As Israeli bill to ban binary options stalls, Canada prepares law of its own
Fraud investigator: We're calling on Israel to shut this down as soon as possible

As Israeli bill to ban binary options stalls, Canada prepares law of its own

Binary options are not legal in Canada, but new legislation will make that fact explicit. Official vows endless battle, as some Israeli firms move operations overseas

Simona Weinglass is an investigative reporter at The Times of Israel.

The Canadian parliament building  in Ottawa, Canada (MarcBruxelle/iStock)
The Canadian parliament building in Ottawa, Canada (MarcBruxelle/iStock)

Fed up with the large-scale theft, much of it emanating from Israel, known as the binary options industry, Canada is set to prohibit the advertising, offering, selling or otherwise trading of binary options to any Canadian individual. The proposed National Instrument 91-102 Prohibition of Binary Options rule was announced on April 26, and is set to be enacted several months from now, after short comment periods in each of Canada’s provinces.

Once the comment periods are over, each provincial securities commission will decide if the rule becomes law. Usually, the decisions of various provincial regulators are harmonized, so it is likely most if not all provinces will enact the rule.

“We aren’t going to stop until this ends,” Jason Roy, a senior investigator with the Manitoba Securities Commission and chair of Canada’s newly formed Binary Options Task Force, told The Times of Israel. “We will protect Canadians in every way we can.”

Cumulatively, the binary options industry is estimated to generate between $5 billion and $10 billion a year. As The Times of Israel has documented in an ongoing series of articles for the past year, a large proportion of binary options fraud and some forex fraud as well emanates from call centers in Israel. The industry, which employs thousands of Israelis, has been operating for at least 10 years in Israel with little to no intervention on the part of law enforcement. Fraudulent firms use a variety of ruses to trick clients all over the world, who believe they are making potentially lucrative short-term investments, into parting with their funds. Almost all customers lose all or nearly all of their money.

A government bill — drafted by the Israel Securities Authority, the Justice Ministry and the Attorney General’s Office — that would shutter the entire industry here, barring it from targeting people anywhere in the world, was presented to Israel’s Ministerial Committee for Legislation in February, the first step in its progress toward becoming law.

It has yet to be brought up for discussion before the committee, however. Well-placed sources told The Times of Israel two months ago that the draft bill had encountered strong opposition from lobbyists who have the ear of some Knesset members.

If passage of the Israeli law continues to be delayed, Canada may enact its legislation before Israel does. The proposed Canadian ban does not mean that binary options are currently legal in Canada, the Canadian Securities Administrators, an umbrella group for Canada’s 13 provincial securities regulators, stresses in its explanatory notes to the proposed rule.

“We emphasize that no offering of these products, including by a broker, dealer or platform, has been authorized in Canada. All current offerings in Canada are therefore illegal, with only limited and narrow exception, for transactions with highly sophisticated investors.”

Explaining the rationale for the ban, the Canadian Securities Administrators points out that many binary options companies misleadingly promote their products as legal in Canada. These marketers often employ sophisticated search engine optimization, so that misleading articles claiming that some binary options companies are legitimate and legal in Canada show up high in search engine results.

“It is our intention that the proposed instrument will make it explicitly clear that these products may not be advertised, offered, sold or otherwise traded to an individual in Canada.”

Roy, the senior investigator, told The Times of Israel that while the proposed instrument does not give the CSA any enforcement powers it did not already have, “the most important aspect of the rule may be that it removes any ambiguity about the legality of binary options in Canada. Trading in binary options to Canadians will be illegal, pure and simple. Undertaking this ban will also send a very clear message to the perpetrators and organizations involved in binary options trading.”

Jason Roy, senior fraud investigator at the Manitoba Securities Commission (Courtesy)
Jason Roy, senior fraud investigator at the Manitoba Securities Commission (Courtesy)

Canada received more than 800 complaints from allegedly defrauded victims of binary options companies in 2016, which Roy believes is “a fraction of what is actually happening out there.”

Roy reiterated his call for Israel to shut down binary options even before the law to ban the industry is passed.

“We’re calling on Israel to shut this down as soon as possible.”

A spokeswoman for Israel Securities Authority chairman Shmuel Hauser responded that the ISA does not have the authority to shut down binary options companies targeting customers abroad until the draft law is passed.

Asked when the law would pass, she said it has not yet come before the Ministerial Committee on Legislation. “I have no news about that,” she added.

In recent months, in response to the proposed law, many Israeli binary options companies have moved part or all of their operations overseas. The delay in passage of the law has given some binary options company owners time to sell their companies, move abroad or otherwise seek to hide their tracks from law enforcement agencies and victims seeking redress.

Roy acknowledged that even if the Israeli law is passed, many Israeli binary options call centers will simply move overseas.

“Are they going to move to other countries? I am sure they will. But if we can disrupt this even a little bit I think we need to act.”

The proposed instrument can be found on CSA members’ websites. The comment period is open until May 29, 2017, in Alberta and Quebec; until June 28, 2017, in Manitoba and Saskatchewan; and until July 28, 2017, in all other participating jurisdictions.

Efforts paying off

On March 2, during Canada’s Fraud Prevention Month, the Canadian Securities Administrators launched a new website, as well as a Binary Options Task Force to raise public awareness about what regulators have described as the largest investment fraud facing Canadians today.

In addition to warning the public about binary options fraud, Roy said, Canadian regulators intend to disrupt the marketing and advertising of binary options to Canadians and are approaching Google, Twitter, Facebook and others to eliminate these ads in Canada. He added that Canada has had some success working with Visa and Mastercard.

“They’re reporting some reductions in the numbers of binary options transactions that go through.”

Slide from a lecture by Google to the binary options and forex industry at the IFX Expo, May 2016 (Hunter Stuart/Times of Israel)
Slide from a lecture by Google to the binary options and forex industry at the IFX Expo in Limassol, Cyprus, May 2016. The purpose of the lecture was to help these companies make their advertising more effective. (Hunter Stuart/Times of Israel)


The public awareness campaign has also gone better than expected.

“We had spokespeople across Canada doing interviews. We did see an increase in reporting and had a significant number of visits to the website”

Nevertheless, said Roy, ”our work is not done. Canadians need to know how serious it is to get involved with binary options firms, the fact that they will lose everything they put into those investments.”

In the US, meanwhile, the FBI is investigating several binary options companies. In January, it convened the 2017 Binary Options Fraud Summit, held at Europol headquarters in The Hague, which brought together more than 20 law enforcement agencies and regulators from Europe and North America to discuss the growing criminal threat.

In March, the FBI placed a large warning to the public against binary options fraud at the top of its main website.

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