Amid growing cries for the banning of binary options trading from many stakeholders, particularly the Prime Minister’s Office, The Times of Israel has it on good authority that Israel’s top financial regulator was giving tax payer’s money to a key player in the binary options market to help it expand its operations overseas.
Between 2014 and 2016, The Economy Ministry gave out funds totaling $270,000 to SpotOption, and the company continued to receive money from the ministry even after Israeli regulators prohibited binary options firms from targeting Israeli investors in March 2016. Meanwhile, the regulators were working simultaneously to outlaw the binary options industry due to the obscene levels of fraud many Israeli-based binary options firms are committing internationally. In the last decade, thousands of Israelis working in fraudulent binary options firms have allegedly scammed uncountable numbers of people worldwide of billions of dollars.
According to the Times of Israel, the Economy Ministry gave SpotOption the funds to help it expand into China, whereas, the Israeli binary options market was preparing for a shutdown. When the Times inquired about the non-disclosure of the grant, the ministry said it was an oversight. Despite warnings from stakeholders about the potential blowback of awarding SpotOption the grant because of the rampant fraud in the binary options industry, ministry officials continued to give the company tax payer’s money.
The revelation of the staggering amount of fraud in the Israeli binary industry was precipitated by a publication of The Times of Israel in March 2016. The article created a watershed effect that culminated in Knesset lawmakers voting unanimously to ban binary options on October 23, 2017.
SpotOption came under major scrutiny after news came out about the grant, and while it lobbied aggressively to be exempted from the ban, the ban covers its operations. Even though SpotOptions maintained it had nothing to do with the fraud being perpetrated in the industry since it only provides a trading software, investigations have shown that the company might have colluded with fraudulent binary options firms to trick the system so that traders will always be at a disadvantage. In an FBI affidavit which was released before the arrest of an Israeli binary options firm’s CEO, SpotOption allegedly works with its client firms to increase the chances of particular traders losing money on trades, manipulating of options returns, and ensuring that clients who were having a winning streak lose future trades.
In an in-depth report profiling Malhaz Pinhas Patarkazishvili, the founder of SpotOption, Israeli financial newspaper The Marker revealed that the company was established after its founder was convicted of fraud, forgery and money laundering for his involvement in Israel’s biggest bank theft in history.
The Economy Ministry grant that SpotOption got was from the ministry’s India-China Fund which was meant as financial aid to Israeli firms that wanted to expand their operations to Asia. The company won the grant of about $450,000 to set up its Hong Kong office, despite the warning of fraudulent activities in the binary options industry. After the revelation by The Times of Israel, SpotOption requested that the grant is stopped.
Current and former ministers of the economy ministry denied any involvement in the award of the grant when the Times of Israel enquired about their role in the saga. Meanwhile, many binary options firms who use the SpotOptions trading platform have faced various charges of fraud. In the US for instance, two Israel-based binary options firms, Vault Options Ltd. and Global Trader 365 were fined $4.5 million after a US Federal Court found them guilty of illegally soliciting and defrauding US traders. Due to the huge amount of fraud in the industry, SpotOption has been forced to reduce the number of brokers using its trading platform to about 60 firms from 250.
During deliberations on how to reform the binary options industry in Israel, SpotOption played a prominent role, and its representatives made a strong argument for the company’s operations to be spared from the ban. But the Reforms Committee would not budge despite the intense lobbying of SpotOptions. The binary options firms have however been able to trick the system behind the scenes. In the final draft of the law banning all binary options activities, the rules have been adjusted to give the targeted companies some room to exploit the law. Now, all they have to do is give their products different nomenclatures, and they won’t be flouting the law, even though the finance minister can include more products to the ban after consulting with the Israeli Securities Authority subject to the Knesset Finance Committee’s approval.
While this might be considered a win for the binary options firms, the Israeli Police Superintendent has vowed to intensify its clampdown on the nefarious activities of organized criminals which has grown to frightening proportions in the country. In the words of the police chief at the August 2 meeting of the Reforms Committee, he said: “We will use all the tools at our disposal to uproot this phenomenon.”
This article may also be interesting: CSA Announces Ban on Sale of Binary Options with Short-Term.