FBI targets Israeli binary options traders

Binary options Photo: Shutterstock

The FBI recently managed to arrest the CEO of an Israeli based binary options company.

Israeli politicians blab a lot about Israel's global image and the public relations damage done by organizations that slander the IDF. Recently, however, it seems that Israel has a much more alarming export sector - binary options trading. This billion-shekel industry ensnares innocent investors from around the world into investing money in it. These investors are liable to lose huge amounts of money, with a noose encircling their necks and strangling them.

Many countries around the world have made binary options trading illegal. In Israel, for example, running a gambling enterprise is illegal, so that Israel Securities Authority chairman Prof. Shmuel Hauser has managed to impose internal restrictions on it. There is still one gaping hole in the net, however - Israeli companies, one of which is located in Caesarea, for example, are still grabbing foreign investors from outside of Israel. The FBI recently managed to get on the track of part of the Israeli binary options market. Two weeks ago, they arrested an Israeli CEO of one of these companies, with the story getting almost no coverage in the Hebrew press.

The Knesset Reforms Committee, chaired by MK Rachel Azaria (Kulanu) is currently discussing a bill banning the use of the binary options financial instrument. "Binary options" is a polite term for a sophisticated, hazardous, and addictive gambling machine.

Azaria is a politician with highly developed senses. She read the reports, heard about those who had been victimized by binary options trading (including overseas cases of suicide), heard from the police and Hauser about the gravity of what is happening, and pushed for the bill with all her might. Minister of Finance Moshe Kahlon gave her his full backing. Kahlon and Azaria wanted the bill to pass as quickly as possible during the Knesset summer recess. The bill passed its first reading late in the summer, and Azaria convened the Reforms Committee during the recess, and prepared the bill for its second and third readings.

At a meeting of the ministerial legislative committee, which voted in favor of the bill in June (before the first Knesset reading, of course), there was only one opponent: Minister of Immigration and Absorption Sofia Landver. One minister abstained – Minister of Environmental Protection Zeev Elkin.

Legislation will wait until the end of the recess

In any case, following the vote on the bill in the Reforms Committee, Azaria hurried to the cabinet secretariat to ask for a vote during the Knesset recess. In spite of this, nothing moved or happened. Kahlon also called the cabinet secretariat, and told them to bring the bill up for a vote pronto. Nothing happened. The Knesset convened yesterday for a session during its recess, but heaven forbid they should discuss hasty legislation. It was important for Shas to make deputy minister Rabbi Meshulam Nahari a Knesset member again and reappoint him as deputy minister (yes the famous Norwegian Law, which went into action after the resignation of MK Yigal Guetta). Azaria again proposed adding the ban on binary options, saying it was critical. Nothing happened. As we know, the Knesset is in the middle of a very long recess lasting from late July until late October. Is it logical that no one is willing to move a finger for legislation of international criminal significance, when Israel's global image is being damaged?

Lest it be thought that the importance of the matter is being exaggerated, here are the latest momentous developments. Two weeks ago, Yukom Communications CEO Lee Elbaz got on a flight at Ben Gurion Airport. Upon leaving the plane at JFK Airport, an FBI agent accosted her and arrested her on the spot. 12 hours earlier, when the FBI investigator learned that Elbaz was walking onto the plane, he submitted a statement to the judge, and obtained a warrant for her arrest. Elbaz was brought before a judge in New York, and was put under house arrest. Several days before her flight from Ben Gurion Airport to JFK Airport, she posted something on her Facebook page indicating that she was in Colombia in South America.

The details included in the FBI statement are hair-raising. Lee Elbaz, alias Lena Green, is CEO of Yukom Communications, a company also sometimes called BigOption, BinaryBooks, and SpotOption. She is suspected of instructing employees to lie about their location and not to say that they were working from Israel, when they were working in Caesarea. It is also suspected that the employees specialized in ensnaring in their web people who had recently earned money – not millionaires, just simple people who inherited money or sold a property. Employees of Yukom (or any of the company's variety of names) started them with small amounts, and after they lost money, increased the "investments," i.e. the amount of the gamble.

The FBI statement also shows that at more advanced stages, when the customer realized that he was losing money, and sought to withdraw what he or her had left, the company employees set a trap for him or her. They put money into the customer's account, and then confronted him or her with this supposedly explosive information. They told the customer that because of the amounts in his or her account, there were those who suspected this innocent customer of being involved in money laundering. They then proposed "investment" solutions, i.e. more gambling.

The Israeli press has been publishing negative stories about the character of this industry in recent months. Yukom Communications/SpotOption, however, did not even bother to conceal itself. Public relations stories were formerly published about how the company rewarded its wonderful employees with BMWs. In the heartwarming photos accompanying these reports, Lee Elbaz is hugging and handling out cars to five happy employees.

At a meeting of the Knesset Reforms Committee during the summer, one month before Elbaz's arrest at the airport in New York, two people came to the committee meeting. They presented themselves as heads of binary options companies. One was Yossi Herzog, listed in at the hearing as the owner of Yukom, and the other was Advocate Moshe Avrahami from SpotOption. This week, when we tried to hear what happened at the meeting, people we spoke with were stunned to discover that, at least according to the FBI reports, these two representatives of the binary options industry belonged to the same company with a variety of names.

Speaking on the record at the meeting, Herzog said, "I have worked for 20 years in the forex and binary options business. I market it all over the world, and I'm proud of it. I'm not a swindler or a con man… I'm proud of the more than 500 people I employed and the tens of millions of taxes I paid to the country… How much do I have to listen to this incitement?" Avrahami, listed in the minutes as representing SpotOption, said, "The bill will prevent the providing of technological services," and warned of a loss of jobs in the high-tech market if the bill passes.

The interesting part of the committee discussion took place in the margins. According to several of those present, the atmosphere at the beginning was tense. The representatives of the binary options companies proposed that the law become effective within a year, instead of within three months. They claimed that the law would detract from technological developments, and would harm employees of high-tech companies. MK Oded Forer (Yisrael Beitenu), tried to make sure that the law would apply only to the location of trading theaters, not to technological developments. His argument is likely to deprive the law of its significance, and the police representative argued against him, denying that the binary options companies were high-tech companies, and that closing this industry down would cause mass layoffs. Coalition chairman MK David Bitan, also a committee member, entered the meeting room in the final moments of the morning discussion. In his colorful way, he joked and directed odd comments at Guetta, saying, "Do you people in Shas know what binary means?" Not to be outdone, Guetta's comeback was, "I'm willing to compete with you in mathematics and physics in front of the cameras. How much is 1,000 plus 2,000 plus 3,000?," he joked, hinting at the suspicions against Prime Minister Benjamin Netanyahu.

At this stage, Bitan tried to open some of the items in the law through a revision, but Azaria rebuffed his attempt. "We've had these discussions seven times already. It's out the question to reopen things now," she said. "Enough." The proposal to delay the incidence of the law for a year, instead of three months, was also rejected.

At the end of the discussion, Bitan, Forer, Guetta, and MK Haim Jelin (Yesh Atid) all voted in favor of Azaria's position. The most interesting thing said, however, was off the record, according to people present at the meeting. Bitan hinted that there were certain pressure groups in the Likud that he did not want to run afoul of.

How did representatives of SpotOption and Yukom Communications come to be a Knesset discussion? Multiple claims have been filed against other binary options companies operating in Israel in recent years. Others did not come to the Knesset. Who took the trouble to inform Herzog and Avrahami of the discussion? How did someone come to think that it would be possible to affect the legislation? The questions arise out of concern that there are parties in the Knesset who do not wish the bill to pass quickly and/or want to dilute its significance in order to avoid thwarting all sorts of gambling instruments.

Hauser is exerting massive pressure in favor of the bill. He attended the Reforms Committee discussions, and said that in addition to the economic and mental damage caused to customers tempted into trading in binary options, this industry was damaging Israel's image, and even encouraging anti-Semitism, because some people saw the extent of the fraud from Israel, and translated it into vicious hatred of Israelis.

We tried to find out what was delaying the bill, and why it wasn't being pushed forward with the proper speed. We were told on behalf of Bitan, that this bill would certainly pass on its second and third readings as soon as the Knesset convenes for its winter session.

Published by Globes [online], Israel Business News - www.globes-online.com - on September 28, 2017

© Copyright of Globes Publisher Itonut (1983) Ltd. 2017

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Binary options Photo: Shutterstock
Binary options Photo: Shutterstock
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