Israeli binary options firm to repay money it fleeced from 4,000 American victims

EZTD, which runs the EZTrader and GlobalOption websites, will return $1.5 million to clients and pay $200,000 SEC fine

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

EZTD logo
EZTD logo

An Israeli binary options firm has been ordered to pay a total of $1.7 million by the US government for misleading its customers and causing virtually all of them to lose their money.

On November 10, the US Securities and Exchange Commission announced that it had fined the Israel-based firm EZTD Inc., which operates the websites and, for illegally soliciting over 4,000 US-based customers between June 2011 and August 2014. Without admitting or denying the findings, EZTD agreed to return over $1.5 million in revenues obtained from U.S. customers as well as pay a $200,000 fine.

Despite promises that EZTrader offered a “highly profitable trading platform” and “an extremely lucrative avenue for individuals who are looking to see an increase in income,” fewer than 3 percent of investors earned money and clients lost $2 million of a collective $2.5 million they deposited in EZTD’s platform, the SEC said.

“EZTD negligently misstated or omitted to state the true financial risk associated with investing in the firm’s binary options,” the SEC wrote in its order against the company.

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.

The Prime Minister’s Office last month condemned the industry’s “unscrupulous practices” and called for it to be outlawed worldwide.

Two weeks ago, 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.

In its order, the Securities and Exchange Commission did not accuse EZTD of practices that commonly occur in the Israeli binary options industry — like rigging the trading platform and making it difficult for customers to withdraw their cash. When asked by The Times of Israel whether EZTD had engaged in these practices as well, a spokesman for the SEC declined to comment.

Owned by Israel’s elite

EZTD is owned by Shimon Citron, who in 2001 founded Zone4Play, a technology company that licensed software to online gambling companies. Among its investors were prominent members of Israeli society, including Pini Gershon, a former coach of the Maccabi Tel Aviv basketball team, Shlomo Rothman, former chairman of the Israel Electric Corporation, and businessmen Leon Recanati and Roni Shatan.

In 2008, the company changed its name to Win Gaming Media Inc. and in 2010, the company launched binary options trading, with Ehud Barzily, Israel’s former Income Tax Authority deputy commissioner, as the chairman of EZTD’s Israel-facing site, B Option. Gershon and several other investors of Zone4Play still own shares in EZTD.

Asked if he was still connected to the company, Barzily, the former deputy tax commissioner, told The Times of Israel on Wednesday that B Option never got off the ground. Asked specifically if he is still involved with EZTD, he replied, “I do not have a role or any controlling interest in the company. I know nothing about this field.”

In a telephone conversation with The Times of Israel, the company’s CEO, Citron, sought to stress that $200,000 was a very small fine and that EZTrader’s dealings with the SEC were completely finished.

Citron added that he did not think the SEC’s action merited a news article.

“Our company was not accused of fraud and there were no personal accusations against the owners or managers of the company,” he said, pointing out that this differed from the SEC’s recent judgment against Banc de Binary, which specifically named the company’s owner, Oren Shabat Laurent.

Citron went on to assert that there was no law in the United States against binary options, that in fact binary options are traded on the Nadex and Cantor exchanges, and that EZTrader hopes to receive US regulation soon.

“The US has no problem with trading binary options as long as they follow the law, as long as there is regulation, heavy regulation, and that’s a good thing,” he said.

EZTrader is regulated in Cyprus and Japan and is traded on the US OTC exchange.

A source close to the Nadex exchange told The Times of Israel that binary options are not legal in the United States unless they are traded on highly regulated exchanges, and that he thinks it highly unlikely that any Israeli binary options company, the vast majority of which are fraudulent, would pass muster and obtain regulation in the United States.

A guessing game

“I don’t want to seem like someone who comes from the world of gambling,” Citron told the Calcalist business daily in 2010. “I was the CEO of a company that developed programs for online gambling, and if binary options were gambling, I wouldn’t be involved,” he said, explaining that successfully trading binary options requires prior knowledge and skill.

Israeli basketball coach Pini Gershon
Israeli basketball coach Pini Gershon

But according to the SEC’s order, EZTrader’s business model is based on the assumption that binary options trading is in fact a guessing game.

“EZTD’s business model presumed that on average, US customers would perform no better than if they had relied on random guessing to make the required prediction,” the SEC said. “Although EZTD’s trading platforms provided guidance on methodologies that customers could use to try to accurately predict short-term stock price changes, EZTD did not expect that its customers would be able to do this with a greater than 50% accuracy rate.”

EZTrader stopped soliciting US customers in 2014 but still solicits customers in Europe, Brazil, Indonesia and elsewhere. Both French and Belgian regulators have warned the public against transacting with EZTrader.

EZTrader is an official sponsor of the Roma AS football club as well as Tottenham Hotspur in the UK.

Last week the French parliament approved a law that would prohibit binary options and forex companies from advertising via the internet in France. The law is likely to go into effect in mid-2017.

EZTD sponsors Tottenham Hotspur
EZTD sponsors Tottenham Hotspur

In what may be a harbinger of a wider crackdown in Israel, the ISA last week carried out a highly unusual raid on the Ramat Gan offices of iTrader, a company that offered binary options and forex trading to the Israeli public, arresting seven of its top managers and salespeople. The ISA accused the seven men of providing investment advice without a license, as well as aggravated fraud, all of which allegedly occurred between May 2013 and May 2016.

Prompted in part by the months of reports on this website on widespread fraud by the Israeli-based binary options firms, the ISA is now vowing to close down the entire industry.

“I am deeply troubled” by the fraudulent industry, ISA chief Hauser told The Times of Israel earlier this month. The aim of the new legislation is “to put an end to the whole story” of binary options operations in and from Israel, he said.

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