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Lead investigator for Manitoba Securities Commission finds himself at centre of worldwide effort to shut down massive Israeli scam

There has been a rash of stories of late exposing one of the biggest scams operating anywhere in the world:  the selling of binary options.

What are binary options? Here is a definition from Wikipedia: “A binary option is a financial option in which the payoff is either some fixed monetary amount or nothing at all. While binary options theoretically play a role in asset pricing, they are prone to fraud and banned by regulators in many jurisdictions as a form of gambling. Many binary option outlets have been exposed as scams.”

Simona WeinglassIsraeli journalist blows the lid off the binary options con
The extent to which the binary option industry has a huge base in Israel was first exposed by a Times of Israel journalist by the name  of Simona Weinglass. Weinglass told me that she was born in Romania and moved to the U.S. with her parents, both of whom are electrical engineers, when she was one year old. She grew up in Philadelphia and attended Swarthmore College, she says, before moving to Israel.
In March 2016 Weinglass blew the lid off the Israeli binary options industry, which seems to have started sometime around 2008, Weinglass said to me in an email.
In an explosive – and courageous piece, titled  “The Wolves of Tel Aviv”, Weinglass explained in detail how Israeli call centres find innocent victims around the world. In a recently published article on the TOI website, Weinglass noted 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 tens of billions of dollars from victims all over the world in the past decade. In October, the Prime Minister’s Office called for the industry to be banned worldwide.”
So, how do the salespeople for the companies promoting binary options work? In her “Wolves of Tel Aviv” piece Weinglass explained it thusly: “Having transferred their first financial deposit to the company, customers log in to an online trading platform, as directed by the company’s salespeople, and place money on a prediction that the price of a currency or commodity will go up or down on international markets in, say, the next five minutes. If the customer predicts correctly, he makes a profit of a certain percentage and the company loses money. If the customer is wrong, he loses all the money he placed on the trade, and the company keeps it. Professional options traders consulted by The Times of Israel said that even a financial genius cannot predict with any confidence what, say, the price of gold will do in the next five minutes; rather than an investment, the transaction is really nothing more than a gamble.”
In that same piece Weinglass noted that employees working for Israeli binary options firms are trained in how to hide where they are calling from by using VOIP (Voice over Internet Protocol), which can disguise the origin of a phone call. Thus, someone in Manitoba might get a call that would show an Ontario area code, for instance, thus giving the impression that they were speaking to someone in Canada.

The technique used by binary options salespeople in Israel
Weinglass described the sales technique used by one salesperson for one of the Israeli companies selling binary options. That person would be sitting in a room somewhere in a Tel Aviv office building in what could be described as a “boiler room” (a phrase used to describe any operation that uses extremely hard sell techniques in an attempt to wear down unsuspecting victims over the phone). Here is Weinglass’s vivid description of the con used by that salesperson: “Guralnek sat in a call center with about 50 other employees, many of whom were new immigrants fluent in a variety of languages. His job was to call people around the world and persuade them to ‘invest’ in an ostensible financial product called ‘binary options.’ The clients would be encouraged to make a ‘deposit’ — to send money to his firm — and then use that money to make ‘trades’. The clients would try to assess whether a currency or commodity would go up or down on international markets within a certain, short period of time. If they predicted correctly, they won money, between 30 and 80 percent of the sum they had put down. If they were wrong, they forfeited all the money they put on that ‘trade. Guralnek soon saw that the more trades a client made, the closer they came to losing the entirety of their initial deposit.
“He had been instructed to present the binary option as an ‘investment’ and himself as a ‘broker,’ even though he knew they would most likely lose all their money. ‘The client isn’t actually buying anything. What he’s buying is a promise from our company that we will pay him. It’s gambling and we’re a bookie,’ he says now.”

As well, employees are trained in a variety of deceptive techniques, promising investors that they can get their money back when, in fact, the firms dealing in binary options hardly ever return anyone’s money. Further, employees are not even aware who owns the companies for which they are working.
Ironically, it is illegal for anyone in Israel to sell binary options to Israelis themselves. But these unscrupulous fraudsters have found unsuspecting victims around the globe, including at least 800 in Canada. It was the suicide last year of an Edmonton man who had lost over $330,000 as a result of falling victim to one of these binary option fraudsters that really brought Canadians’ attention to the insidious manner in which telephone solicitors lure naïve investors into their schemes.
Manitoba Securities Commission investigator takes lead role in trying to close down Israeli companies
One individual who who played a major part in attempting to have Israeli authorities ban all companies trading in binary options has been Jason Roy, who is the lead investigator for the Manitoba Securities Commission. Roy is the chair of the Canadian Securities Administrators’ binary options task force.
I spoke with Jason Roy recently. I suggested to Roy that the Israeli government had been “taking a stand-offish position with respect to the selling of binary options” – which had allowed the companies engaged in their selling to flourish.
“That has been the position (of the Israeli government) for some time, “ Roy agreed, “but there has been some pressure from North American regulators, European regulators, law enforcement, victims, as well as concerned citizens inside Israel about what’s happening there, along with the articles in the Times of Israel” to ban the companies engaged in the selling of binary options in Israel.
In Weinglass’s “Wolves of Tel Aviv” article, however, she noted that binary options salespeople are specifically told not to sell to anyone living in the U.S. I asked Roy why he thought that was?
He answered that he wasn’t sure of the reason and, notwithstanding the instructions not to sell to Americans, some salespeople have been contacting U.S. residents. “The FBI,” Roy noted though, “has recently come out and said it’s a $10 billion a year fraud and they’ve asked for investors (who have been contacted by binary options salespeople) to contact them.”
“The problem with this,” Roy continued, “is that there are literally thousands of websites” selling binary options. “New ones are created every day. They also list on their websites that their corporate registries are in Cyprus, or the Seychelles, or Belize or Panama or Gibraltar or the Marshall Islands – places that have secretive banking and easy corporate registration.”
“It’s also well known that the bulk of the boiler rooms – the places that are making the calls, are happening in Israel, “ Roy added.

Watch out for Internet ads promoting binary options
How do people end up being contacted by binary options salespeople? I asked Roy.
“There’s a ton of Facebook ads, a ton of Google adword ads,” he explained. As well, there are robocalls. “I personally received a robocall,” Roy says, during which he himself was pitched on getting into binary options.
I asked Roy to describe what went on during that call. He says that the call began with his being asked, “Do you want to get rich?  Press one – so I pressed one. I ended up speaking with a binary option trader for over an hour, but I used an alias that I’ve got for work purposes. So I was able to have this discussion. I actually opened up an account. They gave me free money – $100 to execute a couple of trades, then they walked me through some trades and they claimed to be in Toronto.
“The main pitch was they wanted my credit card. One of the things they offered was a bonus so that if you put in, say, $1,000, they put in $1,000. There’s lots of that – that’s what they’ll say. You actually never get that money and you can never take it out. That’s how they’ll entice you.
“They’ll actually lure you in with small requests. They’ll talk you into it saying, ‘it’s only 250 bucks – you can get your money back whenever you want. We’re going to give you this bonus. It’s a no-lose, no-risk proposition.’ That’s how they get people in the beginning. They  say, ‘hey, we don’t want five grand, we only want $250. We want to prove ourselves to you.’ ”
“You fund your account through your credit card,” Roy went on. “That ‘s how people find themselves victimized. When people have huge balances on their credit card they have to take from their line of credit or pull money from their RRSPs. We’ve got victims in Manitoba who have lost as much as $400,000.”
50 reports of binary option fraud reported to Manitoba Securities Commission in 2016 alone
“In 2016 we’ve had more than 50 matters involving binary option fraud in the province,” Roy noted, in response to a question how many Manitobans whom he knows of have been victimized.
Roy cautioned that “only a very small percentage of fraud is reported – and across the country the number is more than 800 reports of binary option fraud.”
I said to Roy though that “frustratingly, even if Israeli authorities knew the names of the people behind the binary option fraud schemes, they wouldn’t be able to do anything – correct?”
Roy agreed, saying that because of that particular problem (a lack of Israeli legislation to clamp down on binary option sellers), “we’ created a national task force in the summer, of which I’m the chairman. We created a bunch of initiatives,” including creating a website (binaryoptionfraud.ca) and issuing a press release – “to get the word out to Canadians” about binary option fraud.
“We’re looking to shut off the advertising that we talked about,” Roy added, because no binary option firms are licensed to operate in Canada, he explained, so there “should be no advertising.”
As well, “there are more than 500 apps for binary options where you can actually trade off your phone, but because there are no licensed firms here, our position is those apps should not be available in Canada,” Roy said.
I asked Roy whether he had any suspicion that the Russian Mafia is behind these binary option schemes. “They play for keeps,” I suggested. Roy didn’t offer an opinion, although in my correspondence with Simona Weinglass, she asked me whether I had any idea if there has been any criminal affiliation among the massive Russian-Israeli immigration to Winnipeg in recent years. I told her that I had once met someone who was Jewish (and who had come from Russia, not Israel) and who claimed to be part of the Russian Mafia, but that was the extent of my familiarity with the subject.

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