Op-Ed: Proponents of the widely fraudulent industry are quietly trying to thwart law-enforcement’s long-overdue move to close it down
In these very days, in the corridors of power, a quiet battle is playing out for Israel’s financial soul.
On one side are Israel’s overworked and under-resourced law enforcement authorities, now belatedly seeking to grapple with the worst plague of corruption ever to blight modern Israel. On the other are those who seek to deepen criminality’s hold on the Jewish state.
Ten years after the first binary options company began operating in Israel, a year after The Times of Israel began relentlessly exposing the widely fraudulent industry, and a year, too, after the Israel Securities Authority (ISA) barred the firms from fleecing Israelis, the finance minister has signed off on draft legislation that would ban the entire industry, period. Ban it from operating anywhere in Israel. Ban it from targeting customers anywhere in the world.
It took the ISA a long time to internalize the scale of the industry — estimated to bring in between $5 billion and $10 billion per year — and the gravity of the damage. (The $10 billion figure would represent a staggering 10%-plus of annual Israeli exports.) Thousands of Israelis have been going to work each day for the past decade, at call centers in Tel Aviv, Herzliya, Ramat Gan, Caesarea and beyond, to dupe victims all over the world out of their money. Ostensibly advising clients on lucrative short-term investments made via sophisticated trading platforms, the fraudulent salespeople in fact employ a variety of ruses — including lying about their identities, location and expertise, manipulating market figures, and flat out refusing to let customers withdraw their funds — to ensure that almost all of their clients lose all or almost all of their money.
But to its credit, in recent months, the ISA recognized what was going on, and the damage binary options fraud is doing to Israel’s economic reputation. This was in part because of our reporting, and in part because of the growing furor internationally at the Israel-based fraud, which in turn has brought pressure from the FBI and other international securities regulators.
ISA chairman Shmuel Hauser last summer called the fraud disgusting and ruinous, and vowed to shut it down. The Prime Minister’s Office indicated its support.
Working with the Justice Ministry and the Attorney General’s office, Hauser drew up the necessary legislation earlier this year. Last month, Finance Minister Moshe Kahlon signed off on the draft. Backed also from the opposition, where Yesh Atid MK Karin Elharar’s State Control Committee has played an important role in galvanizing progress, the legislation is supposed to be approved by the Ministerial Committee for Legislation in the next few days, before the Knesset goes into recess.
Two weeks ago, however, at the second special session of the State Control Committee dedicated to the issue, two advocates for the industry argued against an outright ban — managing to keep straight faces as they attempted to defend the morally indefensible. They claimed closing down the industry in Israel would merely lead to it relocating overseas, where others would take Israelis’ jobs — quite possibly true, but no justification for ongoing Israel-centered theft. One of them rather desperately suggested that some of the thousands of Israeli Arabs employed by the industry might, if rendered jobless, resort to nationalist crime. New immigrants, widely employed in the field because of their English, French and other language skills, would be unable to find similarly well-paid jobs, he warned, again ignoring the corrosive immorality of the work. Office blocks would be emptied overnight, he argued, claiming that 20,000 Israelis are directly employed by the industry, and another 60,000 in related industries — figures far higher than some others cited by insiders.
Such assertions were waved away by Elharar and other officials at the meeting, long-since persuaded of the gravity of the fraud, who recognized them as self-serving arguments that seek to rationalize and normalize what is a widely criminal enterprise. Responding directly to the claims that immigrants who have moved to Israel to escape anti-Semitism would find themselves jobless, the ISA’s Hauser fired back: “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?… I was in Europe a few weeks ago with all the regulators and I heard what they had to say about this industry,” he added bitterly.
In the days since that February 28 meeting, however, lobbyists and proponents of the industry have been working quietly behind the scenes to try to undermine support among ministers for the new legislation. They have repeated the argument that a ban would put large numbers of Israelis out of work. And they have pleaded that the binary options firms be regulated rather than closed down — a transparently pathetic delaying tactic given that it is the regulator, appalled by the fraud, who is the very official insistently moving to shutter the entire industry. (“I have yet to come across a single legitimate binary options boiler room,” Jason Roy, the chairman of Canada’s newly formed Binary Options Task Force, noted last week, issuing a plea to the Israeli government to shut down binary options “immediately.”)
Israel has been down this road before. In 2011, then-MK Einat Wilf attempted to have fraudulent binary options and forex firms closed down, but was outflanked by its proponents. This time is a little different. This time, the legislation has been drawn up by state enforcement authorities, is supported by government and opposition, has been approved by the finance minister and is backed by the justice minister.
But binary options advocates are well-funded and not unsophisticated. They are not pushing for ministers or, at a later stage, for Knesset members to actually vote against the law. That would be too publicly embarrassing. Rather, they would have the legislation delayed along the lengthy road to Knesset approval, tied up for weeks and months in proposed amendments, nitpicked and neutered and ultimately abandoned.
Binary options have been allowed to flourish in part because law enforcement in Israel is putting out so many fires in so many areas. This is a country, after all, that currently “boasts” one prime minister in jail for financial misdoings and another, the incumbent, under investigation for graft, a chief rabbi about to be locked away for taking bribes, a former bank chairman jailed for fraud, a former senior police officer indicted for fraud, several mayors being probed for corruption, and a relentless stream of busts and arrests for large-scale fraud and other financial wrongdoings. Some of the industry’s exponents, moreover, are extremely well-connected, including politically.
Nobody is suggesting that law enforcement here turned a blind eye to a fraudulent plague because of political or other pressures. But now that the authorities — including, but not limited to the Prime Minister’s Office, the Jewish Agency, the Israel Securities Authority, the Justice Ministry and the Israel Police — are fully aware of what is going on, it would be inexcusable for Israeli legislators not to approve the firm action that these authorities belatedly recognize to be necessary.
Allowed to continue, fraudulent binary options firms will reach out to anyone and everyone, anywhere and everywhere worldwide, with their well-honed routines for separating trusting individuals from hard-earned money, leaving a trail of ruined lives in their wake. Allowed to continue, fraudulent binary options firms will make a mockery of the rule of law in this country and normalize criminality. Allowed to continue, fraudulent binary options firms will continue to seduce thousands of young Israelis into lives of crime.
The Times of Israel documented the tragic suicide of Fred Turbide in Canada three months ago after he was fleeced by an Israeli binary options firm. If the belated legislation is now derailed, Israel will not be able to say, “Don’t blame us. We didn’t know,” about the next Fred Turbides. Israel won’t be able to say, “Don’t blame us. We didn’t know,” about the damage thousands of our unscrupulous citizens are doing to others, and to ourselves.
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Victims of binary options fraud are invited to contact The Times of Israel, and/or Israel Police, and/or the Israel Securities Authority, and/or the Ministry of Justice. Current or former employees of fraudulent firms are also invited to do so.