FBI, EU fraud authorities hold emergency summit on binary options fraud
Unprecedented session at The Hague comes as Israeli police still largely fail to act against multi-billion dollar plague of criminality that has flourished from Israel for almost a decade
Simona Weinglass is an investigative reporter at The Times of Israel.
Horrified at the vast global fraud being perpetrated by fraudulent binary options firms, most of which are located in or connected to Israel, law enforcement officials from some 20 countries convened in the Netherlands earlier this month to discuss how to tackle the crime, The Times of Israel has been told.
The unprecedented summit two weeks ago included officials and investigators from most European countries as well as the FBI, the US Securities and Exchange Commission, the Canadian Securities Administrators (CSA), and the Autorité des marchés financiers (AMF) of France. The meeting was hosted by Europol, the EU’s law enforcement agency, whose purpose is “to assist the 28 EU Member States in their fight against serious international crime and terrorism.”
The largely fraudulent binary options industry emerged in Israel in 2008, partly in response to the US Unlawful Internet Gambling Enforcement Act of 2006 (UIGEA), which banned online gambling companies from accepting payments from US customers, sources told The Times of Israel. It has been allowed to flourish with little to no intervention by the Israeli authorities ever since, despite overwhelming evidence of the fraud being perpetrated by the Israel-based and Israel-owned firms.
Israeli authorities last year barred binary options firms from targeting Israelis, but they have been allowed to continue to target victims all over the world. The police have largely refused to tackle the more than 100 companies operating in Israel, even though many of the ruses they employ are blatantly illegal.
“People were looking for a way to gamify financial markets and present a simplified financial casino to the masses,” an insider told The Times of Israel of the origins of the industry. However, from the start, much of the industry was fraudulent, with “brokers” adopting false names, credentials and locations, and lying to customers about the nearly nonexistent chance of earning money.
Fraudulent binary options firms lure their victims into making what they are duped into believing will be profitable short-term investments, encouraging them to “invest” more and more money. But by employing a variety of ruses, the firms ensure that in the overwhelming majority of cases their clients wind up losing all or almost all of their money. Victims frequently lose tens of thousands of dollars or more. The industry has grown and flourished in Israel for the past nine years, scamming hundreds of thousands of victims worldwide out of billions of dollars with little to no intervention from Israeli law enforcement.
Most binary options brokerages as well as most of the main platform providers are located in Israel, although some are located in Bulgaria, Romania, South Africa and elsewhere.
“I can confirm that there was a meeting on binary options,” Tine Hollevoet, a spokeswoman for Europol, told The Times of Israel. “The aim of the meeting was to raise awareness about this phenomenon in Europe, to exchange experiences and best practices, and most importantly to try to establish an overview of the phenomenon in Europe. It was the first meeting we organized about this topic, and I’m sure more will follow in the future.”
Hollevoet said that “some 20 EU member States, American and Canadian authorities, regulators and private partners joined this meeting.” Israeli authorities were not present.
The Times of Israel has been exposing Israel’s largely fraudulent binary options industry in a series of articles since March 2016, 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. Thousands of Israelis work in the field, which is estimated to have fleeced billions of dollars from victims all over the world.
On Thursday, The Times of Israel detailed the suicide of Canadian Fred Turbide, who took his life after he was fleeced of over 200,000 Canadian dollars (US$152,000) by an Israeli-run binary options firm. The Canadian law enforcement official who alerted The Times of Israel to his suicide said money was charged to Turbide’s credit card even after his death and even after his family had put a hold on the card. His widow detailed the tragedy because, she said, “I want to see these people shut down. I want this scam closed and I want the world to know that they were responsible for taking the love of my life away from me.”
In direct response to The Times of Israel’s reporting, the Prime Minister’s Office in October condemned the industry’s “unscrupulous practices” and called for the entire industry to be outlawed worldwide.
Responding to The Times of Israel’s reporting, the Knesset’s State Control Committee held a hearing on January 2 on the government’s failure to shut down binary options fraud. The committee chair, MK Karin Elharar (Yesh Atid), demanded that the police begin enforcement activity against fraudulent binary options firms in the next month and that the Israel Securities Authority urgently advance legislation to shut down the entire industry. ISA chief Shmuel Hauser said last summer that he was disgusted by the fraud and that it was ruinous to Israel’s reputation, and promised legislation to ban the Israeli firms outright.
The Israel Police, which has consistently refused requests by The Times of Israel to discuss its failure to tackle the plague of fraud, ignored Elharar’s request to appear at the Knesset hearing. A follow-up hearing will take place in February, and police have been ordered to attend.
