Israel announces groundbreaking indictment of binary options firm, owner, staff
Operatives of Gal Media Trade Ltd., which ran the website itrader.co.il, to be charged, pending a hearing, with aggravated fraud and offering investment advice without a license
Simona Weinglass is an investigative reporter at The Times of Israel.
Israel’s state prosecutor announced that it intends to indict a binary options company, its owner and several senior employees, pending a hearing, on charges of aggravated fraud and giving investment advice without a license.
According to a press release issued by the state prosecutor earlier this month, the Israeli company Gal Media Trade Ltd., which operated under the brand name iTrader, was a binary options trading company active from 2013-2016. The company had thousands of clients who made hundreds of millions of shekels worth of trades.
If the company’s employees are charged, it would be the first time Israeli binary options operatives have been indicted in Israel for their binary options activity per se, as opposed to other activity they were allegedly involved in.
Itrader.co.il sold binary options investments to Israeli customers, while its sister brand FMTrader.com offered investments to clients outside of Israel. The indictment is for the company’s activities relating to Israeli clients only.
According to the charge sheet, representatives of the company applied unfair sales pressure to clients and “exploited their lack of experience and lack of understanding of binary options trading.”
The charge sheet alleges that the suspects engaged in “aggressive and fraudulent sales tactics, deceptive practices and the hiding of crucial information from clients.”
Thus, sales agents allegedly “misrepresented the risks and chances of success involved in binary options trading, lied about their experience and track record trading and managing client portfolios and pressured clients to use trading techniques that required a large investment of resources and led to huge customer losses,” according to the August 1 press release.
In addition, representatives of the company are suspected of giving clients investment advice without a license.
The case was investigated by the Israel Securities Authority.
The state prosecutor’s press release was issued during the trial of Israeli binary options operative Lee Elbaz, who was convicted in the United States on August 7 on three counts of wire fraud and one count of conspiracy to commit wire fraud. Elbaz was the CEO of the Israeli binary options firm Yukom Communications Ltd. which is alleged to have caused more than $145 million in investor losses.
Yukom Communications Ltd. and Gal Media Trade Ltd. are but two of more than a hundred binary options firms that operated from Israel in recent years.
A spokesman for Israel’s Justice Ministry told The Times of Israel that the timing of its announcement, at the same time as the trial of Elbaz, was purely coincidental.
Binary options fraud flourished in Israel for about a decade before the entire industry was outlawed via Knesset legislation in October 2017, largely as a result of investigative reporting by The Times of Israel that began with a March 2016 article entitled “The wolves of Tel Aviv.” At the industry’s height, hundreds of companies in Israel were engaged in the widely fraudulent industry, employing thousands of Israelis, allegedly fleecing billions out of victims worldwide.
Many of the fraudulent operatives have since moved their operations abroad, or switched to other scams.
According to Israeli attorney Nimrod Assif, who has filed lawsuits against several forex and binary options firms on behalf of allegedly defrauded investors, the pending Israeli indictment differs from the US government indictment in the Elbaz case in several ways.
“The US government said that the binary options agents misrepresented the fact that the company and sales agents earned money from investor losses. The sales agents said that they make money when the investor makes money and this was false. This revenue model was common to all forex and binary options companies in Israel. They earned money from net deposits, which is deposits minus withdrawals. This is a key point and does not appear in the [Israeli] state prosecution’s press release.”
Assif said that the US also charged binary options operatives with misrepresenting their location and using fake names, something that the brokers at iTrader presumably did not do, since it was obvious they were calling from Israel.
Both the US and Israeli indictments talk about sales agents misrepresenting the potential for client profits but only the US indictment talked about clients having trouble withdrawing their funds, he said.
Gal Media Trade was owned by Ido Fishman, a binary options operative from the well-to-do town of Kiryat Ono who employed many of his high school classmates in the business as well as at call centers in the Philippines and Cyprus, an acquaintance of Fishman’s told The Times of Israel.
Gal Media Trade has been sued more than 30 times in Israeli courts, for the most part by Israel-based investors.
