In the first hearing of its kind, the powerful Knesset State Control Committee met on Monday to discuss how Israel’s law enforcement bodies can join forces to urgently tackle Israel’s widely fraudulent binary options industry.
Representatives from the Justice Ministry and Israel Securities Authority attended the event and answered questions from committee chair MK Karine Elharar (Yesh Atid) as to why nothing has been done to shut down the industry to date and what can be done going forward. Notable for their absence at the hearing were the Israel Police, who were summoned but failed to show up.
“If the police were here we could ask them why they haven’t investigated this,” Elharar said, “but they’re not here.”
Following the meeting, police said they had no immediate comment on why they did not attend the committee. The police spokesperson subsequently failed to respond to numerous requests for a comment on the issues discussed.
Elharar scheduled a follow-up session for February, and said she would ensure, via the minister responsible, that the police responded to Monday’s meeting and attended the next one.
Among the speakers at the meeting were Shmuel Hauser, the head of the Israeli Securities Authority, and representatives of the attorney-general’s office and the Justice Ministry, who are working together on new legislation to ban the industry altogether.
Telling the committee that she had decided to convene a hearing on binary options after being alerted to the phenomenon by David Horovitz and Simona Weinglass from The Times of Israel, Elharar said she quickly recognized that “a crime is taking place right under our noses.”
The Times of Israel has been exposing Israel’s fraudulent binary options industry in a series of articles since 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.
“If binary options is prohibited in Israel why do we export it?” Elharar asked the committee in her introduction. “Binary options gives a bad name to Israel. How can we defeat this phenomenon?”
“Thousands of Israelis get up every day and go to work stealing money from people around the world,” Horovitz told the committee.
“You have to understand that binary options crooks are very powerful in Israel; they have connections to very prominent people. Parts of the Israeli government have actually helped encourage their activities,” he added. “The firms pay for the most expensive lawyers to battle people who try to expose them. Some of the firms give money to charities, which gives them access to and influence with the most prominent people in Israel.”
Horovitz added: “It is illegal to give dishonest investment advice. It is illegal to lie about where you are based and who you are — to lie about your name and your training. But these are routine practices in binary options. The police need no new laws to prosecute these offenders. The Israel Securities Authority needs no new laws to shut down the guilty firms right now. It is also illegal,” he said, “to refuse to let people withdraw their money.” Yet this breach of the law allegedly occurs widely in binary options, he said.
Hauser told the panel that new legislation would be needed to stop binary options companies from targeting customers abroad. But several lawyers and anti-binary options activists in attendance challenged the notion that any new legislation is needed.
Nimrod Assif, an Israeli lawyer who represents forex and binary options victims, said, “A crime is a crime if any part of it takes place from Israel. If you had a drug lab that was exporting drugs abroad, the Israeli police would shut it down. Binary options is the same. There is no need for a new law.”
Graham Towler, an 82-year-old retired banker from London, flew to Israel especially for the session, and explained how he was duped out of 70,000 pounds by a firm he said was called OptionsXO, which he eventually learned was operating from Israel. “I have to continue to work at the age of 82 to recover some of the debt I am in,” he told the panel. “I can’t help with my grandchildren’s education, and I may have to move to a cheaper home.”
Adam Nujidat, an Israeli Arab ex-employee of a binary options firm, told the panel how he innocently took a job with a binary options company, not knowing what it was. He was shocked when his future supervisor told him, “We are screwing over half a billion Muslims in the Arab world.” He added, “I am Muslim; this upset me.”
Nujidat added, “No customer ever made a profit in the company where I worked. I never saw it. “
Bobby Ben Hur, an activist on behalf of victims of the binary options industry, had the harshest words of all. “Lots of people have gone to the police with evidence and the police have done nothing. The Israeli government is giving shelter to these companies,” he charged.
The Knesset State Control Committee oversees the work of the State Comptroller and is responsible for auditing and criticizing the executive branch and pointing out corruption or negligence on the part of the governing bureaucracy. As such, it is usually chaired by a member of a Knesset opposition party.
The Prime Minister’s Office in October condemned the binary options industry’s “unscrupulous practices” and called for the entire industry to be outlawed worldwide.
Last month, ISA chairman Hauser told The Times of Israel that consultations had begun on the framing of legislation to bar all Israel-based binary options operations from targeting anybody, anywhere. The consultations have extended to Attorney General Avichai Mandelblit and to the government, he said. On Monday, the Knesset panel was told that the new legislation was weeks away.
The committee called another hearing for February, in a month. Elharar said she expects to see progress by then towards legislation as well as enforcement action on the part of the police.
“We must advance legislation,” she concluded, “but before then we must use the enforcement tools at our disposal, because this [binary options fraud] is simply terrible.”