Absent or opposed, not all ministers backed bill to ban binary options

The Israeli cabinet on June 18 approved a bill that would ban the entire binary options industry, a multi-billion dollar, widely fraudulent, Israel-based enterprise, whose activities have been exposed in a series of articles by The Times of Israel since March 2016. The bill, presented by Finance Minister Moshe Kahlon and backed by Prime Minister Benjamin Netanyahu, is expected to come before the Knesset plenary for a first reading next Monday, then to go to the Knesset Finance Committee for further debate, and then back to the plenary for a second and third vote before its passage into law — an outcome that is now seen as highly probable.

Although a large majority of ministers in Israel’s government voted on Sunday to approve the ban on binary options, the vote was not unanimous, a source who was present at the meeting told The Times of Israel. One minister, the source said, voted against the ban, another abstained, and a third minister left the room and was not present during the vote.

According to the source, who asked not to be named because cabinet meetings are not open to the public, the minister who voted against the ban was Immigration and Absorption Minister Sofa Landver of Yisrael Beytenu. Landver argued prior to the vote that shutting down the binary options industry — whose fraudulent firms have been fleecing immense numbers of victims worldwide out of billions of dollars for the past decade — would put many immigrants from the former Soviet Union out of work. A spokesperson for Landver denied that she voted against the bill.

The minister who abstained was Minister of Jerusalem Affairs and Environmental Protection Ze’ev Elkin from the Likud party, the source said. His spokesperson confirmed this.

Defense Minister Avigdor Liberman of Israel Beytenu left the room before the vote took place, the source told The Times of Israel. Despite repeated phone calls and text messages over two days to Liberman’s spokesperson, The Times of Israel was unable to ascertain why he had left the room and what position the minister will take in the plenary vote on binary options.

The binary options industry employs thousands of Israelis, including many new immigrants prized for their language skills. Fraudulent companies ostensibly offer customers worldwide a potentially profitable short-term investment, but in reality — through rigged trading platforms, refusal to pay out, and other ruses — these companies fleece the vast majority of customers of most or all of their money. The fraudulent salespeople routinely use false identities, conceal where they are located, and misrepresent what they are selling.

Israel’s securities regulator Shmuel Hauser said last week that the fraudulent industry, with its trail of worldwide victims, constitutes “a greater cause of anti-Semitism than any other factor.”

Last October, the Prime Minister’s Office lambasted the Israel-based industry as “unscrupulous” and urged that it be banned worldwide.

Secret meetings subject to leaks

According to Israeli law, cabinet meetings dealing with national security or foreign affairs are secret, while the protocols of other legislative committee meetings can be kept secret by order of the prime minister or committee chair. It is a generally observed rule that cabinet votes are kept secret so ministers can feel free from political pressures and vote their conscience. However, cabinet meetings are also notoriously subject to leaks, some of which can be politically motivated or inaccurate.

The source who was inside the meeting and agreed to leak information to The Times of Israel said that the cabinet vote on the proposed law to outlaw binary options — which was drafted by Hauser’s Israel Securities Authority, the attorney general, and the Justice Ministry, and presented to the cabinet by Kahlon (Kulanu) — was preceded by a long and earnest debate.

At one point, Education Minister Naftali Bennett along with Justice Minister Ayelet Shaked, both of the Jewish Home party, raised the question of why Israel should completely ban binary options when other countries have not banned the financial product and some (like Cyprus) even regulate it. In other words, they argued, why should Israel go overboard with its regulation?

The response from others in the room was that the widely fraudulent Israel-centered binary options industry is fanning the flames of anti-Semitism around the world and that therefore when the financial product known as “binary options” is presented as a legitimate financial instrument, but is actually a thin cover for fraud in the vast majority of cases, it must be banned entirely.

According to the source, this argument, that binary options is contributing to anti-Semitism, won the day, and in the end the vast majority of the 20 or so ministers in the room voted in favor of banning binary options.

In order to confirm the source’s version of events, The Times of Israel phoned and texted all the ministers in the Israeli cabinet. Of those who responded, almost all said they had voted for the bill. The Times of Israel heard from Netanyahu (Likud), Shaked, Kahlon, Economy Minister Eli Cohen (Kulanu) Minister of Science and Technology Ofir Akunis (Likud), Communications Minister Ayoob Kara (Likud), Minister of Regional Cooperation Tsachi Hanegbi (Likud) and Religious Affairs Minister David Azulai (Shas), all of whom said they voted for the bill.

“The minister voted in favor of this bill because he is disgusted that innocent people are being taken advantage of and losing their money,” a spokesman for Azoulay said. “The minister is opposed to gambling in general and so much more so when gambling is disguised as an investment leading many trusting people in Israel and around the world to become victims.”

A spokesman for Shas Minister of the Interior Aryeh Deri, who is currently under police investigation for corruption, said that Deri was sick and was not at the cabinet meeting.

A spokesman for Health Minister Yaakov Litzman (United Torah Judaism) said that the minister did not attend the cabinet meeting as he was celebrating a sheva brachot (post-wedding festive meal) for his grandson, and that Litzman had not yet decided how he would vote in the Knesset plenary.

A spokesman for Elkin confirmed that he abstained from the vote, saying that the minister was torn: “On the one hand, the Immigration and Absorption Ministry has said this would cause many new immigrants to lose their jobs. But there are moral and diplomatic considerations in favor of the law, on the other hand.”

A spokeswoman for Landver said she voted for the ban, while The Times of Israel’s source said she voted against it.

Liberman’s spokesman could not be reached for comment.

Liberman, Elkin and Landver are Russian speakers who enjoy support among the Russian, Ukrainian and Georgian communities, both in Israel and abroad, and whose donor base includes oligarchs from the former Soviet Union.

A perusal of the public donor lists of these three politicians does not reveal any direct donations from known owners of binary options companies.

As the Times of Israel has reported in the past, a large number of prominent players in Israel’s binary options industry come from FSU communities, many of the banks where the binary options money goes are Russian and Georgian, and the company formation agents who set up shell companies abroad for binary options companies are the same ones used by Russian and Ukrainian oligarchs, government cronies and mafia.

The Times of Israel, beginning with an article entitled “The wolves of Tel Aviv: Israel’s vast, amoral binary options scam exposed,” has for the past 17 months been detailing the largely fraudulent Israel-based industry. The bill outlawing the entire industry approved by ministers on Sunday provides for penalties of up to two years in prison for anyone who violates the ban.

The law would apply to anyone who “manages an online trading platform” that either sells binary options abroad or sells another financial product in a country where it lacks a license. The proposed law defines managing an online trading platform as “making strategic decisions for a company that manages the trading website” or “operating the website, including through software or hardware systems, call centers, or online or telephone marketing, either directly or through a company that manages the trading website or provides services to the website.”

In recent months, in anticipation of the proposed law, several binary options companies have shut down, while some others have relocated their call centers abroad, including to Ukraine and elsewhere in Eastern Europe.

For nearly a decade prior to Sunday’s cabinet approval, the Israeli government and law enforcement authorities did almost nothing to stop this massive fraud, which is estimated to earn between $5 and $10 billion a year, to involve well over 100 companies, and to employ between 5,000 and tens of thousands of people. Previous efforts to alert the Knesset to this nefarious activity, by Independence Party MK Einat Wilf in 2011 and by the banker and whistleblower Ariel Marom in 2013, fell on deaf ears.

Last month, in a move that indicated that Israel Police had finally begun to tackle the multi-billion dollar global fraud, Eliran Saada, the Tel Aviv owner of a fraudulent binary options firm, was arrested on suspicion of aggravated fraud, misrepresentation, false accounting, forgery, extortion and blackmail.

The Times of Israel has interviewed dozens of former employees of the industry and repeatedly asked them why the government has allowed the fraud to go on for so long. Frequently, insiders have said that binary options executives spare no expense to curry favor with politicians and even to try to corrupt members of the police. The Times of Israel was told by government officials in March that passage of the bill — which was submitted to the Ministerial Committee for Legislation in February — was being stalled by high-profile lobbyists arguing that the industry should be regulated, not banned, and that a ban would cause large-scale unemployment among Israeli Arabs and new immigrants.

At a February 28, 2017, State Control Committee meeting on the fraudulent industry — the second of two such meetings convened in direct response to The Times of Israel’s reporting — proponents of binary options argued strenuously against the legislation, which had just been unveiled, and implored politicians not to close down the industry.

One of them argued that new immigrants fleeing anti-Semitism in their countries of origin would have no jobs if binary options was shut down. ISA chairman Hauser interrupted him: “You said people moved here to escape anti-Semitism. Did they come here to inflame anti-Semitism? Is that what they came to Israel for?”

Raoul Wootliff contributed to this report.