Blacklisted and fined in several countries, company has voluntarily renounced its Cyprus regulation; some insiders speculate it will relocate to eastern Europe and operate under a different name
Banc de Binary, one of the first binary options firms to be established in Israel, has reportedly shut down its Israeli call center and renounced its Cypriot license. The firm has been forced in the past by US courts to pay millions of dollars for illegally soliciting customers there. It was also fined last year by its Cyprus regulator and has been cited for illegal activity by regulators in Australia, New Zealand and Canada.
Reports in the Hebrew daily TheMarker and the trade publication Finance Magnates cited tighter regulation of binary options by the Cyprus Securities and Exchange Commission (CySEC) and increased media scrutiny of the company’s questionable practices as reasons for the shutdown. As of Thursday, the firm’s website was still operating.
The Times of Israel, which focused on Banc de Binary in an article last August, has been exposing widespread fraud in the Israeli binary options industry for the past 10 months. As a direct consequence of this reporting, the Knesset’s State Control Committee earlier this month held a special session to deal with the fraud, and demanded urgent police action against the fraudsters and expedited legislation to close down the entire industry. Israel’s securities authority has vowed to “eradicate” the fraud, which has seen victims worldwide fleeced out of billions over the past decade.
On January 9, CySEC announced that Banc de Binary, which is regulated in Cyprus and has offices in Israel, had voluntarily renounced its Cyprus registration, which allowed it to legally solicit European customers through the web site eu.bancdebinary.com.
The Cypriot securities regulator added that Banc De Binary Ltd “remains under the supervision of the CySEC until it settles its obligations arising from the investment services or/and activities that will lapse.”
At least one client of Banc de Binary who received a judgement in August from the Cyprus Ombudsman that the company owes him €170,000 ($180,000) is still waiting anxiously for his money.
The Australian Securities and Investment Commission has listed the banks where Banc de Binary keeps their money as Piraeus Bank Cyprus Limited, West East Bank, Credit Suisse, Wirecard Bank AG and TBI BANK EAD.
Is the company really shutting down?
Several sources with knowledge of Banc de Binary told The Times of Israel on Tuesday and Wednesday that reports of the company’s closure are true, and that many employees have been fired. Others were more skeptical. Posts on social media speculated about what this meant for the future of the binary options industry in Israel.
The Banc de Binary Tower in Ramat Gan in 2014 (CC BY-SA BDBJack, Wikipedia)
“Wow,” wrote one Israeli poster on Facebook, “Banc de Binary was one of the first and largest in Israel. I know how most people feel about Binary Options as being scam; etc etc. but this is a huge hit to the economy — to Ramat Gan.”
Ramat Gan is a town adjacent to Tel Aviv which hosts dozens of binary options firms.
Other online commenters, presumably employed in binary options, lamented the closure as the beginning of the end of the binary options industry in Israel.
“You got what you wanted,” wrote one commenter in TheMarker, “Are you happy now? Thousands of unemployed workers, a drop in purchasing power, taxes that won’t be paid, service providers that will go bankrupt. But, hey, great job, you shut down binary options. Idiots!”
To which another commenter responded, “Sorry but I have no tears to shed for scammers who committed legal and moral crimes and who helped to generate anti-Semitism against Israelis and Jews.”
Some sources with knowledge of the binary options industry told The Times of Israel they did not believe Banc de Binary was shutting down for good, but perhaps rebranding. One woman had heard the company was relocating its call center to Romania while keeping other functions in Israel.
“I heard from my friend who worked there that they are doing a relocation to Europe but will continue to sell binary options,” a third source told The Times of Israel. “Maybe they will continue to work from Israel as well but will keep a low profile.”
The Times of Israel contacted ETBO Services, the company’s headquarters in Ramat Gan, to ask if they were indeed shutting down their entire operation. After repeated phone calls, a woman responded, “I cannot tell you. You have to call our legal department.”
No one in ETBO’s legal department could be reached prior to publication.
Banc de Binary first appeared online in about 2010. In the same year, a man by the name of Oren Shabat registered the Israeli firm E.T. Binary Options Ltd., which was the Israeli company that operated a call center and managed Banc de Binary. The company, which later changed its name to E.T.B.O. Services, is owned by Oren, Hezi and Lior Shabat, according to Israel’s corporate registry. A smaller portion of the company’s shares are held in trust for Yossi Almaliach, Ronen Tubul, Ohad Tzori and Yoram Menachem.
In March 2016, the company was ordered by a US court to pay over $11 million in restitution and penalties for illegally soliciting US customers.
John Berry, a senior lawyer for the US Securities and Exchange Commission, said in a May 2016 interview with BBC radio that not only had Banc de Binary sold ostensible financial products to investors without being licensed to do so, but it had also deceived those investors as well.
Oren Shabat Laurent, founder and CEO of Banc de Binary (Youtube screenshot)
“We presented evidence to the court that Banc De Binary was telling US-based investors that Banc De Binary was actually based on Wall Street, and we had evidence of online chat discussions where a Banc De Binary broker would tell a US investor, ‘Hey, I live, you know, right down the street from Wall Street, I’ve got a Wall Street address, I work there,’ and so they had repeatedly lied to US-based customers about being in the United States and being based in the United States with a US address on Wall Street and a New York-based phone number.”
Regulators in Australia, New Zealand and Canada have issued warnings against Banc de Binary for illegal activity. Another brand that appears to be associated with Banc de Binary, Option.fm, has been blacklisted by financial regulators in Ontario, Hong Kong, Australia and New Zealand.
The company has faced an onslaught of media scrutiny in the last year, including articles in The Times of Israel as well as the British Daily Mail and Sunday Times newspapers. It is speculated that the Southampton Football Club in England dropped Banc de Binary’s sponsorships after being questioned on its association with the company by the media.
Banc de Binary was fined €350,000 ($370,500) by CySEC last January and has been under investigation by the regulator ever since. On November 30, the regulator instructed companies that they could no longer offer “bonuses” to clients whereby they are offered monetary incentives to continue trading but must achieve a certain high volume of trades before they can withdraw their money.
The Times of Israel has been exposing Israel’s largely fraudulent binary options industry in a series of articles since March, beginning with an article entitled “The Wolves of Tel Aviv,” and has estimated that the industry here numbers over 100 companies, most of which are fraudulent and employ a variety of ruses to steal their clients’ money. These firms lure their victims into making what they are duped into believing will be profitable short-term investments, but in the overwhelming majority of cases the clients wind up losing all or almost all of their money. Thousands of Israelis work in the field, which is estimated to have fleeced billions of dollars from victims all over the world in the past decade.
The Prime Minister’s Office in October condemned the industry’s “unscrupulous practices” and called for the entire industry to be outlawed worldwide.
Responding to The Times of Israel’s reporting on the widely fraudulent industry, on January 2, the Knesset’s State Control Committee held a hearing on the government’s failure to shut down binary options fraud. The committee chair, MK Karine Elharar (Yesh Atid) demanded that the police begin enforcement activity against fraudulent binary options firms in the next month and that the Israel Securities Authority urgently advance legislation to shut down the entire industry. A follow-up hearing will take place in February.
MK Karin Elharar, center, chairs a meeting of the Knesset State Control Committee on binary options fraud, January 2, 2017 (Luke Tress /Times of Israel)
Despite these developments, the possible closure of Banc de Binary was a voluntary step taken in response to pressure from CySEC and the media, not a response to Israeli law enforcement, which has so far taken scant enforcement action against the industry. Even with the layoffs at Banc de Binary, more than 100 binary options companies are still operating without hindrance from within Israel’s borders.
As one woman posted on an Israeli Facebook page on January 10, “Worked at Banc De Binary? Looking for a new home? Regulated company looking for the BEST OF THE BEST.”
