Israel has now joined Japan, Australia and the United States to completely ban the binary options trade.
Yesterday, the Knesset, the Israeli parliament, voted 53-to-0 to adopt a new binary options law, which now goes to the country’s president for his signature. It will enter into effect in three months, during which time all existing binary options companies must shut down. Following that grace period, anyone in Israel involved in the industry will be subject to arrest and, if convicted, will face up to two years imprisonment.
Last month, the FBI arrested Lee Elbaz, CEO of Yukom Communications, an Israeli binary options firm, when she disembarked from an airplane at JFK airport in New York. That one incident demonstrated the determination of the international law enforcement community to put an end to these global multi-billion dollar scams that have bilked millions of innocent investors out of their money, emphasizing the Knesset’s need to take action on its own.
Unlicensed and unregulated binary options brokerages and related support services ̶ such as those provided by the firms that produce the software and websites used by online scammers worldwide ̶ began to proliferate in Israel as early as 2007. By 2016, the estimated 100 companies that comprised the industry contributed approximately $1.25 billion to the country’s GDP. They continued to function freely until March 2016, when they began to pack up and leave after the Knesset adopted a law banning binary options firms inside the country from conducting business with Israeli citizens. That legislation, however, contained a loophole allowing them to continue to target individuals abroad. The lacuna necessitated the passage of this new law.
Like Israel’s original binary options law, however, this new one also contains a loophole. It does not prohibit unlicensed forex brokerages from continuing to operate in the country. While there indeed are numerous legitimate but unlicensed forex companies, there also are plenty of others that engage in forex fraud. It has yet to be seen if any of the Israeli binary options scams that will have to shut down over the next three months will use that interval to transform themselves into illicit forex and CFD trading platforms.
But they might not have to. Other options are available to them. According to The Times of Israel, an online newspaper that took the lead in publicising the criminality inherent in the binary options industry, ‘former binary options operatives have started to focus on opportunities to profit in the fields of diamond investment scams, cryptocurrency scams, including Initial Coin Offerings, and predatory business loans,’ while others have moved their activities to other countries with far more permissive oversight, among which are Ukraine and Cyprus.