Binary Options in the News Again as Victims File Lawsuits in Israel

Do you remember the binary options scandal that hit the headlines as far back as 2016? Were you caught up in this scandal that defrauded consumers around the globe of billions of dollars of hard-earned cash? Hopefully, you answered “No” to the latter question. The victims of those heinous crimes are still filing lawsuits, but the likelihood of a payoff down the line is remote.

The first hint of this monumental scam was revealed when Simona Weinglass of The Times of Israeli published her exposé in early 2016. It detailed her first grasp of what was taking place behind a shroud of offshore shell companies and call centres located in Israel.

What was the Binary Options’ scam all about?

More than five years ago, binary options were the new rage in what many observers regarded as nothing more than “legalised online gambling”. The potential for a huge gain in a small timeframe was the draw, but actual loss rates exceeded 90% by most estimates. Many regulators had major problems with this exciting new investment vehicle. US regulators baulked at them, refusing to allow any such activity on US shores.

Organised crime was not deterred. The crooks were already arranging a complex web of shell companies to hide their identities, but the main engine would turn out to be call centres in Israel. These “bucket shops” would call their target, promise outrageous returns, produce a few wins early on to draw in more deposits, and then pocket the cash, never to return a penny in most cases. Aggressive cold callers followed a carefully worded script, demanding more deposits, only later to refuse withdrawal requests and claim accounts balances were zero due to huge losses.

Complaints to Israeli law enforcement authorities fell on deaf ears because no Israeli citizens were victimised. Without complaints from local citizens, no investigations could proceed past square one. No licences were required for the same reason. It seems as though the criminals had done their local homework on how to avoid being shut down. Eventually, however, the press attention forced changes, but no losses were ever recovered.

Will the latest raft of lawsuits produce any favourable results?

Ms Weinglass has been on this trail for more than five years. In her latest update, she presents a review of just ten of the many court cases now weaving their way through the Israeli justice system. The stories are heart-wrenching tales of the plight of unsuspecting victims, but the presence of greed on their part is also part of the story. Although a few lucky plaintiffs have settled out of court, it is, unfortunately, doubtful if any of the billions in losses will ever be recovered.

Concluding Remarks

Binary options may have been legislated out of existence, but the same fraudsters still proliferate in the virtual world of online trading. The products may have new names, but the websites still have fake addresses and identities that appear real. Be vigilant if aggressive cold callers promise huge returns if you forward hard cash to some foreign entities bank account. You are your last line of defence against fraud!

About the author: Justin Freeman

Justin is an active trader with more than 20-years’ industry experience of working for big banks and hedge funds. He has an inside knowledge of how the financial markets work, thanks to roles including trader on a $750m Event-Arbitrage desk and CRO and COO of hedge funds running a variety of strategies. From stat-arb and trend-following CTA to fixed-income relative value. Firm’s he has worked at include big banks like Citi, and prominent hedge funds including D. E. Shaw and Millennium Capital Management.

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