Israel is known as a “start-up nation” that offers investors many chances to earn a solid return.
So it may be hard to grasp that Israel-based firms offering too-good-to-be-true investments have left a trail of financial woe in Canada.
Over the past few months, Canadian securities regulators have been reaching out to their counterparts in Israel in an effort to end fraudulent financial transactions that originate in the Jewish state.
Regulators in Canada hope to quash the sale of Israel-based binary options, which have reportedly fleeced thousands of investors around the world, including in this country. The outfits are not registered to operate in Canada.
As the name implies, there are only two outcomes in a binary option. If a trader bets correctly on the direction of any publicly traded instrument, even within a small time frame, he is paid a fixed return. If he wagers incorrectly, he loses everything.
“But that’s giving it too much credit,” said Jason Roy, senior investigator at the Manitoba Securities Commission and chair of the Canadian Securities Administrators’ (CSA) binary options task force.
“These Israeli boiler rooms that are contacting Canadians are outright scams,” Roy told The CJN. “There’s no legitimacy to it. They’re just trying to steal your money.”
Evidence of fraudulent activity began in 2014 “but really exploded in 2016.” Now, Roy said he’s getting calls from New Zealand, South Africa and Australia with similar complaints.
Last year, “there was a significant amount of binary options fraud reported to various CSA jurisdictions, and if that’s only a fraction of what’s out there, there’s a real concern for us.”
Roy said he’s unable to put a dollar value on losses “because most fraud goes unreported.”
The task force began its work last summer.
Binary options were the subject of a series of articles in The Times of Israel last year and into 2017. Titled “The Wolves of Tel Aviv,” they exposed the industry as a massive sham.
The articles detailed how investors in Manitoba, two of whom were elderly retirees, lost a combined $144,000 through an online trading platform called Plustocks, which has a call centre in Ramat Gan, Israel. One man reportedly lost $85,000.
One distraught investor in Edmonton, Frederick Turbide, committed suicide Dec. 21 after dropping $200,000 to 23Traders.com, which operates from Israel.
“Cumulatively, the Israeli binary options industry is estimated to turn over hundreds of millions of dollars a year, if not billions,” stated one of the Times articles. “A large portion of the industry engages in deceptive and fraudulent practices, from lying about their names and locations, to allegedly rigging the trading platforms, to refusing to allow customers to withdraw their money under any circumstances. These fraudulent companies are not offering clients the opportunity to invest or trade, as they claim.”
They are “getting away untraced.”
Roy said he stands by his statement to the Times that binary options fraud “appears to be the current greatest threat to Canadian investors.”
These companies sometimes use robocalls, but more often, they contact would-be investors via Facebook, Google AdWords or other online platforms. “There are hundreds of these firms and new ones are being created every day,” Roy told The CJN.
Though the companies list addresses in places such as Belize, Cyprus and Malta, “the bulk” of them operate from Israel, he said.
Provincial securities watchdogs have issued more than 60 warnings, cautions and alerts on binary options, he noted.
Last March, binary options trading within Israel was banned by the Israel Securities Authority on the grounds it’s essentially gambling. Last October, the Israeli Prime Minister’s Office condemned the industry’s “unscrupulous practices” and urged that it be outlawed worldwide.
Nonetheless, “several trading platforms operating in Israel continue to offer binary options to foreign customers overseas,” the Israel Securities Authority (ISA) said this month. “In most cases, these customers lose their investments.”
The ISA said current legislation doesn’t allow it to take action against foreign transactions conducted from Israel.
“They can’t scam Israelis, but it’s OK to scam anybody else,” Roy said. “We’re concerned about that, and we’ve expressed those concerns to Israel.”
The ISA said it’s working with law enforcement agencies to allow it to take action against Israel-based platforms that target foreigners.
Asked whether Israel’s response has been satisfactory, Roy said, “I’m encouraged that Israel is now talking about changing how these things operate. But I think those changes need to happen very quickly.”
In an email to The CJN, Alison Trollope, communications director for the Alberta Securities Commission, said Canadian regulators “are aware of multiple websites promoting binary options trading platforms that are soliciting Canadians. Unfortunately, not only are these sites not registered to sell securities in Canada, but generally they are fraudulent.”
She said the task force has reached out to the Israeli press and the ISA “to identify ways to work together to tackle the problem.”
Red flags for consumers include any unsolicited investment, promises of low risk and high return, and unregistered salespeople and companies. “Anything too good to be true,” Roy said.
Before Israel banned them, binary options reportedly comprised 63 per cent, or $1.25 billion (US), of the country’s $2-billion securities and derivatives industry.