The Israel Securities Authority is working on legislation to outlaw the entire Israel-based binary options industry, the authority’s chairman, Shmuel Hauser, said.
After months of reporting by The Times of Israel on the largely fraudulent industry, which for the past decade has been employing thousands of Israelis to dupe vast numbers of victims all over the world out of hundreds of millions if not billions of dollars, the Prime Minister’s Office two weeks ago condemned the industry’s “unscrupulous practices” and called for it to be outlawed worldwide, and Hauser vowed to “eradicate” it.
In the past few days, Hauser said in a telephone interview, consultations have begun on the framing of legislation to bar all Israel-based binary options operations from targeting anybody, anywhere. (Israeli firms are already banned from targeting Israelis.) The consultations have extended to Attorney-General Avichai Mandelblit and to the government, he said.
“I am deeply troubled” by the fraudulent industry, Hauser said. The aim of the new legislation is “to put an end to the whole story” of binary options operations in and from Israel.
Furthermore, said Hauser, the police and judicial authorities have been made aware of the scale of the problem, so that the entire “arsenal” of enforcement can be wielded against the fraudsters. “All branches of enforcement are aware, and they all understand the problem,” he said. “The urgency of it is clear.”
Hauser said the wording of the legislation was straightforward but nonetheless represented “a dramatic change” and had to be structured precisely so as to apply specifically to binary options.
“What I am initiating now is legislation that will give us the means to regulate those [companies] that are based in Israel even if they are offering [binary options] to non-Israelis. They too will be covered by the legislation.” This legislation will mean that “Israelis and people overseas” are protected from the scammers.
Asked how long it would take to enact the legislation, Hauser said that depended on how high a priority the government makes it. The Times of Israel has been told that Hauser has the backing of Prime Minister Benjamin Netanyahu, underlined by the unprecedented statement issued by the Prime Minister’s office on October 28 calling for a worldwide ban on trading in binary options.
Hauser also urged regulators around the world to contact his organization on behalf of binary options victims in their countries. “We’re saying to all regulators overseas who want our help, turn to us, and we’ll do the investigations for them. We can’t initiate it. They have to turn to us.”
The Times of Israel has been exposing the fraudulent industry in a series of articles since March, beginning with an article entitled “The Wolves of Tel Aviv, and has estimated that 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.
Hauser’s new legislative initiative comes as a belated response to widespread allegations of fraud carried out for years by the Israel-based binary options firms, as highlighted on this website and, increasingly, in publications around the world. Numerous countries, including the US, Canada and France, are investigating Israel-based binary options fraud on behalf of their citizens who have been cheated.
Some Israeli-linked investment professionals have been pleading for months for Israel to take firm action to prevent the fraudulent Israeli firms from fleecing victims abroad, warning of the damage their activities are doing to Israel’s global financial reputation.
Numerous victims from all over the world — notably in North America, Eastern and Western Europe, and Arab countries — have contacted The Times of Israel in recent months to detail how they were duped into parting with large sums of money by Israel-based salespeople misrepresenting themselves, their location, and the nature of the transactions they were offering. There have been suicides, family crises and extreme financial hardship caused to victims of the fraudulent Israeli firms.
Hauser said last month he considers Israel’s fraudulent binary options industry to be “an ugly phenomenon that harms innocent people and unfortunately fans the flames of negative perceptions of Israelis and Jews.” He said in August that “as a regulator, as a Zionist, as a father,” the fraudulent industry “looks awful to me.” He called the Israel-based companies “disgusting” and a problem of national significance, and vowed to gather all branches of law enforcement to tackle it.
Also this summer, Natan Sharansky said that the Israel-based binary options industry is “repugnant,” “immoral” and profoundly damaging to the country, and urged Israeli regulators to do everything in their power to close it down. Sharansky, who heads the Jewish Agency, the primary organization responsible for immigration and absorption of Diaspora Jews in Israel, said the agency was alerting all immigrants and other potential employees to steer clear of the industry, “which uses immoral methods to entice innocent victims.”
The US has banned overseas binary options firms from targeting its citizens. In August, Belgium became the first European country to ban the industry. Netanyahu’s office, in its statement last month, urged other countries to ban binary options outright: “I hope that, in other countries, they will follow in our footsteps and make binary trading illegal.”
While not all companies that offer binary options are fraudulent, many that purport to be guiding their customers in making lucrative short-term investments are in fact using a variety of ruses, including misrepresentation, allegedly manipulating rigged trading platforms, and outright refusal to return deposits, to steal their clients’ money.