Knesset gives initial okay to bill banning binary options

MK Dov Khenin (Joint List) calls for the law to be expanded to include additional ‘toxic’ financial products

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

The Knesset plenum votes on the state budget for 2017-2018, December 21, 2016. (Yonatan Sindel/Flash90)
The Knesset plenum votes on the state budget for 2017-2018, December 21, 2016. (Yonatan Sindel/Flash90)

The Knesset plenary on Monday evening approved a bill to ban Israel’s widely fraudulent binary options industry, taking another step toward shutting down the multi-billion-dollar scam.

All 31 Knesset members in the plenary at the time voted in favor of the law on its first reading.

Binary options is an Israel-based enterprise which has flourished with almost no intervention by law enforcement for a decade. Fraudulent firms employ thousands of Israelis, whose activities bilking people around the world out of money have been exposed in a series of articles by The Times of Israel since March 2016.

Deputy Finance Minister Yitzhak Cohen (Shas) presented the law on Monday, saying it was necessary for the social good, as many families have been devastated by binary options fraud.

“I hope it moves to the Finance Committee and is passed quickly, as this law will save many families,” he said.

Yitzhak Cohen, speaking at the Knesset in 2011 (photo credit: Kobi Gideon/Flash90)
Yitzhak Cohen (photo credit: Kobi Gideon/Flash90)

Opposition lawmaker Dov Khenin (Joint Arab List) said he welcomed the law and commended the Finance Ministry for introducing it, calling binary options a “toxic and dangerous financial product.”

However, Khenin called for the proposed law to be expanded to include other fraudulent speculative financial products as well. Khenin did not specify which additional financial products he was referring to.

The proposed law does state that forex companies operating from Israel will be required to be licensed in the counties where they do business, but does not ban retail forex.

The law will now go to the Knesset House Committee, which will in turn pass it on to whichever other Knesset Committee it determines is most appropriate, in order to prepare it for a second and third reading in the plenary.

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.

The bill bans all binary options trading, period, and thus aims 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.”

Prof. Shmuel Hauser, chairman of the Israel Securities Authority, seen at the Finance Committee in the Knesset. (Miriam Alster/Flash90)
Prof. Shmuel Hauser, chairman of the Israel Securities Authority, seen at the Finance Committee in the Knesset. (Miriam Alster/Flash90)

In 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 on June 17, 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 died by suicide, after losing most of his life’s savings to an Israeli binary options company called 23Traders. Just 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. This and a third death were documented by The Times of Israel on Sunday.

Apple earlier this month 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 the 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.

Last month, in a move that indicated the Israel Police had finally begun to tackle the multi-billion dollar global fraud, Eliran Saada, the Tel Aviv owner of a fraudulent binary options firm, was arrested on suspicion of aggravated fraud, misrepresentation, false accounting, forgery, extortion and blackmail.

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.

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