Felicia, a single mother from the Asia-Pacific region, came home one day to find her teenage son in tears. Hoping to surprise his mother, he had “invested” over $100,000, using her credit cards, in what he believed to be a legitimate binary options trading site, and made an apparent profit. But the company was not allowing him to withdraw his mother’s money, including ostensible winnings, and he realized belatedly that he had been scammed by one of Israel’s numerous fraudulent binary options firms.
Felicia went online, asking for advice on “Forex Peace Army,” an informal consumer watchdog site for the binary options and forex industries. An anonymous tipster sent her a private message with the name and personal details of the binary options site’s owner, information that is often a closely guarded secret in this industry. Felicia began sending the owner personal emails demanding her money back, and telling him she was on her way to Tel Aviv to see him. She asked him about his pets and his time spent traveling in South America, and hinted that she had high-level contacts in the Israeli Justice Ministry. Within two weeks, the website owner capitulated. “I am very depressed and want this to be over with,” he wrote, and soon afterward refunded all of her money.
Felicia, who asked us not to reveal her real name, is one of the fortunate few. According to the French securities regulator, the Autorité des Marchés Financiers (AMF), close to 100 percent of binary options customers lose some or all of their money. This is due to the fact that the companies’ income derives directly from customers’ losses. In some companies, particularly those regulated in Cyprus, employees told The Times of Israel that some customers are able to withdraw some money if they refuse a “bonus” — money “given” to clients by the firms, with many small-print strings attached, to encourage them to trade more, and then used as a pretext to prevent them withdrawing their funds — resist aggressive sales pitches, and are very adamant in their demands. The far more common scenario, however, is that customers are refunded only if they threaten a credit card chargeback or otherwise cause the company immense headaches, and even then only rarely.
The Times of Israel has been exposing Israel’s largely fraudulent binary options industry in a series of articles since last 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. Thousands of Israelis work in the field, which is estimated to have fleeced billions of dollars from victims all over the world in the past decade.
The Prime Minister’s Office in October condemned the industry’s “unscrupulous practices” and called for the entire industry to be outlawed worldwide.
Responding to The Times of Israel’s reporting on the widely fraudulent industry, on January 2, the Knesset’s State Control Committee held a hearing on the government’s failure to shut down binary options fraud. The committee chair, MK Karin Elharar (Yesh Atid), demanded that the police begin enforcement activity against fraudulent binary options firms in the next month and that the Israel Securities Authority urgently advance legislation to shut down the entire industry. A follow-up hearing will take place in February.
Former employees of binary options companies told The Times of Israel that a defrauded customer’s first course of action should be to try to reverse the credit card transaction. Even the threat of a chargeback can sometimes get a customer their money back, Adam Nujidat, an ex-employee of a binary options firm in Ramat Gan, said.
“If the company goes above a certain percentage of chargebacks, they could have problems processing credit cards,” said Nujidat, who testified at January’s Knesset committee session, “so they prefer to just return a customer’s money. But not many binary options customers know that is even an option.”
If the company does not return your money, you should approach your credit card company or issuing bank and fill out the paperwork for a chargeback, citing fraud, misrepresentation and breach of contract as the reasons, former industry insiders said. (Israeli binary options salespeople routinely lie about their identity, location and financial experience.)
Mitch, a partner with the New York-based firm Wealth Recovery International, which helps binary options victims recover their funds in exchange for a percentage of the recovered loss, agreed that a victim’s first recourse should be to try as hard as possible to obtain a chargeback.
“Don’t pay anyone to help you with a chargeback,” said Mitch, who asked that we not use his real name due to the undercover nature of his work. “This is something you do on your own.”
If you suspect you have been defrauded by a binary options company, said Mitch, you should at first try to negotiate with it directly. If, as is often the fraudulent firms’ initial response, they tell you to put in more money in to recover your lost investments, don’t do it, as you will likely never see that money again either. If the company refuses to refund your money, you will then at least have documentation to show your bank that you made a good-faith effort to recover your funds, he noted.
Mitch also advised defrauded customers to provide their bank with as much documentation as possible demonstrating that false promises were made, but to make sure to send it all in a single email.
“Don’t just forward a bunch of emails to the bank. Take the time to arrange all the documents in a single PDF file. If you don’t take the time to organize your evidence, the overworked bank employee is unlikely to do it for you.”
Mitch added that if you are able to ascertain the real location of the binary options firm that defrauded you, you should provide that information to the bank. Many binary options firms claim to be calling from England or Scotland. If you can show that they are actually in Israel, Cyprus or Bulgaria, it will bolster your case.
The Times of Israel has spoken to several victims of binary options fraud who were indeed able to recover their money just by ascertaining the real address and names of the company owners.
One British victim, who lost $35,000 to a Tel Aviv-based firm, hired a private detective to ascertain the company’s real address and owner. Then he wrote the following email: “Look, I smell the pungent fragrance of scam — unauthorized trades and operating from another country when I thought you are from UK. My contacts in Tel Aviv, by total coincidence, are very strong. You may soon be graced with a visit from me in December in Ramat-Gan.”
The defrauded victim then provided the address of the company and the name of the company’s CEO, an Israeli citizen. His money was refunded promptly.
Another victim, from Finland, approached the Finnish Financial Supervisory Authority about his losses, asking it to request that the Israel Securities Authority launch an investigation. As soon as he informed the company that he had done so, he was offered a full refund.
Indeed, the Israel Securities Authority has lately been “flooded” with personal appeals from defrauded binary options victims asking the Israeli government regulator to help them get their money back. The Israel Securities Authority has said it will launch an investigation on behalf of defrauded clients if, and only if, it receives an official request from that client’s government financial regulator.
Israel’s State Control Committee is in the process of taking testimonies from victims of binary options fraud, specifically those who have complained to the Israeli police. If you were the victim of binary options fraud and complained to the police, the committee is interested in hearing what response the police offered, if any, to your complaint.
Following the money
Until Israeli and other government authorities crack down on fraudulent binary options firms — Israel is finalizing legislation aimed at closing down the entire industry here — Mitch from Wealth Recovery International advises defrauded clients to tackle the companies in two ways: by pressuring the brokers themselves, and by pressuring banks and payment processors that handle their money.
“Even if you find out the name of the company’s owner, they may not care, because they have lawyers to deal with that. But if you can find out the real names of the brokers you dealt with, that sows panic on the sales floor,” said Mitch. recalling how his company recovered $1.5 million for US businessman Steve Koel by serving several brokers with demand letters at their home addresses.
“Another tactic that works is following the money and putting pressure on the banks where the binary options cash is stashed,” said Mitch.
Mike B., an auditor from Ohio in the United States who lost about $25,300 to a binary options firm with offices in Israel, was able to get a refund when he began asking questions about how the company processed its payments.
He noticed that his credit card had been billed by a company called “Grey Mountain Management,” located at Ulysses House, Foley Street, in Dublin, Ireland. This firm, he saw, claimed to provide “white label” services for dozens of binary options websites, and named its company directors as Liam Grainger and Ryan Coates. He noticed that Liam Grainger had been the director of dozens of other companies, including Narect Ltd. and Coral Petroleum Ltd., a company that was recently at the center of a $2 billion dispute among Russian oligarchs, as well as Multisports & Image Management (M.I.M.), a company at the center of a tax scandal involving Real Madrid soccer star Cristiano Ronaldo. Strangely enough, there seemed to be hundreds of companies located on the third floor of Ulysses House in Dublin, many sharing the same small group of directors.
Mike called Grey Mountain Management to complain about his experience with the Israeli binary options firm. He spoke to a woman who gave her name as Danielle Earle. He emailed both Liam Grainger and Ryan Coates but after the first time he emailed them, his emails started bouncing back. Nevertheless, he got his money back.
“I hounded them until they got sick and tired of hearing from me. Grey Mountain Management refunded all of my money.”
Eugene Williams, a bank employee from South Africa who lost over $27,000 to a binary options firm operating from Israel, also saw the words “Grey Mountain Management” on his bank statement after he made a wire transfer to a binary options website called Edgedale Finance. He asked the fraud department of his bank, Nedbank, to ascertain the name of the bank that received his money on behalf of Grey Mountain Management. But despite the bank’s efforts, it was unable to obtain this information.
Grey Mountain Management did not respond to The Times of Israel’s request for comment.
Mitch from Wealth Recovery International acknowledges that pressuring binary options sales people or payment processors does not always work.
“Sometimes you have to take it as far as litigation. If you’re hiring an Israeli lawyer, check with the Israeli Bar Association to make sure they’re legitimate, and try to get references from people whose stories seem genuine,” he said. “Too many victims have been contacted on message boards by people promising to get their money back. And that turned out to be yet another scam.”