Israel plans ban on binary options scam
THE ISRAELI government unveiled draft legislation on Tuesday aimed at shutting down the country’s entire binary options sector, a largely fraudulent online trading industry.
The binary options industry, which began about 10 years ago in Israel, has mushroomed. Today, more than 100 companies fleece hundreds of thousands of “investors” all over the world out of billions of pounds — with little intervention from the Israeli police or securities regulators.
Over the past year, partly as a result of exposure by the Times of Israel, other Israeli media outlets and UK news websites, the Israel Securities Authority (ISA) has been “flooded” with complaints from alleged victims of the scam and securities regulators in other countries.
The ISA and the Israeli Ministry of Justice have now introduced draft legislation that, if passed, will shut down the entire industry within Israel’s borders — both the call centres and the websites that target would-be investors in Israel or abroad.
The legislation would impose a punishment of up to two years in jail for individuals who continue to sell binary options investments after the law goes into effect.
“The draft of the law will give exceptional authority to the Israel Securities Authority,” ISA chairman Shmuel Hauser told the Knesset State Control Committee, “because this industry gives Israel such a bad name and inflames antisemitism.”
The draft legislation must pass through several Knesset committees before it can be voted on.
The chairman of the State Control Committee, Yesh Atid MK Karine Elharar, promised to fast-track the legislation, but a lawyer familiar with the process told the Times of Israel that the draft was likely to encounter well-funded opposition from lobbyists for binary option firms.
“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,” said the lawyer.
“He is not coming out directly against the law but rather arguing that the industry should be regulated. I don’t think many MKs will vote against this law but they can say things like, ‘We need clarifications, we need to consult experts, we need to debate it’.”
At the Knesset hearing on Tuesday, two opponents of the draft bill made the argument that Israel’s binary options industry was “too big to fail”.
Yanir Melech, the owner of a private investigations and security firm, said he had learned about the binary options industry through his work and estimated it employed 20,000 Israelis directly and 60,000 indirectly, including 4,0005,000 Israeli Arabs.
“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.”
Mr Rimon, who said he was speaking on behalf of the European Union Binary Options Association (a group of Israeli-run binary options firms that are regulated in Cyprus, allowing them to legally target EU investors) suggested that instead of banning the industry, the ISA should regulate it “with very strong teeth.
“If the law is passed, I don’t think we will change the world or make it a better place but we will hurt thousands of workers,” Mr Rimon told the Knesset session.
“This argument is truly ridiculous,” said Nimrod Assif, a lawyer for binary options victims. “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.”
Nevertheless, the other lawyer who spoke to the Times of Israel said: “If the lobbyists are successful, they could delay the legislation for a long time.”
The draft law to shut down the industry will be fought by a wellfunded lobby