Police say they'll go after the scammers 'from every angle'; regulator: 'This industry gives Israel such a bad name'

MKs, officials reject binary options advocates’ pleas to spare industry

At Knesset session, supporters of widely fraudulent industry that fleeces victims worldwide say bill to ban it would put 80,000 Israelis out of work. Unfazed, regulators, police and legislators vow to expedite law

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

Binary options industry proponents Yanir Melech (left), Roni Rimon and binary options victims lawyer Nimrod Assif at the Knesset State Control Hearing on binary options fraud, February 28, 2017 (Simona Weinglass/Times of Israel)
Binary options industry proponents Yanir Melech (left), Roni Rimon and binary options victims lawyer Nimrod Assif at the Knesset State Control Hearing on binary options fraud, February 28, 2017 (Simona Weinglass/Times of Israel)

Two advocates for Israel’s widely fraudulent binary options industry attempted on Tuesday to persuade Knesset members and government officials to abandon legislation to shut it down, arguing that the law would cause massive unemployment and a collapse of the real-estate market.

At a meeting of Israel’s Knesset State Control Committee, a follow-up to the committee’s January 2 hearing on the topic, representatives from the Israel Securities Authority and the Justice Ministry presented draft legislation that would shut down the entire Israeli industry, a widely fraudulent field in which more than 100 companies employing thousands of Israelis have defrauded vast numbers of victims worldwide out of billions of dollars for the past decade. The legislation has been signed off by Finance Minister Moshe Kahlon and is to be brought to the Ministerial Committee for Legislation in early March to start its progress through the Knesset.

“The draft of the law will give exceptional authority to the Israel Securities Authority,” ISA chairman Shmuel Hauser told the meeting, the second such session convened in direct response to the past year’s reporting on binary options fraud by The Times of Israel. “Because this industry gives Israel such a bad name and inflames anti-Semitism, we must uproot the phenomenon,” Hauser said.

In contrast to the January 2 State Control Committee meeting, at which condemnation of Israel’s binary options industry was unanimous, on Tuesday several lobbyists and backers of the binary options industry showed up, and two of them argued, essentially, that binary options is “too big to fail.”

MK Karine Elharar (center) and MK Merav Ben-Ari (right) preside over a Knesset State Control Committee meeting which discussed shutting down Israel's binary options industry, February 28, 2017 (Simona Weinglass/Times of Israel)
MK Karin Elharar (center) and MK Merav Ben-Ari (right) preside over a Knesset State Control Committee meeting which discussed shutting down Israel’s binary options industry, February 28, 2017 (Simona Weinglass/Times of Israel)

PR professional Roni Rimon, who identified himself as a spokesperson for EUBOA (the European Union Binary Options Association), which he said represents “European binary options brokers that have licenses,” said that the binary options industry should be regulated by the Israel Securities Authority, not shut down. If the law is passed, he warned, it would throw thousands of people out of work and do terrible damage to Israel’s economy.

“We don’t think Israel should throw out the baby with the bathwater. These Israeli companies will simply move to Western and Eastern Europe and hire Europeans to work in their call centers instead of Israelis.”

According to Finance Magnates, a trade publication for the binary options and forex industries, EUBOA is a “self-regulating” organization for binary options companies established in 2016 that includes iq Option, 24option, Anyoption, SpotOption and TechFinancials among its members. 24Option has been described as a “dangerous” company by French regulators and banned from doing business in France. Anyoption has been the subject of multiple regulator warnings in Canada. Spotoption provides the back end and customer relations management for a large proportion of binary options websites, including 23Traders, the Israeli firm that fleeced the late Fred Turbide of Edmonton, Canada, who took his own life as a direct consequence.

A second speaker, who identified himself as Yanir Melech, the owner of Abir Security Services (a company that provides private investigation, polygraph and other security services), argued that shutting down the binary options industry could lead to terrorism and the collapse of the real estate industry and possibly the entire economy.

“This industry employs 4,000 to 5,000 Israeli Arabs,” Melech began. “Most of them have no profession and this is perhaps the only thing that the State of Israel has done to turn these minorities into Israelis.”

Melech argued that if the entire binary options industry were banned, as it would be under the legislation, it could cause Israeli Arabs to turn to terrorism. “They will likely go back to their villages and have no work and this could cause a nationalistic problem for the State of Israel.”

Melech’s speech was interrupted by exclamations from lawyers and advocates for binary options victims.

“Who paid you to speak here?” lawyer Nimrod Assif interjected.

“No one,” he replied.

Melech said that in his estimate, there are 20,000 people employed in binary options in Israel, and 60,000 people indirectly. “You see the building boom right now in Tel Aviv? Well, you can just say goodbye to that because most skyscrapers in Tel Aviv will be empty. There will be no one to fill them up.”

Dismissing suicides caused by binary options companies as negligible in number, Melech went on, “To close an industry, this is not like closing a grocery store in south Tel Aviv. It has greater repercussions than how the BDS movement sees us” — a reference to the argument that the industry inflames anti-Israeli sentiment.

The late Fred Turbide, who took his own life after he was fleeced by an Israeli binary options firm, with his wife Maria Chaves-Turbide (Courtesy)
The late Fred Turbide, who took his own life after he was fleeced by an Israeli binary options firm, with his wife Maria Chaves-Turbide (Courtesy)

“This argument is truly ridiculous,” lawyer Assif said after the session. “If the police cracked down on organized crime, it would cause some individuals to lose their jobs, but that’s not a reason not to do so. The fact that this industry became so gigantic is not a reason not to shut it down, but a reason to shut it down faster.”

Melech also argued that new immigrants fleeing anti-Semitism in their countries of origin would have no jobs if binary options was shut down. ISA Chairman Shmuel Hauser interrupted him, “You said people moved here to escape anti-Semitism. Did they come here to inflame anti-Semitism? Is that what they came to Israel for?”

“To blame worldwide anti-Semitism and anti-Israelism and the new Naziism on an industry, that is not realistic,” Melech replied.

“I was in Europe a few weeks ago with all the regulators and I heard what they had to say about this industry,” Hauser said. “And I am telling you, this is something you don’t know about.”

A view of Ramat Gan's diamond district, where many binary options firms are located, on April 3. 2016. (Simona Weinglass/Times of Israel)
A view of Ramat Gan’s diamond district, where many binary options firms are located, on April 3, 2016. (Simona Weinglass/Times of Israel)

The draft legislation was finalized last week, a year after The Times of Israel began exposing the widespread fraudulent practices of the binary options industry. Last August, 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. And in October, the office of Prime Minister Benjamin Netanyahu, alerted to the fraud by The Times of Israel, called for a worldwide ban on the “unscrupulous” industry.

Israel banned binary options firms from targeting Israelis in spring 2016. The current proposed law 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 fraudulent Israeli firms employ a variety of ruses to steal their clients’ money, including misrepresenting themselves, their location and the product they are selling, and refusing to let clients withdraw their 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 funds.

The draft law has several hurdles to pass before becoming law. The first stage is the Ministerial Committee for Legislation, the committee that decides which bills to bring before the Knesset. It will then go to another Knesset committee, probably the Finance Committee but possibly the Economic Affairs Committee or the Constitution, Law and Justice Committee, where there will be further debate and deliberation prior to a vote. Then the proposed law would go to the Knesset plenary for a first reading, then back to the committee for tweaks, and then back to the Knesset plenary for a second and third vote.

Two government officials at the February 28 Knesset hearing told The Times of Israel that because the proposed law is sponsored by the Justice Ministry — not an everyday occurrence — it has a high probability of passing these hurdles. However, a lawyer familiar with the legislative process said that at each stage there may be delays.

“The binary options industry has hired Roni Rimon, one of Israel’s most experienced and prestigious public relations professionals, to make its case before the Knesset,” explained the lawyer.

“He is not coming out against the law but rather arguing that the industry should be regulated. I don’t think many Knesset members will vote against this law but MKs can say things like, ‘We need clarifications, we need to consult with experts, we need to debate whether the sanctions are too draconian.’ All this could cause delays.”

The chairwoman of the State Control Committee, Karin Elharar (Yesh Atid), vowed Tuesday to push for the speedy passage of the legislation and said it would have the support of the opposition. MK Merav Ben-Ari (Kulanu) who is also a member of the State Control Committee, told the Knesset committee that because it is a government draft law as opposed to a private bill, its chances of passing are high.

But all this may not be enough, said the lawyer. “If the lobbyists are successful, they could delay it for a long time, then propose alternative legislation to regulate the industry, and that could take a long time as well.”

Where are the police?

Speaking at the session, David Horovitz, editor of The Times of Israel, praised Hauser for the legislative initiative and expressed hope that it would not be derailed by lobbyists like the ones who spoke at the meeting.

He also said he was glad to see two police representatives at the session; the Israel Police was absent from the previous January 2 Knesset binary options hearing.

Nevertheless, Horovitz warned, while the draft law awaits passage, binary options fraud continues to claim victims with little to no police intervention.

Police representatives attend a Knesset State Control meeting on binary options fraud, February 28, 2017 (Simona Weinglass/Times of Israel)
Police representatives attend a Knesset State Control meeting on binary options fraud, February 28, 2017 (Simona Weinglass/Times of Israel)

“The problem is what has been happening for 10 years and what continues to happen every day. Two weeks after our previous meeting, we learned that Fred Turbide, a Canadian man, had killed himself because a company by the name of 23traders, which operates from Ramat Gan, stole his money,” Horovitz noted. “That’s just one instance, in one company, out of over one hundred companies that continue to operate each day as we speak.

“If we could collect the names of these companies without much trouble,” Horovitz said, holding up a list of over 100 Israeli binary options companies, “why is it so hard for the police?”

Police Superintendent Gabi Biton told the hearing that the police had only received 52 complaints since 2009 concerning binary options fraud, and not the “flood” of complaints that the Israel Securities Authority has experienced.

“We are acting because of the media reports about binary options,” Biton said, “not because it is justified by the number of complaints.”

“This is a global fraud that employs thousands of Israelis,” Horovitz challenged Biton. “The fact that you got 52 complaints is because you insisted on not hearing and not seeing and not dealing with it. We first reported this a year ago, and you did nothing, and that was eight years too late.”

Biton did say that now that the police have had their eyes opened, they are actively investigating binary options.

“We will tackle this from the criminal angle, we will go after the credit card processing, and if we don’t catch them from the criminal angle we will catch them from the regulatory angle. And if we don’t catch them that way, we will find their sources of money. And if we don’t catch the sources of money, we will go to the tax authority and get them for not reporting income,” Biton promised. “We will attack this from every direction.”

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