ISRAEL has discovered a “monster”. That, at least, is how one of its most senior police officer sees its booming industry in “binary options” scams, online financial market gambling sites routinely rigged against punters,

“Our eyes have been opened,” said Superintendent Gabi Biton, who investigates fraud and money laundering. “What we’re seeing here is a massive organised criminal enterprise.”

Over the last year or so Israeli authorities have gradually woken up to the global damage being done by binary options websites operated from call centres in Tel Aviv - but often officially registered by opaque UK shell firms, especially Scottish ones.

Mr Biton was speaking at a meeting of a committee Israeli parliament, the Knesset, on new legislation targeting binary options. He acknowledged that the police were investigating the industry’s gangster roots.

His remarks come after successive international financial watchdogs - including Israel’s - issued warnings over the sites.

READ MORE: Registrations of Scottish shell firms collapse

Punters - or “investors” as they are called online - are encouraged to make instant all-or-nothing bets on the movement of two financial products, say the Chilean peso and the Canadian dollar, in the course of a short time period, even a minute.

However, those who part with their cash are often locked in to contracts which mean that after early success - on their screens - they end up losing.

One London-based expert representing the British victims, Richard Howlett, of law firm Selachii, last week called binary options “probably the biggest online scam in the world”.

Some punters have committed suicide after being cheated out of their savings - and more.

Tel Aviv

HeraldScotland: Tel Aviv

Several countries have banned binary options sites altogether in their home markets, including Israel. The current legislation is designed to stop Israeli-based called centres pushing such “investments” overseas.

The Israel Securities Authority treats the sites as “gambling”. In the UK they are not regulated by either gaming or financial watchdogs.

Mr Biton said. “It’s true that there are some countries that allow activities like this, like they allow prostitution, drugs, etc. But in Israel gambling isn’t permitted,” he said.

Last month Israel arrested a dozen figures in the industry. But pursuing action against the industry - when its victims, profits and activities are abroad - is tough, Mr Biton said.

He said:”It’s tremendously difficult to assemble enough evidence for filing an indictment. They establish companies in countries where the law allows them to, and the servers they use are largely not in Israel.”

In a hint at Israel’s difficult relationship with many of its neighbours over Palestine, he added: “The victims are in Arab and other countries where it is difficult to obtain testimonies.”

Mr Biton’s testimony came more than a year after The Times of Israel revealed the sheer scale of the industry in a landmark journalistic investigation.

Glasgow office where some binary options firms are registered


The binary options industry is believed to be worth between $5bn and $10bn a year and employ at least 5000 people - though possibly tens of thousands more, from call-centre staff and IT technicians to payments professionals and linguists.

That scale - and quick profits - attracted organised crime, said Mr Biton. “They saw the huge economic potential in binary options,” he said. “It has grown to monstrous proportions,” he added. “I can say that we are discovering new paths of money laundering through this crime that we were not aware of.”

Superintendent Gabi Biton gives evidence in Knesset


The Herald a year ago revealed at least 30 Scotland-registered shell firms, mostly secretive Scottish limited partnerships or SLPs were fronting for binary options sites or providing payments services.

Earlier this summer we found that number had exceeded 40 with 22 of those subject to warnings from international regulators.

As we report elsewhere today, a UK government move to force SLP owners to reveal themselves has resulted in a dramatic drop in their registrations.

However, our research shows at least another 140 English shell companies are fronting for binary options websites, sparking concern among politicians that the industry was using Britain as a smokescreen of respectability within the EU.

Israeli sources have told The Herald they believed the industry was moving “offshore” in response to the crackdown proposed.

BACKGROUND: Scottish binary options fronts

However, Israeli politicians have split over how to deal with an industry which their own watchdogs refer to as “filth”.

In an echo of debates over the future of Scottish limited partnerships, there are those who warn of “throwing the baby out with the bathwater”.

The Knesset committee reviewing the new legislation this week discovered the government had watered down a draft law.

Previously the bill would have stopped unlicensed Israelis from operating both binary options and analogous financial gambling sites, such as forex trading. Now it is just binary options, sparking concerns the industry will simply rebrand.

The Times of Israel Thursday suggested industry lobbyists were behind the changes. A source told the online paper: “The industry has vast amounts of money and is exerting massive pressure.”

The committee votes on Monday on whether the bill can progress to further full second and third readings in the Knesset.