Last October, Israel finally banned the sale of binary options – highly risky financial instruments that had been used to bilk unsuspecting investors around the world out of billions of dollars.
The law prohibiting the sale of binary options, which passed 53-0 in the Knesset, gave brokers three months to cease operations. It came 19 months after the Times of Israel began exposing the multi-billion dollar industry as a global scam.
Binary options allow people to make an all-or-nothing bet on a single proposition, such as the price of gold reaching a certain dollar value by the end of the year. But the unregulated nature of the financial instrument has seen it become a favourite of scammers around the world, and especially in Israel.
The Israel Securities Authority (ISA) praised the ban as “one of the most important” laws passed by the Knesset.
“Trading platforms that offer trading in binary options cause grave, destructive damage to Israel’s image, which is quickly gaining momentum and fuels anti-Semitism against Jews, in general, and Israelis in particular, and undermines Israel’s foreign relations,” ISA chair Shmuel Hauser said in a statement.
But for some Canadians, the ban came too late.
The CJN recently spoke to one investor who lost $31,000 through a website that was linked to Israel.
Last month, Brian Roxborough, a Canadian citizen who lives in the Philippines, threatened to kill himself after losing what he called his life’s savings – $170,000 – in an online investment scam that was based in Israel. Police in the Philippines intervened after being alerted by Canada’s embassy in Tel Aviv.
A year ago, one distraught investor in Edmonton, Frederick Turbide, a father of four, committed suicide after losing $200,000 on a trading website operating out of Israel.
Trading in binary options, which promise fast, lucrative returns, began flourishing in Israel in 2007, thanks to slick marketing campaigns run through websites and via Facebook, Google AdWords and other online platforms.
At its height, the industry was estimated to earn between $5- and $10-billion a year, according to the Times of Israel.
In the wake of the reporting on the wreckage the fraud had left, Israeli Prime Minister Benjamin Netanyahu called for the practice to be banned worldwide.
While Canadian officials welcomed the new policy (Canada has also banned binary options trading), they now warn that some of the more disreputable, unregulated Israeli brokers will simply move to other high-risk financial instruments, such as contracts for difference (CFDs), a form of derivative trading, foreign exchange markets (ForEx) or trading in highly volatile crypto-currencies. Some have already switched to diamond sales and predatory business loans.
(The original bill considered by the Knesset reportedly would have outlawed some other shady investments, but the final version banned only binary options.)
“I am pleased Israel took action,” Jason Roy, senior investigator at the Manitoba Securities Commission and head of the Canadian Securities Administrators’ binary options task force, told The CJN. “I think it’s a positive step, but potentially, we will be right back where we were.”
Roy said Israel was the “epicentre” of binary options fraud and that, already, his office is hearing of scams involving other investments that can be traced to boiler rooms and call centres in the country.
He said he could not put a dollar value on how much Canadians have lost to Israel-based platforms, as only between five and 10 per cent of all targets report being victimized. “Victims don’t come forward in most cases,” Roy said.
Travis Parsons is one victim who came forward and continues to wage war against his swindlers.
A 47-year-old father of two who works at a college in British Columbia, Parsons said he lost US$24,250 ($31,000) between October 2016 and February 2017 on a website called Suisseoption, which is based in London, England.
The tech-savvy Parsons spent months researching the firm and found that a trading platform called Airsoft, which is based in Tel Aviv, was supplying Suisseoption and some two dozen other websites with software and technical support for unlicensed brokers.
He said that Airsoft describes itself as “a full-service brokerage technology developer, with offices in Cyprus and Hong Kong, offering binary options, ForEx and contracts for difference.”
Parsons said that, ideally, he would like his money back, but that at a minimum, he is requesting a full investigation by Israeli police of Suisseoption and Airsoft, which presents a “legitimate front, while supporting criminal binary option brokers,” according to his voluminous complaint.
In May, the ISA informed Parsons that his case had been referred to the Israeli national police. He also contacted Canada’s embassy in Tel Aviv.
In an email to The CJN, John Babcock, a spokesperson for Global Affairs Canada, said his department is aware of the controversies surrounding binary options trading, but that it cannot comment on specific cases.
“When Global Affairs is contacted under such circumstances, consular officials can provide a list of local lawyers and sources of information about local laws and regulations,” he said.
A federal website says the government of Canada “cannot intervene in private legal affairs, and has no influence over another country’s legal proceedings.”
Parsons said he hasn’t heard “a peep” from the embassy or Israeli police. Airsoft, he stressed, is still operating.
In a letter sent to members of the Knesset prior to the passage of the law that banned binary options, Parsons said he lost “not only my financial wellbeing, but also my trust in humanity was taken away from me by unscrupulous characters.”
He said he has gathered 16 other victims of Israel-based binary options trading from six different countries, each of whom has been defrauded of between US$2,000 and US$100,000.
“These include single parents, the sick, the disabled and the elderly,” Parsons told the MKs. “Many do not know if they can feed their children. Many are deep in debt. One man will lose his house. The stories of people in despair are many and hard to bear.”
I thought Israel was better than this.
– Travis Parsons
He said most other victims have given up on getting their money back.
While he welcomes the ban as a symbolic step, he rues the fact that, to date, no one in Israel has been charged with an offence. And he doesn’t think the ban will deter crooked brokers.
“All they’re doing is moving their operations to unregulated centres” in Eastern Europe, he said. “They’re still pumping out new brands.”
He’s not giving up, though. “I told the Suisseoption scammers that I was an easy mark, but I will never be an easy victim,” he said.
Parsons, a non-Jew, said he has always supported Israel. “I don’t have problems with Israel,” he said. “I’m just disappointed because I thought Israel was better than this.”