Facing threats and government inaction, Israeli activists take aim at binary options fraud
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Facing threats and government inaction, Israeli activists take aim at binary options fraud

Lawyer for binary options victims sends letter to securities authority demanding immediate shutdown of industry, says he is prepared to petition High Court of Justice

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

An illustrative photo of the Ramat Gan diamond center, where many binary options firms are located, June 23, 2015. (Miriam Alster/Flash90)
An illustrative photo of the Ramat Gan diamond center, where many binary options firms are located, June 23, 2015. (Miriam Alster/Flash90)

On an early December evening, at a youth hostel in south Tel Aviv, a group of about 20 activists gathered in the hope of starting a movement. Ranging in age from their 20s to their 50s, they had met on the Facebook group “Stop Israel’s Binary Options Fraud,” and were united in their disgust at the Israeli government’s failure to shut down Israel’s massive and largely fraudulent binary options industry, which brings in anywhere from hundreds of millions to $5 billion a year.

Some were veteran anti-corruption activists, others were regretful former employees of the industry, while others were curious citizens seeking to learn more.

“I am here because I work in venture capital for Israeli startups, and I see the damage this industry is doing to Israel’s reputation abroad,” said a man in a polo shirt.

“I used to work for a binary options company. It took me two and a half weeks to figure out that this was a scam and evil,” added a man in his 30s, who has travelled abroad to assist binary options victims.

Illustrative: An online binary options trading platform, advertised on YouTube (YouTube screenshot)
Illustrative: An online binary options trading platform, advertised on YouTube (YouTube screenshot)

Activists brainstormed ways to capture the attention of the Israeli public. One person suggested lobbying Knesset members, another suggested that the entire group visit a police station together and file a collective complaint. Despite the fact that binary options fraud has been covered by many major news outlets, it is not a burning public issue, several activists concurred.

“Why should the Israeli public care, when most of the victims are abroad?” asked a young woman rhetorically. “Why is it in anybody’s interest to make a fuss about this?”

“Because it ruins Israel’s reputation abroad,” answered the 30-something man, “and it fans the flames of anti-Semitism.”

Yes, argued several attendees, but Israel’s reputation is not a bread and butter issue for the average Israeli. It’s not something that worries them day to day. In the meantime, this fraud brings a lot of tax revenue into the country.

“Ultimately, we need to put a stop to it because it’s just plain wrong,” retorted the man.

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 it to be outlawed worldwide.

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

Last month, ISA chairman Shmuel 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. (Israeli firms are already banned from targeting Israelis.) The consultations have extended to Attorney General Avichai Mandelblit and to the government, he said.

The Times of Israel spoke to several of the activists at the “Stop Israel’s Binary Options Fraud” meeting; none agreed to be identified by name.

“We’ve received threats,” explained an anti-binary options activist in his 20s, echoing a scenario described to this reporter by several lawyers and activists speaking out against binary options fraud.

“You’d better watch out, so-and-so knows where you live and where your children go to school,” one of them was told. The recipient of the threat went to the Israel police, but the police did nothing, he claimed.

Several of those in attendance said that they personally, or people they knew, had approached the police to report binary options fraud over the past several years, some even providing detailed evidence and documentation. To date, the Israeli police have arrested only a handful of suspects of the many thousands who work in the industry.

Suing the Israeli government?

One activist at the meeting raised the possibility of petitioning the High Court of Justice in an attempt to force the government to shut down binary options.

Indeed, in a separate development, Yossy Haezrachy, a lawyer with the Friedman-Haezrachy law firm, which represents about a dozen alleged victims of binary options fraud, wrote a letter to the Israel Securities Authority arguing that its current stance on binary options is illegal.

In the letter he addresses a March 15, 2015 opinion by an ISA legal team in which the team asserts that an amendment to Israel’s securities law, which regulates online trading platforms, does not apply to those companies that solely solicit customers outside of Israel. Haezrachy says that this opinion is not valid because several months later the ISA later declared binary options illegal gambling. Since gambling is illegal in Israel, binary options should be illegal whether or not the customer is Israeli or foreign.

The High Court of Justice in session, July 2013. (Miriam Alster/Flash90)
The High Court of Justice in session, July 2013. (Miriam Alster/Flash90)

The Israel Securities Authority insists it needs new legislation to shut down Israel’s massive binary options industry, but Haezrachy argued that the government regulator in fact has the authority to shut it down immediately. Haezrachy said that he is prepared to petition the High Court of Justice if the ISA remains unresponsive.

“Our law office represents a large number of foreign residents who lost astronomical sums of money, including pensioners who lost their entire savings and spend many months trying to understand who was behind it and how it happened,” he told The Times of Israel.

“We have decided that in addition to just representing each client against the company that caused him to lose, we must take a broader stance against binary options companies as a whole and their activity in Israel. The ISA must decide if binary options is “gambling,” and if so, apply the law against gambling to foreign residents as well.”

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