In a bombshell speech, a senior Israel Police officer told a Knesset panel on Wednesday that Israeli crime kingpins are behind the binary options industry and that organized crime in the country has been massively enriched and strengthened as a result of law enforcement’s failure for many years to grasp the vastness of the problem.
“Our eyes have been opened,” said Superintendent Gabi Biton, who investigates financial fraud and money laundering. “What we’re seeing here is a massive organized criminal enterprise.
We are talking about criminals at various levels of crime organizations, up to the very top.”
The widely fraudulent binary options industry is estimated to generate between $5 billion and $10 billion a year and to largely emanate from Israel.
It has been estimated to number well over 100 companies, and to employ between 5,000 and tens of thousands of employees.
But in reality — through rigged trading platforms, refusal to pay out, and other ruses — these companies fleece the vast majority of customers of most or all of their money.
The fraudulent salespeople routinely conceal where they are located, misrepresent what they are selling and use false identities.
Because binary options is such a lucrative scam, established organized crime groups gravitated toward it, said Biton. “They saw the huge economic potential in binary options,” he added, explaining that these organized crime bosses then hired professionals, foreign language speakers and payments experts to help them carry out their fraud.
“It has grown to monstrous proportions,” he added. “I can say that we are discovering new paths of money laundering through this crime that we were not aware of.”
Biton was speaking at the second of three meetings of the Knesset Reforms Committee devoted to deliberating a proposed law to ban the Israeli binary options industry.
At the previous meeting, held Monday, several of those in attendance were shocked to discover that the draft legislation unveiled in February had been substantively weakened.
The original text, which was drafted by the Israel Securities Authority together with the Justice Ministry and the attorney general’s office, banned the entire binary options industry, but also, significantly, would have prohibited Israeli forex, CFD (Contracts for Differences) and other online trading companies from offering their wares to customers abroad without a license.
The February draft law stipulated that online trading companies operating from Israel and targeting customers abroad must do so with a license from the country where they operate.
But in the ensuing months the text was changed, and in its current version which was approved by the cabinet last month the ban on binary options stands but the additional clauses, covering other financial instruments, have been deleted.
This new version of the proposed law was formally published by the Knesset on June 20 but not publicized, and many critics of the industry only discovered the change in recent days or at Monday’s session.
During Wednesday’s committee meeting, some of those in attendance argued that the watered-down bill would allow binary options fraudsters to re-brand their product, offering forex or CFDs instead, and continue to defraud customers abroad with impunity.
A source involved in the legislation told “The expanded bill would have been ideal but I do not think it would be able to pass a final Knesset vote, even if the committee approved it.
You cannot imagine the amount of pressure being exerted on Knesset members to weaken this bill. The industry has vast amounts of money and is exerting massive pressure.”