, and The Times of Israel began exposing its fraudulent nature in a series of articles starting in March 2016, with an article entitled “The Wolves of Tel Aviv. The industry here numbers over 100 companies, most of which are fraudulent and employ a variety of ruses to steal their clients’ money. These firms lure their victims into making what they are duped into believing will be profitable short-term investments, but in the overwhelming majority of cases the clients wind up losing all or almost all of their money. Thousands of Israelis work in the field, which is estimated to have fleeced tens of billions of dollars from victims all over the world in the past decade. In October, the Prime Minister’s Office called for the industry to be banned worldwide.
InJanuary, The Times of Israel’s detailed the defrauding of a Canadian man, Fred Turbide, who took his own life after he was scammed by an Israeli-based firm. The Times of Israel receives a constant stream of complaints from victims around the world, saying they have been defrauded by Israel-based firms and pleading for assistance.
The FBI told The Times of Israel last month that it was investigating binary options fraud worldwide, and invited victims and informants to contact it. In January of this year, law enforcement bodies and securities regulators from 20 European companies as well as the United States and Canada held an emergency summit at The Hague, to figure out how to tackle the Israel-centered crime. At this meeting, law enforcement officials estimated that the industry steals $10 billion a year from victims worldwide.
At a February 28 hearing of the Knesset State Control Committee, the Israel Securities Authority and Justice Ministry presented a draft of a bill that would completely shut down Israel’s fraudulent binary options industry, citing the terrible damage the industry does to Israel’s reputation and its capacity to inflame anti-Semitism worldwide.
However, sources within the Israeli government have told The Times of Israel that the draft law is facing an uphill battle in the Knesset due to robust lobbying efforts from the binary options industry. At the committee session and since, the lobbyists have been making the argument that the industry employs tens of thousands of people and should be regulated rather than shut down entirely.
Asked what he thought of the idea that binary options companies could or should be regulated rather than shut down, Roy replied: “I have not come across a legitimate binary options boiler room. I have yet to come across a single, legitimate one.”
At the February 28 Knesset hearing, Police Superintendent Gabi Biton said that the police had only received 52 complaints since 2009 concerning binary options fraud, and had not hitherto perceived it to be a major problem. “We are acting because of the media reports about binary options,” Biton said, “not because it is justified by the number of complaints.”
Biton added that now that the police have had their eyes opened, they are actively investigating binary options. “We will tackle this from the criminal angle, we will go after the credit card processing, and if we don’t catch them from the criminal angle we will catch them from the regulatory angle. And if we don’t catch them that way, we will find their sources of money. And if we don’t catch the sources of money, we will go to the tax authority and get them for not reporting income,” Biton promised. “We will attack this from every direction.”
From his vantage point in Canada, Jason Roy described a problem so major and so severe that it is “the leading investment fraud facing Canadians today.”
‘Overwhelming majority of sites are rigged’
In a press release announcing a new website, www.binaryoptionsfraud.ca, launched by the Canadian government last week, Canadian securities administrators warn that “the overwhelming majority of binary options sites are rigged to lure in victims with small early returns. In many instances, no actual trading occurs, and the entire interaction takes place for the purpose of stealing money. Once larger sums are invested, the losses begin to spiral, often through unauthorized credit card withdrawals and requests to send money offshore to an unregistered firm. Once a victim has lost their money, it is almost impossible to recuperate their losses.”
The website and Binary Options Task Force were launched on March 2 to tackle the “escalating” problem of binary options scams in Canada, to raise awareness and protect Canadians. The task force will also target the advertising and payment processing of binary options websites.
The website addresses the problem encountered by many victims of binary options when their “brokers” disappear and the victim has no idea who took their money.
“The fact is, you never know who you are dealing with,” explains the website. “These criminals are aggressively targeting Canadians and others around the world, swindling them out of billions of dollars. Victims have been defrauded of their life savings, RRSPs, and money set aside for post-secondary education.”
In recent weeks, a number of Israel-based binary options companies have shut down or are rumored to have shut down. Some have moved their call centers overseas, to countries including Bulgaria, Romania, Panama and South Africa. Last week, Israel’s first binary options company, AnyOption, which was founded in 2008 by individuals connected to the massive ICC-Cal credit card processing fraud for online gambling firms, is reported to have shut down its Israeli call center, laying off about 100 employees. AnyOption is one of the companies that has been the subject of complaints to Canadian securities regulators, Roy said.
Asked if shutting down Israeli binary options companies would resolve the problem for Canadians, since many of the call centers will just migrate to other countries, Roy replied, “it doesn’t end the threat of these boiler rooms. We anticipate that they’re going to move, but having them all centrally located in a country and being allowed to freely operate and steal money from Canadians is a concern.”
He added, “We’re glad that Israel has acknowledged that there is a problem and that they’re going to correct it and my hope is that they correct it sooner rather than later. Every day that this continues to operate there are more and more Canadian victims.”
Who would stall a law to ban criminals?
Meanwhile, Israel’s draft law to shut down the binary options industry is facing well-funded lobbying efforts to rewrite and/or delay it ,The Times of Israel has been told by sources inside the government.
The Times of Israel consulted Dr. Ronen Bar-el, who teaches economics at Israel’s Open University, to try to understand how a widely criminal enterprise is able to mount a lobbying effort in the Knesset that could stall or even defeat the efforts of law enforcement to shut it down.
“Binary options, like drug dealing, is a pretty clear-cut case of something that needs to be shut down,” said Bar-el. “There shouldn’t be any argument. The Knesset could pass this in three days if it wanted to.”
One unfortunately plausible explanation for the inability of the Knesset and police to date to shut down a $10-billion-a-year scam, he said, is corruption.
“Look, Israel has 30,000 police officers. And there is enough crime to keep them all very busy. So maybe it’s just that the blanket is too short, and they can’t tackle everything. But if organized crime in Israel has become powerful enough, then the other possibility is that some police officers are getting two salaries to look in one direction and not another.”
As for why any Knesset member would stymie efforts to crack down on binary options, Bar-el conjectured that some may have financial incentives to do so.
“In the United States you have campaign contributions, and in exchange you make a deal with the legislator. In Israel large campaign contributions are prohibited. It’s hard to imagine what leverage lobbyists could have, unless one imagines that in addition MKs are receiving not campaign contributions, but personal contributions.”
If this were the case, it would be illegal, and Bar-el despairs that perhaps “the swamp of Israeli corruption already has too many noxious chemicals in it.”
If the industry is not banned, countries could enact economic sanctions against Israel for failing to stop the ongoing crimes against their citizens, he said.
“The healthiest thing Israel could do right now would be to make life very difficult and unpleasant for crime organizations. One way to prevent organized crime from infiltrating the Knesset — and I hope it’s not too late — is to just declare that all binary options activity is illegal, period,” he said. “Don’t wait for other countries to enact sanctions against us. Don’t wait for the entire world to be angry. This industry should not exist and anyone who engages in scamming people abroad from Israel should know they will pay a heavy price.”