After months of delay, Israeli cabinet to vote Sunday on law to ban binary options
In unusual move, Kahlon to present legislation directly to cabinet. Anticipating closure of multi-billion dollar, widely fraudulent industry, some firms moving overseas
Simona Weinglass is an investigative reporter at The Times of Israel.
Four months after a draft law to ban Israel’s widely fraudulent binary options industry was unveiled by the Israeli government, the cabinet is finally set to vote on it on Sunday morning.
In a rare move, the bill will be presented by Finance Minister Moshe Kahlon directly to the cabinet as opposed to going through the Ministerial Committee for Legislation, where it had stalled. The cabinet is expected to approve it, and from there, a spokeswoman for the Israel Securities Authority told The Times of Israel on Saturday night, it should be fast-tracked through the Knesset to be voted into law.
If the law is passed, it will shut down all binary option companies that operate from within Israel’s borders, and give the Israel Securities Authority the power to prosecute and jail those who breach the ban.
Unveiled at a session of the State Control Committee on February 28, the bill languished for several months amid rumors that lobbyists for the binary options industry were working to block its passage at the Ministerial Committee for Legislation. Proponents of the industry argued strenuously against a ban at the February meeting of the State Control Committee.
While the ministerial committee’s deliberations are private, opposition by any minister to the law at the cabinet session would be public information.
The proposed law was drafted by the Israel Securities Authority, the Justice Ministry and the attorney general.
Kahlon, who will present it to the cabinet, is a firm proponent of the proposed law, The Times of Israel was told. The legislation is also backed by the State Control Committee’s chair, opposition Yesh Atid MK Karin Elharar. Prime Minister Benjamin Netanyahu, in a statement to The Times of Israel last October, called for the entire “unscrupulous” industry to be banned worldwide.
The draft legislation will be put to ministers more than a year after The Times of Israel began exposing the widespread fraudulent practices of the binary options industry. Last August, the ISA’s chairman, Shmuel Hauser, promised The Times of Israel to take the necessary steps to thwart the fraudsters. That same month, Jewish Agency chief Natan Sharansky urged the government to close down the “repugnant, immoral” industry.
Israel banned binary options firms from targeting Israelis more than a year ago. The proposed law bans all binary options trading, period, and thus aims to put a complete halt to the blight of Israeli binary options firms duping victims all over the world into parting with their money. (The draft law also targeted unregulated forex and CFD companies operating from Israel, requiring them to obtain a specific license to operate in any country where they have customers. Many such companies operating from Israel also engage in fraudulent practices.)
Speaking on Channel 2’s “Meet the Press” program on Saturday, ISA Chairman Hauser said that his authority had received hundreds of complaints from victims of the scam as well as from financial regulators around the world.
“The regulators tell us, ‘you have to do something, it’s like you’re turning a blind eye to this’,” he said. “I’m telling you,” Hauser added, “these binary options are a greater cause of anti-Semitism than any other factor. This is stoking anti-Semitism.”
At a recent global meeting of securities regulators, he added, dozens of officials, from the United States, Canada, Belgium, France and beyond, all lined up and said to the Israeli officials, “You have to do something.”
Hauser also mentioned two suicides as a result of binary options fraud. Last December, as documented by The Times of Israel, Canadian businessman Fred Turbide died by suicide after losing most of his life’s savings to an Israeli binary options company called 23Traders. Just recently, the Israel Securities Authority learned of another suicide, by a woman on the island of Sardinia, a single mother who worked as a cleaning woman, who lost a large sum to an Israeli binary options firm.
Apple earlier this month banned binary options trading apps from its online store. And in March, the FBI placed a public warning against binary options fraud at the top of its website.
The Times of Israel, in a series of articles beginning in March 2016 with “The wolves of Tel Aviv: Israel’s vast, amoral binary options scam exposed,” has exposed the largely fraudulent Israel-based industry that has been stealing billions of dollars from hundreds of thousands of victims worldwide for the past decade. Duplicitous binary options companies ostensibly offer customers 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 proposed law would give the ISA the authority to impose penalties of up to two years in prison to 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 web site” or “operating the web site, including through software or hardware systems, call centers or online or telephone marketing, either directly or through a company that manages the trading web site or provides services to the web site.”
Old scams never die, they just tweak their product
The Israeli binary options industry, which has flourished for a decade with almost no intervention by Israeli law enforcement, has been estimated to bring in between $5 billion and $10 billion a year and to employ between 5,000 and many tens of thousands of employees.
Last month, in a move that indicated the 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.
In recent months, in anticipation of the proposed law, several binary options companies have shut down, while many have relocated their call centers abroad, largely to places like Ukraine and Eastern Europe. Other binary options boiler rooms have begun offering new products that they apparently hope will not be affected by the ban — like forex, CFDs, investments in diamonds, debt relief, or loans to small businesses overseas. For instance, Olympus Marketing, which until recently operated the OmegaOptions website, is still seeking salespeople but now bills itself as a “broker of business loans overseas.”
Visitors to the OmegaOptions.com website are greeted with the following message: “Unfortunately, due to regulation changes we will be unable to provide our clientele with our services for the foreseeable future as our accounts are frozen… We hope you understand that we are extremely busy, so we would appreciate your patience in receiving our contact.”
