The FCA Continues To Crack Down On Binary Options Fraud

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The FCA Continues To Crack Down On Binary Options Fraud

Regulators Crack Down, But Who Are They Really Hurting?

The British FCA has put two more binary options brokers under provisional liquidation following reports of fraud. This comes only weeks after the regulator shut down Magnum Options for the same complaints. The brokers are accused of operating without a license, using misleading information, making false claims of success and low risk to lure in unsuspecting victims. The operators are Right Corp Limited and Curve Point Limited, both now listed as dissolved on the business registry. Since both were operating out of virtual offices as front companies for businesses headquartered in off shore financial havens I wonder who or what it was they actually busted.

Along with this comes a warning of another scam emerging in the binary options world, the recovery room. Recovery room scams claims to be able to help recover funds lost to binary options scams, even funds lost in trading. They guarantee success, but for a fee, and have now begun to target traders involved with Right Corp and Curve Point. The FCA points out that there are legitimate recovery services but they make no claims of success and do not charge up front fees.

Dragon Options Loses Its License

Traders with Dragon Options and Tao Trade will be interested to hear that the operator of those brands, Dragon Options LTD, has renounced its CySEC license. This move comes in the wake of massive crackdown across the industry and a suspension for the operator earlier this year. In March CySEC suspended their license and gave the broker 10 days to fix issues with banking services and client funds that has yet to be resolved. We can only assume that the voluntary loss of licensing is in result of an agreement between Dragon Options and CySEC. CySEC has advised anyone waiting for a withdrawal to contact them with their complaint.

FCA takes on binary options scams

LONDON (Reuters) – Britain’s markets regulator is bringing quick-fire binary options under its remit in an effort to crack down on scams that have conned investors out of nearly 60 million pounds over the last five years, it said on Tuesday.

High-risk binary options allow people to place bets on whether the value of securities such as shares, commodities, indices and currencies will rise or fall over periods that can be as short as 30 seconds or five minutes.

The Financial Conduct Authority (FCA) said it would take over regulating firms that offer binary options, that can lure investors by advertising on social media under an illusion of respectability, from the Gambling Commission on Jan. 3.

The move comes after nearly 700 people reported losing a total of more than 18 million pounds on binary options scams in the first six months of this year, prompting police to raid 20 London offices last month as part of a broader crackdown on investment frauds.

The FCA warned investors that fraudsters were linking binary options adverts to websites that appear professional, promising higher-than-average returns for bets that are never placed, manipulating software to distort prices and payouts and often refusing to pay winnings before disappearing.

From next January, victims will be able to seek redress at the Financial Services Compensation Scheme, a safety net for investors in regulated businesses.

Countries such as Israel and Belgium have banned binary options trading, while the United States requires them to be traded on regulated markets.

The FCA also issued a warning to investors about the risks of putting money into speculative cryptocurrency contracts for differences (CFDs).

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Cryptocurrency CFDs allow investors to speculate on a change in price of a virtual currency such as Bitcoin or Ethereum, which have proved volatile. The CFDs can have little price transparency, come with high charges and with leverage that can multiply losses.

The FCA said it did regulate CFDs, but warned such bets should only be placed by experienced investors with sophisticated knowledge of financial markets.

Reporting by Kirstin Ridley; Editing by Mark Potter

Amid police inaction on binary options fraud, FBI pursues suspects in Israel

Agents visit platform provider SpotOption, and question binary options company owner Yossi Herzog

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Simona Weinglass is an investigative reporter at The Times of Israel.

While Israeli authorities have failed to convict or even indict anybody for a decade of global binary options fraud, the FBI has taken on the work, and agents flew here to question several alleged binary options fraudsters in recent days.

FBI agents, accompanied by Israeli police officers, visited the Ramat Gan offices of the major binary options platform provider SpotOption on January 8. The company’s owner, Pini Peter, told The Marker business daily that the visit was not a raid, that the FBI had taken files from SpotOption’s computers, and that he had cooperated fully with the US authorities.

The FBI also questioned Yossi Herzog, the owner of Yukom Communications Ltd., an Israeli company that has run the websites Bigoption.com and Binarybook.com. The CEO of Herzog’s company, Lee Elbaz, was arrested by the FBI in September when she landed at JFK airport, and remains under house arrest in the US until her trial. She is suspected of wire fraud and conspiracy to commit wire fraud, violations that can carry up to 20 years in prison each.

In the FBI affidavit explaining her arrest, Yukom Ltd. was accused of illegally defrauding thousands of investors, including Americans, out of tens of millions of dollars.

SpotOption, in the same affidavit, was accused of conspiring with Elbaz to manipulate the outcome of trades. Herzog’s lawyer Haim Levy confirmed to The Marker that Herzog had been questioned by the FBI, adding that his client insists that both he and Elbaz are innocent.

Meanwhile, the British Financial Conduct Authority on January 12 published a list of 94 companies offering binary options to UK investors without authorization. A large portion of the companies on the list until recently operated from Israel.

The Israel Police, Israel Securities Authority and FBI all declined to comment on the FBI’s visit to Israel.

The FBI told The Times of Israel last February that it had begun investigating binary options in earnest.

“Our agents are going to look under every rock and stone,” FBI Supervisory Special Agent Milan Kosanovich said in a telephone interview, speaking a month after law enforcement officials from North America and Europe had gathered for an emergency summit on binary options fraud in The Hague.

The FBI’s visit to Israel comes under the ongoing exchange of information and judicial cooperation that Israel maintains with many governments abroad, including the United States.

Thousands of alleged fraudsters, no prosecutions

Some observers regard the recent FBI actions in Israel as reflecting poorly on the Israeli police and justice system.

Nimrod Assif, an Israeli lawyer who represents victims of binary options and forex fraud, said that he views the FBI’s intervention here as “a direct result of Israel’s failure to enforce the law.”

Assif told The Times of Israel that he has been trying for years to alert the Israeli police to binary options and forex fraud, to no avail.

“I’ve complained to the police on behalf of at least ten victims from all over the world. I provided the police with the names of the Israeli companies that are behind the binary options websites, the addresses in Israel of their offices, and the names of the Israelis behind these companies,” he said. “At least once, I gave the police the phone number of a former employee who was willing to give evidence, and another time I gave the police concrete information on one of the main issues that the FBI is now investigating. As far as I know, the police have done nothing with all these complaints and information.”

Binary options is a fraudulent industry that flourished in Israel for over ten years and employed thousands of Israelis. Only a handful of binary options operatives have been arrested and not a single one has been indicted, despite the fact that the industry was estimated by foreign law enforcement bodies to bring in $5 billion to $10 billion a year.

On October 23, as a result of pressure from foreign governments as well as The Times of Israel’s reporting on the issue, the Knesset unanimously voted to ban the entire Israeli binary options industry. The law goes into effect January 26.

As a result of heavy lobbying from the online trading industry, the original bill was constricted and the law does not ban unregulated and fraudulent forex, CFD and cryptocurrency companies that continue to target investors abroad.

Many Israeli binary options companies have moved their call centers abroad, while some continue to operate call centers and online trading platforms from within Israel, offering forex, CFDs, cryptocurrencies or other financial products in lieu of binary options.

A ‘criminal offense’

On January 12, Britain’s securities regulator, the Financial Conduct Authority, published a list of 94 companies offering binary options to UK investors without authorization.

“Since January 3rd 2020, firms involved in binary options trading in the UK have been required to be authorized by the FCA,” stated a press release on the FCA’s website.

“Firms that are not authorised by the FCA and continue with binary options activities beyond that date will be acting in breach of section 19 of the Financial Services and Markets Act 2000 (FSMA), which is a criminal offense,” the FCA continued.

“This list is based upon information that the FCA has received from consumers, partner agencies and from monitoring the binary options market. Many of these firms claim to be based in the UK but the FCA believes that most of the addresses they provide are false and that the firms are actually based overseas.”

Many of the names on the list are companies that have operated from Israel. Many of those websites are still up and running.В It is unclear if they maintain the same ownership and operate from abroad, or if they continue to operate from Israel, albeit quietly.

Among the websites on the UK list are IvoryOption.com and 72option.com. Until recently, those two sites were operated from offices of Liantech Ltd. and Holy Top Media Ltd. in Ramat Gan. Both of the latter companies are owned by Anton Senderov and Lior Babazara. Holy Top Media continues to advertise for workers on Israeli job boards. It is seeking salespeople to relocate abroad to Ukraine and is also seeking cryptocurrency salespeople for its Israeli office.

The ultimate beneficial owner of Option500.com, another company on the list, was, until recently, Ofir Eyal Bar, according to documents seen by The Times of Israel.

TitanTrade.com, another website on the list, was the subject of a lawsuit filed in May 2020 by a Polish woman who lost $95,000 to the company. According to the lawsuit, filed by attorneys Yossi Haezrachy and Nir Friedman, TitanTrade was operated by Gtech Media Development Ltd. (formerly known as MIG GA Marketing Finance Ltd.). Gtech’s director and owner is a man by the name of Guy Galboiz. In his writ of defense, Galboiz’s lawyers denied that Gtech is connected to TitanTrade. The lawsuit was withdrawn before it reached the evidentiary stage. The Times of Israel has been told that the plaintiff requested to withdraw the lawsuit and also stated that she had no cause for action against Gtech. The plaintiff did so because as the proceedings were commencing, the plaintiff received all her money back from TitanTrade, even though TitanTrade was not the defendant.

Ubinary.com, another website on the FCA list, was until recently run from a call center at Hamasger 9 in Tel Aviv, by a company called Gambol Online Ltd., which is closely associated with Toyga Media Ltd and the UFX.com forex trading website.

In April 2020, Bank Hapoalim informed Gambol that it had decided to close its account because the company’s binary options activity had subjected the bank to increased anti-money laundering scrutiny from banks abroad. Gambol Online sued the bank to keep the account open.

Gambol stated in the lawsuit complaint that it had offered call center services, customer service, development, technical support and marketing services to the binary options websites ubinary.com and ucapital.com. It claimed to have had 160 employees at its height.

The company told Bank Hapoalim that Gambol Online’s beneficial owners are Sa’ar Pilosof (18.04 percent), Haim Toledano (18.04%) and a company called Positive Approach LLP, which owned 28.36% of the binary options firm.

According to the Isle of Man corporate registry, the address for Positive Approach LLP is Hamarganit street 3 in Tel Mond, Israel. According to Israel’s corporate registry, the address also belongs to Gil Hod, an Israeli businessman best known for his close association with Israeli tycoon Koby Maimon.

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