In a massive blow to the large and largely underground sector of Israel’s economy that peddles investment scams, Google announced Wednesday that it will be banning ads for binary options and cryptocurrencies as well as unregulated CFD, forex and financial spread betting companies.
In an announcement in the section of its website devoted to Google AdWords policy, the internet search and advertising giant announced that beginning in June, it will restrict the advertising of contracts for difference, rolling spot forex, and financial spread betting, as well as enforce an outright ban on advertising for binary options and cryptocurrencies.
In addition, Google stated, aggregators and affiliates, which are third-party advertisers for such investment websites, will no longer be allowed to serve ads for contracts for difference, rolling spot forex, financial spread betting, binary options, cryptocurrencies and related products.
The move could have major consequences for Israel’s economy, or at least for a large stratum of professional scammers who have operated with impunity for the last decade and who could see their incomes drop significantly.
Over the last decade, Israel has become a global hub of investment scams, employing more than 10,000 new immigrants and foreign-language speakers in boiler rooms throughout the country, selling fraudulent binary options, forex, CFDs and cryptocurrency investments over the phone and internet to people abroad. In the absence of attention from law enforcement, such criminal activity ballooned to the point where binary options fraud alone was estimated to earn about $10 billion a year in revenue, much of it flowing to criminal operatives based in Israel.
The Knesset outlawed binary options in October, in the wake of investigative reporting by The Times of Israel since March 2016. The ban took effect on January 26 of this year.
However, some binary options operatives have simply ignored the ban, continuing to offer the product from Israel, while others moved their operations abroad, and still others have begun offering fraudulent forex, CFD and cryptocurrency investment products, taking advantage of a loophole in the binary options law that allows unregulated companies to tweak their product and continue targeting victims abroad.
An original draft of the binary options bill would have prohibited Israeli forex, CFD and other online trading companies from offering their wares to customers abroad without a license from the country they target. The Times of Israel was told that online trading industry insiders managed to successfully lobby the Knesset to water down the bill so that the clauses covering other financial instruments than binary options were deleted.
Google’s move to ban advertising for all of these largely fraudulent industries, which came about as a result of relentless pressure from US and Canadian regulators, will deliver the massive blow to Israel’s investment scam industry that Israel’s Knesset has failed to deliver, sources with knowledge of the industry told The Times of Israel.
Facebook banned ads for binary options, cryptocurrencies and ICOs, or initial coin offerings, in January.
“This is probably the biggest threat to this industry of any event so far,” Joshua, a former PPC (pay-per-click) expert for the binary options industry, told The Times of Israel.
“The ban on Google ads as well as the ban on affiliates purchasing Google ads could wipe out as much as two-thirds of their traffic,” he estimated.
In its announcement, Google said it would ban binary options and cryptocurrency ads outright while requiring that advertisers offering contracts for difference, rolling spot forex, and financial spread betting be certified by Google before they can advertise through AdWords.
Certification will only be available, Google said, if a website is “licensed by the relevant financial services authority in the country or countries they are targeting.”
Joshua said that the ban would decimate the global binary options and cryptocurrency scams as well as largely kill off Israel’s forex and CFD companies, as most such companies operate without licenses in the countries they target. He said Israel’s online investment companies would probably seek a way around the Google ban but were unlikely to find one.
“I imagine that Israeli forex, CFD, cryptocurrency and binary options companies will ramp up their SEO (search engine optimization) efforts but that will only work for a short while as the data and intelligence that they are able to get from the Google PPC efforts will become old and obsolete in a few months, leaving them sort of ‘driving blind’ without knowing what the trends are or which keywords convert the best,” he said.
Joshua estimated that by November of this year, Israel’s investment scam industries, as well as investment scammers all over the world, will have about 10 percent of the number of leads they did prior to Google’s ban.
“It will cease to be a growing, thriving business. At the very least, the bank accounts of the owners of these companies will grow much more slowly.”
In an interview in February, Jason Roy, a senior investigator with the Manitoba Securities Commission and head of Canada’s Binary Options Task Force, said that while binary options was a largely Israel-based fraud, the situation with cryptocurrencies and ICOs is murkier. Fraudulent cryptocurrency companies appear on the surface to originate from all over the world, and not just Israel, he said.
Google’s policy will apply globally to all accounts that advertise these financial products, the company said.