The Knesset Reforms Committee will meet next week for three days of intensive deliberations on a government-drafted bill to ban Israel’s binary options industry, a month after the bill was approved unanimously in an initial Knesset vote.
The committee, called the Special Committee for Discussion of the Planning and Building Bill, but also known as the Reforms Committee, will convene on Monday, July 31 (9:30 AM), Wednesday, August 2 (10 AM), and Thursday, August 3 (9:30 AM) to discuss the proposed law to entirely ban Israel’s widely fraudulent binary options industry. MK Rachel Azaria from the Kulanu party, who chairs the committee, will preside over all three meetings.
Binary options is an Israel-based enterprise which has flourished with almost no intervention by law enforcement for a decade. Fraudulent firms have employed thousands of Israelis, whose activities milking people around the world out of money have been exposed in a series of articles by The Times of Israel since March 2016.
Among those invited to attend the committee meetings are representatives of government ministries, the Israel Securities Authority, the Bank of Israel, as well as lobbyists and trade organizations representing the binary options industry.
During the meetings, there will be an opportunity for those in attendance to comment on and argue for changes to the proposed law before it progresses to the Knesset plenary for a second vote and then for a third and final vote.
Despite the cabinet’s support and initial plenary approval to ban the industry, binary options proponents are expected to seek to block or weaken the bill during next week’s committee sessions, said one activist.
“They will argue that the industry needs to be regulated not banned,” said Tzvika Graiver, a lawyer for the “Keep Olim in Israel” movement which advocates on behalf of new immigrants to Israel.
“Their lobbyists are working around the clock, meeting with Knesset members to ensure this law is changed so that it has no teeth,” said Graiver, who spends much of his time in the Knesset.
Graiver said he was pessimistic about the ability of ordinary citizens to overcome such a powerful and well-connected industry in today’s Israel, which he described as “one of the most corrupt societies in the West.”
“There is too much money at stake,” he added. “Based on my experience, I am not sure if the law will pass in the end.”
Fraudulent Israeli binary options companies ostensibly offer customers worldwide a potentially profitable short-term investment. But in reality — through rigged trading platforms, refusal to pay out, and other ruses — these companies fleece the vast majority of customers of most or all of their money. The fraudulent salespeople routinely conceal where they are located, misrepresent what they are selling, and use false identities.
Graiver said he has seen many new immigrants lives and psychological well-being destroyed by working in binary options.
“I remember meeting a new immigrant from Italy. For the first 20 minutes she was crying hysterically and couldn’t speak. Then she told me she had gotten work as an actress in a commercial. She read the lines and didn’t know what it was for; she didn’t bother to ask. It turns out it was a binary options commercial, and people from her hometown saw it. She started getting hate mail, she was publicly shamed. When I met her she was suicidal. I don’t know where she is now.”
A complete ban on binary options
The bill bans all binary options trading, period, thus aiming to put a complete halt to the blight of Israeli binary options firms duping victims all over the world into parting with their money. (It also targets unregulated forex and CFD companies operating from Israel, requiring them to obtain a specific license to operate in any country where they have customers. Many such companies operating from Israel also engage in fraudulent practices.)
The Times of Israel began exposing the fraudulent industry in a March 2016 article entitled “The wolves of Tel Aviv: Israel’s vast, amoral binary options scam exposed.”
Last August, Israel Securities Authority Chairman Shmuel Hauser promised he would take the necessary steps to thwart the fraudsters. That same month, Jewish Agency chief Natan Sharansky urged the government to close down the “repugnant, immoral” industry. The Prime Minister’s Office last fall called for it to be banned worldwide.
Speaking on Channel 2’s “Meet the Press” program last month, Hauser said that his authority had received hundreds of complaints from victims of the scam as well as from financial regulators around the world.
“The [overseas] regulators tell us, ‘You have to do something, it’s like you’re turning a blind eye to this,’” he said. “I’m telling you,” Hauser added, “these binary options are a greater cause of anti-Semitism than any other factor. This is stoking anti-Semitism.”
At a recent global meeting of securities regulators, he added, dozens of officials, from the United States, Canada, Belgium, France and beyond, all lined up and said to the Israeli officials, “You have to do something.”
Hauser also mentioned two deaths as a result of binary options fraud. Last December, Canadian businessman Fred Turbide committed suicide after losing most of his life’s savings to an Israeli binary options company called 23Traders. More recently, the Israel Securities Authority learned of another death, of an elderly woman on the island of Sardinia who lost a large sum to an Israeli binary options firm.
Apple in June banned binary options trading apps from its online store. In March, the FBI placed a public warning against binary options fraud at the top of its website.
The proposed law would give the ISA authority to impose penalties of up to two years in prison to anyone who violates the ban.
The law would apply to anyone who “manages an online trading platform” that either sells binary options abroad or sells another financial product in a country where it lacks a license. The proposed law defines managing an online trading platform as “making strategic decisions for a company that manages the trading web site” or “operating the web site, including through software or hardware systems, call centers or online or telephone marketing, either directly or through a company that manages the trading web site or provides services to the web site.”
The Israeli binary options industry has been estimated to bring in between $5 billion and $10 billion a year, to number well over 100 companies, and to employ between 5,000 and many tens of thousands of employees.
Earlier this month, The Times of Israel reported that at least 12 alleged binary options fraudsters are under criminal investigation in Israel. In recent months, in anticipation of the proposed law, several binary options companies have shut down, while many have relocated their call centers abroad, including to Ukraine and elsewhere in Eastern Europe.