A Knesset panel finally tackles binary options fraud
Op-ed: Prompted by The Times of Israel’s reporting, the State Control Committee on Monday began coming to grips with the vast, global, Israel-based scam. This is what I told the session
David Horovitz is the founding editor of The Times of Israel. He is the author of "Still Life with Bombers" (2004) and "A Little Too Close to God" (2000), and co-author of "Shalom Friend: The Life and Legacy of Yitzhak Rabin" (1996). He previously edited The Jerusalem Post (2004-2011) and The Jerusalem Report (1998-2004).
The Knesset’s State Control Committee, chaired by MK Karin Elharar (Yesh Atid), on Monday held a session aimed at tackling Israel’s vast fraudulent binary options industry.
Opening the session, Elharar noted that the issue had been brought to her attention by The Times of Israel, and specifically by myself and Simona Weinglass, the Times of Israel reporter who has spearheaded our reporting on binary options fraud. Describing binary options as “a crime occurring under our noses,” Elharar’s dismayed opening question was: If selling binary options to Israelis is illegal, why are the Israel-based firms still allowed to fleece people all over the world?
Quite.
Among the speakers were Shmuel Hauser, the head of the Israeli Securities Authority, and representatives of the attorney-general’s office and the Justice Ministry, who are working together on new legislation. An English retiree, Graham Towler, who lost 70,000 pounds to binary options fraudsters, flew in to testify to the committee about how he was duped. And a former binary options worker, Adam Nujidat, explained how the scam works from the inside.
Elharar invited me to open the discussion. My aim was to enable the committee to better understand the pernicious nature, colossal scale, and appalling consequences of the fraud, and to stress that, while new legislation may have a role to play, the police already have all the legal tools necessary to close down much of the fraudulent industry because of its routine breaches of existing laws — basic laws prohibiting theft and misrepresentation.
It was my contention that the Israel Police have unconscionably failed to act against the fraud for almost a decade. Rather underlining my point, the police chose not to attend the meeting, despite having been directly called upon to do so by Elharar. She said she would address this directly with the minister responsible, would ensure that the police respond to a summary of the session, and would schedule a second session next month which police representatives would be required to attend.
Here is a lightly edited transcript of what I said.
Thousands of Israelis (as many as 15,000, according to some insiders) get up every day and go to work stealing money from people around the world.
They claim to be enabling clients to make money through short-term investments. In fact, many of them are committing fraud and theft; almost all of the clients of the industry lose all or almost all of their money. By its own estimates, the industry brings in anything from $1 billion per year to $5 billion.
In some aspects, the binary options scam is quite sophisticated. But in some aspects, it’s very simple, and — I want to stress this — in blatant breach of existing laws.
It is illegal to give dishonest investment advice. It is illegal to lie about where you are based and who you are — to lie about your name and your training. But these are routine practices in binary options. The police need no new laws to prosecute these offenders. The Israel Securities Authority needs no new laws to shut down the guilty firms right now.
It is also illegal to take money from people’s credit cards without their permission. It is illegal to refuse to let people withdraw their money. Both of these breaches of the law allegedly occur widely in binary options.
It is illegal to manipulate trading platforms to ensure that people lose their money. This, too, is allegedly widespread in binary options.
It is unforgivable that this has been allowed to continue for about a decade. It’s happening right now as we sit here. Thousands of people in Tel Aviv, Herzliya, Ramat Gan, Caesarea are phoning people all over the world and tricking them into parting with their money.
This is destroying Israel’s reputation as a safe place to do business.
It is causing anti-Semitism.
It is the dark side of the startup nation we are so rightly proud of.
It is also corrupting thousands of young Israelis who work in the field — including lots of immigrants and Arab Israelis, whose ability to speak foreign languages is essential to the fraud.
The scam has lots of accompanying scammers: the firms that write promotional material for the binary options companies; the firms that film their promotional videos; the search engine optimization experts who ensure that when you search online to learn about binary options — perhaps after this Knesset committee meeting — you get sent to pages that look like they give you honest information about binary options, but are in fact pages maintained by corrupt binary options firms themselves. Then there are the firms that transfer the colossal payments. The lawyers who set up offshore companies to hide the money. And on and on.
You need to understand the scale of this. Hundreds of thousands of people have been robbed around the world. People have committed suicide as a consequence. There are huge numbers of people whose lives have been ruined. Israeli binary options crooks are stealing billions, and leaving a swath of broken lives around the world.
And you have to understand that binary options crooks are very powerful in Israel; they have connections to very prominent people. Parts of the Israeli government have actually helped encourage their activities. The firms pay for the most expensive lawyers to battle people who try to expose them. Some of them give money to charities, which affords them access to and influence with the most prominent people in Israel.
They use violent threats against those who try to expose them. They have threatened Simona Weinglass, who has led our reporting on this for The Times of Israel, and they have threatened The Times of Israel itself.
The police and the regulators should have closed down these companies years ago. Instead, right up to today, the police refuse to even meet with us to hear the details of what is going on.
This is a plague of theft like nothing we’ve ever seen in this country. It has to be stopped.
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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.
In November, 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. The Knesset panel was told on Monday that the legislation was now being drafted.
