Massive loophole: If Israeli government bans all binary options activities, here is where they will go

Cutting and running is one thing. That is usually what orchestrators of scams do when the heat gets too high. However, outsourcing operations to a call center and sales firm that specializes in this industry, overseas, may allow them to carry on and circumvent any new laws.


Israel’s binary options industry rose to prominence very very quickly in the middle of the last decade, and has during the past year become the bete noire of financial markets regulators, mainstream news entities and consumer protection groups, largely because it is about as far removed from a genuine financial product as is humanly imagineable.

The vast binary options business, which bears absolutely no resemblance to genuine electronic trading whatsoever, is indeed a weighted gambling platform masquerading as a retail trading environment, which the operators, most of whom come from adult entertainment, online poker, lead buying (and stealing in some cases) and affiliate marketing backgrounds rather than financial services, use to pocket the deposits of unsuspecting customers worldwide.

Binary options is reviled on a global scale, with France, Belgium, Germany, Denmark, the United States, and Holland having outlawed it, and Britain making a clear point never to regulate it as a financial product.

Mainstream news sources have made large investigations into the activities of these brands and their respective platform providers which are also market makers, as absolutely no binary options business has any connectivity to a live market.

No doubt, mention the word ‘prime brokerage’ or ‘aggregated price feed’ to any of the owners of brands or binary options platform providers and it is unlikely that they will have any idea what either vital component’s teminology means.

Just as binary options firms are beginning to find that the gravy train is inevitably coming to a halt as the doors are closing around the world and the Israel Securities Authority chief Professor Shmuel Hauser has made extensive efforts to extinguish this fraudulent business that is casting a shadow over the genuine electronic trading sector from existence by requesting powers from the Attorney General to ban all of them from conducting any activity whatsoever from Israel, a loophole has appeared.

Thus far, binary options firms have been able to continue their odious activities by creating layers of different entities with registered companies in offshore jurisdictions and client bases in others, whilst only maintaining a service and marketing entity in Israel, which is structured as a separate company, thus circumventing national regulatory laws of every nation that they attract clients in, as well as the law of the State of Israel which stipulates that binary options is illegal.

Indeed, former US secret agent and Israeli intelligence officer Haggai Carmon, who has so far helped victims recover $2 million from binary options fraudsters, likened the way that binary options firms layer their corporate structure to “structures seen only in espionage organizations or among world-class money launderers or terrorist organizations.”

“A top professional tailored the layering,” he said, referring to the practice among money launderers to distance money from its criminal origins by hiding it behind layers of financial transactions. Binary options companies, 90 percent of which, Mr Carmon estimates, operate from Israel, similarly hide behind layers of false identities.

Now, as the Knesset (Israeli parliament) begins its Knesset Committee hearings on the instigation of the new laws against binary options, and some companies are closing down their operations, as well as the general consensus being not at all favorable, it looks as though the end is nigh.

Banc de Binary, one of the most notorious and largest of the binary options brands, closed its operations down last week.

The question is, what will the binary options do next? Lie down and go away quietly?

Not necessarily.

FinanceFeeds came across a company called Level770, whose website states that it is a provider of technology solutions to investors, which are tools that provide online marketing and drive sales for the retail FX and CFD industry.

“In practice, our enterprise supplies and provides a full capacity of Forex and CFDs whole services within a professional environment. Our services benefit our partners and rising international call centers, who are interested in the world of capital markets and leading online trading innovations” states the firm’s description with regard to its business activities.

What does that mean, when the marketing-speak is stripped away?

It means that this particular company will allow a retail trading firm to outsource its entire sales and marketing activities, therefore no longer needing a presence in Israel.

FinanceFeeds is aware of several brands of binary options platform providers with registration in Cyprus or offshore which are preparing to shut their Israel operations in the advent of Professor Hauser’s proposals to outlaw any binary options activity from Israel, including the provision of sales and marketing by Israel based call centers (belonging to the brand itself) working on behalf of offshore registered or Cyprus based firms run by Israelis.

Put simply, if many binary options firms are Israeli owned and operated, yet they are officially licensed in Cyprus and registered offshore, and Israel’s new law – with good intentions – aims to quash them by making it illegal to operate at all from Israel knowing that this will stunt their future because the entire ownership team live and operate from Israel, then all they have to do is outsource their sales and marketing to a separate company, and that’s the new laws circumvented before they are even in place.

Level770 operates from Serbia, however it has also a telephone contact number in London. We attempted to contact both divisions of the firm, and both times were greeted by an automated, computerized call handling system, which asked us to leave our details in order that someone would return the call, which is somewhat unusual, as one would expect a sales team to be able to have taken the enquiry.

At this stage, we are not insinuating in any way that this particular firm operates outsourced call centers specifically for binary options, however what is clear is that a company such as Level77o could easily take on the sales and marketing of binary options entities who could tell the government that they are closing their operations, only to spring up the next day with the same management team and internal staff, a new name, and an outsourced call center overseas.

Until a global alliance is formed with international governments – Britain’s City of London police having recently stated that binary options is the largest internet scam they have ever seen – there will always been means of circumvention.

Today, in this electronic, borderless world, a borderless law enforcement activity is required if Professor Hauser’s well intentioned ideology of finishing the nefarious binary options business once and for all is going to have any long lasting and final effect.

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