A Knesset committee will hold a hearing on Israel’s binary options industry early next month, citing “insufficient” government action to tackle the widely fraudulent industry.

The hearing, to be held by the Knesset State Control Committee, will take place in the Knesset on Monday, January 2, at 11 a.m. and is open to members of the public provided they register in advance.

The Knesset State Control Committee oversees the work of the State Comptroller and is responsible for auditing and criticizing the executive branch and pointing out corruption or negligence on the part of the governing bureaucracy. As such, it is usually chaired by a member of a Knesset opposition party. Karine Elharar (Yesh Atid), who currently chairs the committee, told The Times of Israel that she decided to convene a hearing on binary options after concluding that the government’s response to the largely fraudulent industry has been lacking.

“Several months ago I was approached and made aware of the painful subject of binary options. After an extensive examination I reached the conclusion that what the government is doing to tackle this issue is insufficient.”

Added Elharar: “It is not acceptable that people are able to operate from Israel and cheat people around the world. Not for nothing has binary options been outlawed in Israel [targeting Israelis], and now we must make sure it will not be possible to do this to people in other countries.”

Knesset State Control Committee chair Karin Elharar leads a committee meeting in the Knesset, June 08, 2015. (Miriam Alster/FLASH90)

Knesset State Control Committee chair Karin Elharar. (Miriam Alster/FLASH90)

She was therefore convening the committee, Elharar said, “to make sure this activity is stopped and that all [law enforcement] bodies coordinate their efforts to this end.”

An adviser to Elharar told The Times of Israel that representatives from the Israel Securities Authority, the Israel Police, the State Prosecutor’s Office and the attorney general’s office had been summoned to appear before the MKs.

The Times of Israel, which has been reporting on the vast binary options fraud in an ongoing series of articles since March, has been asked to present information to the session.

“We will sit everyone down and examine what has been done and what else can be done, and — if it can’t be done within the scope of the existing law — what new legislation will have to be introduced,” said the adviser.

The hearing, which will be held in Hebrew, will last 1.5 to 2 hours. Those wishing to attend can register at this link.

Speaking on Monday, meanwhile, Israel Securities Authority Chairman Shmuel Hauser warned that fraudulent operators of online trading sites will “pay a very high price” for their crimes.

“In the past year we began to implement our regulation of online trading platforms, or forex sites, as they are known,” he said.

“Twenty-one online trading platforms submitted a request for a license from the ISA and only six reached the finish line and received a license after we determined that they met our criteria. In addition, we completely prohibited the selling of binary options to the Israeli public. Around the world, regulators are trying to decide what to do about binary options — whether it is a legitimate form of trade or not. We are not trying to decide. Binary options resemble gambling, and we cannot accept the damage that occurs to investors who invest in this with enormous leverage.”

“Nor can we accept the ugly phenomenon of the aggressive selling of these toxic products to the public. The testimonies that we receive are simply chilling,” said Hauser.

“Hardworking people who saved every shekel in order to be able to grow old with respect fall prey to greedy charlatans who suck the marrow from their bones. They take everything they have and even what they don’t have, and leave them with penniless. I want to say it here explicitly, anyone involved in online trading who acts illegitimately and illegally to cheat, extort and exploit the public, will pay a heavy price.”

Prof. Shmuel Hauser, chairman of the Israel Securities Authority (Miriam Alster/ Flash90)

Prof. Shmuel Hauser, chairman of the Israel Securities Authority (Miriam Alster/ Flash90)

The Times of Israel has been exposing Israel’s fraudulent binary options 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. Thousands of Israelis work in the field, which is estimated to have fleeced billions of dollars from victims all over the world in the past decade.
The Prime Minister’s Office in October condemned the industry’s “unscrupulous practices” and called for the entire industry to be outlawed worldwide.

Last month, ISA chairman Hauser told The Times of Israel that consultations had begun on the framing of legislation to bar all Israel-based binary options operations from targeting anybody, anywhere. The consultations have extended to Attorney General Avichai Mandelblit and to the government, he said.