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Frans Roest & Walter Leonhardt
Introduction into
Binary Options and the fight against Binary Option - Investment - fraud
Introduction into Binary Options and the fight against Binary Option – Investment - fraud Frans Roest / Walter Leonhardt
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Table of Contents
0. Introduction ................................................................................................................................. 2
1. Introduction to Investment Fraud with Binary Options .............................................................. 6
2. Fraudulent binary options and the watchdogs ........................................................................... 13
3. Binary options fraud victims feel helpless; stronger prosecution by the authorities is needed. 20
4. Recent legal actions against binary options scams related to Israel .......................................... 21
4.1 Israel ................................................................................................................................... 21
4.2 USA .................................................................................................................................... 23
4.2.1 Bloombex Options und Partnerfirmen vor Gericht ..................................................... 23
4.2.2 Verdict against CEO of Yukom Communications ....................................................... 24
4.3 Canada ................................................................................................................................ 25
4.4 EUROJUST arrests in Europe ............................................................................................ 26
5. Private asset tracking and recovery companies related to Israel ............................................... 28
5.1 Legal asset recovery firms ................................................................................................. 28
5.2 Suspected illegal asset recovery firms ............................................................................... 29
6. Recommended fraud victim initiatives ..................................................................................... 33
7. What to do? ............................................................................................................................... 34
7.1 What can cheated investors do? .......................................................................................... 34
7.2 What can police do?............................................................................................................ 35
7.3 What can financial watchdogs do? ..................................................................................... 35
7.4 What can financial institutions and payment service providers do?................................... 35
7.5 What can website hosting companies and internet providers do? ...................................... 36
7.6 What can telecommunication companies do?..................................................................... 36
7.7 What can binary options software operators do? ................................................................ 37
8. Biography .................................................................................................................................. 37
About the authors
Frans Roest is a Dutch expert on investment fraud. He has written various books and papers on this
subject. His latest e-book dates from 2017 and is called “Share Fraud & Boiler Room Scams
Exposed”. More info at www.boilerroomfraud.be.
Walter Leonhardt is a German open-source intelligence analyst. He has written various books and
papers about various topics.
Recommended citation
Roest, Frans; Leonhardt, Walter (2020): Introduction into Binary Options and the fight against Binary Option -
Investment – Fraud, Omeath & Antwerpen, August 2020.
Introduction into Binary Options and the fight against Binary Option – Investment - fraud Frans Roest / Walter Leonhardt
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English
0. Introduction
Let's suppose an Israeli makes you an offer to place a wager with him under the following
conditions: He gives you the object of the bet and tells you that its price should fall or rise above a
certain value by a certain time. This means that the value must not simply rise, but must rise above
a certain level and remain there until the end of the deadline. All you have to do is to say yes or no.
If you are right, you win at most one hundred percent minus a service fee, if you are wrong, you
lose everything. The fee and your losses will go to your trading partner, who at the same time
regulates your bet, for example by providing the trading platform. It doesn't represent the betting
object in real time, but can vary a little bit in time, namely according to your smartness between
some seconds up to several hours, so that the outcome of the bet might be known to your trader
from the beginning and he controls the betting odds accordingly, so that you give everything in any
case. Because your betting partner not only sets all betting parameters, but he alone also controls
that all rules are followed. At the same time, your betting partner is willing to bet with you in any
amount, because you have to bring cash in advance of your bet while he plays the bank and
manages all bets. So you are not only betting on whether you will succeed in your wager, but also
on whether your betting partner is able and willing to pay. And you don't know anything about him.
You don't even know he's from Israel. Instead, he might tell you he's based in London.1
You can assume that he's solvent, but his willingness to pay you out depends solely on his good
will, because you have no legal means of pressure, which means that if he doesn't pay, you can
hardly ask anyone for help. You don't even know which country he's in, you only know his website.
So, you have to take your entire investment as a loss in this case.
At the same time your betting partner has market knowledge, while you have little knowledge of the
betting market itself. You don't even know that it's a betting market, but believe that an investment
is taking place. And to fill your knowledge gap, your trading partner provides you with free training
material and an fee-free investment advisor who receives rewards if you lose. And even if
everything works out, i.e. you don't lose and get your profit paid out, you have to pay up to 25
1 See Weinglass/Horovitz 2016
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percent of it to the tax authority. Would you make that bet? Yes or no?
The answer is "probably yes", because this form of offer causes addictive behavior like Speed and
releases considerable amounts of adrenaline:2 Common sense is thus gradually switched off and you
feel great. Because when you win, you feel more alert and carefree. You feel neither hungry nor
thirsty nor tired, but feel extremely capable and ready to take all the risks. But if you lose, you feel
worse than bad, because you are irritable and feel a lot of anxiety, with aggression, depression and
hope alternating, driving you crazy.3 Typical gambling madness. But because you are told that this
is not a wager, but a trader's business, you don't feel guilty because the risks and side effects of
betting are known and considered as harmful. But investment is good, even if the odds are higher in
classic roulette than in binary options trading. Because in a casino you can at least calculate the
probabilities, whereas in binary options trading everything depends on your trading partner. And he
can basically do anything as long as he is creative enough to find a reason.
So much about the legitimate binary options business.4 This is also known as „the perfect financial
game“.5 In this paper we focus on the less perfect game, namely fraudulent binary options traders,
for whom all these factors aren't enough in their favor and who therefore eliminate any chance of a
client for ever winning.
2 See Murphy 2018
3 Cf. checkit! 2016: 1
4 The AMF writes that even the practises of some regulated platforms from EU countries are similar to those of
illegally operating traders (see AMF 2017: 7f.).
5 See Binaryoptions.co.uk o.D. C
Illustration 1: https://www.binaryoptions.co.uk/tradologic
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In legal binary options trading, three percent of all investors in average come out as winners and get
more money back than they put in. Eighty percent of all customers suffer total loss. 6 This amounts
to an average of 2,000 euros per customer. In fraudulent binary options trading, the average loss rate
is around one hundred percent and the average amount of damages is 22,000 euros per investor.7
And the number of investors is gigantic: according to the FBI, fraudulent binary options alone
generated ten billion euros in sales per year worldwide in the recent past. French clients alone
contributed four billion euros between 2011 and 2017.8 In Canada, binary options were at times
considered the biggest investor threat.9
Ten billion divided by 22,000 corresponds to 454,000 people exploited each year by fraudulent
binary options. How many more customers have honestly lost their money through the perfect
financial game is unknown. But when you consider that binary options and other highly speculative
products at times made up fifty percent of all online advertising for financial products, the number
must be enormous. Especially when you realise that there is a whole industry of binary options in
Israel, which at times employed up to ten thousand people.
6 See Money Mail Reporter for the Daily Mail 2017; cf. Newman 2016
7 See Newman 2016; cf. Murphy 2018
8 Cf. Weinglass 2017b
9 Cf. Weinglass/Horovitz 2016; cf. Weinglass 2017a
Illustration 2: SpotOption training material (cf. Newman 2016)
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Illustration 3: AMF 2017: 5
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And, last but not least: they also advertised with European Champions League class football teams
like Paris Saint Germain,10 Juventus,11 Liverpool Football Club,12 etc.13
1. Introduction to Investment Fraud with Binary Options
Binary options are also called “financial fixed odds bets”, “binary bets” or “Finanzwetten”.14 In
principle, they have already been around since 1927, but only became known in the mid-2000s,
after the Northern American Derivatives Exchange ("NADEX") began operating and presented
10 See Nikolova 2017a
11 See Finance Magnates Staff 2016
12 See Mizrahi 2015
13 Cf. Nikolova 2017c; cf. AMF 2017: 10
14 Cf. Raw 2009: 3; cf. Deker et al. 2019
Illustration 4: Mizrahi 2015
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itself as a binary options exchange to the public.15 At the same time, the industry benefited from
consumer concerns in the wake of the 2008 Great Depression and the collapse of Goldman Sachs,
as well as from advances in mobile technology. In particular, the use of smartphones ensured that
the unregulated market grew wildly.16
Binary options are similar to vanilla options, but unlike them, they're short-term, but have a fixed
interest rate and a fixed investment. This makes them ("rien ne va plus") inflexible, so they're
classified as "financial spreadbettings".17
15 Cf. Mizrahi 2016; cf. Kolková/Lenertová 2016: 53
16 Cf. Murphy 2018
17 See Kiiskinen 2016: 20-22; see ibid. 26f.; cf. Smith 2019
Illustration 5: Binary Option vs. vanilla American option (cf. Kiiskinen 2016: 22; cf. Smith 2019).
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They stand in the middle between investment and betting. In some countries they're considered a
wager, which is why the profits are tax-free there.18 In other countries, such as the USA, they're
classified as investments, so you have to pay twenty-five percent tax on your profits.19
In binary options, investors place a bet against their trader. The trader says: "At time x in the future,
the value of the Dow Jones index, a currency or a certain stock rises or falls to at least the following
value y - is this right or wrong? If you say "right", you buy an option, if you say "wrong", you make
another bet that the value y of the betting object at time x is below it - you buy an option as well.
The Office of Education and Advocacy writes about this type of call/put binary option:
„The yes/no proposition connected to the binary option might be something as straightforward
as whether the stock price of XYZ company will be above $9.36 per share at 2:30 pm on a
particular day pr whether the price of silver will be above $33.40 per ounce at 11:17 am on a
particular day. Once the option holder acquires a binary option, there is no further decision for
the holder to make as to whether or not to exercise the binary option because binary options
exercise automatically.”20
If your forecast is right, you're in-the-money and get your stake plus a percentage profit share of
less than one hundred percent. If it was wrong, you're "out-of-the-money" and lose the entire placed
betting capital.21 A binary options trader said: „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“22
The Director of the Central Bank of Ireland, Derville Rowland, confirms this view when she says
that binary options are as much an investment as betting on a horse.23
Every binary options transaction is tied to time: fast trades last less than sixty seconds, the longest
18 Cf. Raw 2008: 3
19 Cf. Kolková/Lenertová 2016: 52f.
20 Cf. SEC Office of Education and Advocacy 2013: 1
21 Cf. SEC Office of Education and Advocacy 2013: 2
22 Weinglass 2016a
23 Cf. RTÉ 2019
Illustration 6: http://www.binaryoptions.co.uk/spotoption
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up to several months. In 2010, the most popular trading lengths were 5.15 minutes, one hour or one
day.24 Meanwhile, the average betting duration has increased after binary options transactions with
a betting time of less than one hour have been internationally banned.25
Binary options have a bad reputation. Several factors are responsible for this. First, they're
advertised by Internet trading portals as a financial instrument where little or no knowledge of the
stock markets is needed. Instead, one can "play along" immediately.26 Two financial analysts from
the Technical University of Ostrava tried to "replay" binary options and had to use sophisticated
mathematical models to get close to the profit zone in the long term. "Close" means 44 percent by
473 tries. That neither sound profitable nor easy.27 And even if traders might tell now about the
24 Cf. Kolková/Lenertová 2016: 54
25 Cf. FSMA 2016: 2. What is prohibited under the regulation?; for Canada, see Martin 2017
26 Siehe auch FSMA 2016: 4. Why is the distribution of binary options and derivative contracts with a maturity of less
than an hour prohibited?
27 Cf. Kolková/Lenertová 2016: 57f.
Illustration 7: Binary Option-"gaming-models" (cf. Kiiskinen 2016: 7-9; cf.
Kolková/Lenertová 2016: 54; see also Mitchell 2020).
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difference of academic knowledge and trader's practise, professional investors also agree that
nobody can predict prices for such short periods of time based on facts without manipulation.28
In addition, thirdly, investors have a negative cumulative payout to traders: the latter possess a
house advantage - like casinos in roulette through zero - whereby, unlike the casino, the house
advantage isn't fixed. On average, investors receive an eighty percent payout on "investment
success".29 This means that if you are five times right and four times wrong, the result is plus minus
zero. This means that the average probability of winning a simple Binary Options investment bet is
less than 45% by nature, in European Roulette with one zero it's 48.65% (18/37), in American
Roulette with zero and double zero it's 46.37% (18/38).30
28 See Weinglass 2016a; see Kiiskinen 2016: 25-27: Questions 2 & 6
29 Cf. Kiiskinen 2016: 2; cf. Smith 2019
30 See Brilijant o.D.: 9f.; see SEC Office of Education and Advocacy 2013: 2
Illustration 8: Brilijant o.D.
Illustration 9: ASIC 2019: 4
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Playing Roulette is therefore statistically safer than Binary Options trading, although Binary
Options traders distract from this fact by offering cashback functions, for example.31
„This particular Web site pays $71 for each successful $100 'trade'. If you lose, you get back
$15. Let's say you make 1,000 'trades' and win 545 of them. Your profit is $38,695. But your
455 losses will cost you $38,675. In other words, you must win 54.5% of the time just to
break even“32
Last but not least, the binary options gambling structure is highly addictive.33 Andrew Saks writes
about this:
„It is widely recognized that many binary options brands have also interests in poker and
gaming sites, and then when the gambler has lost enough money, the brands transfer the lead
to their binary options desk and try to convince the gambler that he should not gamble, but
instead trade the financial markets, which is a blatant and outright attempt to mislead.”34
With binary options, you lose. Or, in other words, only three percent of investors make a profit.
Seventeen percent get at least some money back, eighty percent lose up to everything and come
back with nothing. The typical client looks like this: he invests 2,000 USD and thus makes 220
Binary Options bets within five months until he stops investing.35 This means that the Binary
Options market is targeting micro-investors: About one third of all speculators are low-income
earners.36 In addition to people on the dole and over-indebted, many senior citizens are also
targeted.37 The Bureau of Investigative Journalism writes that many pensioners are frustrated by the
banks' zero interest rate policy and are misled to believe that binary options are a conservative
short-term investment strategy. Younger people, on the other hand, are lured by photos of expensive
watches and sports cars.38 Binary Options patron Pini Peter said in an interview that binary options
are financial instruments for people for whom other forms of investment are too difficult:
„This is a simple financial product that anyone can trade. Anyone that could not trade forex
because it is too sophisticated – even I can’t trade on MT4 because it is too complex for me –
can trade binary options. They make it easy, up or down, 85% payout.“39
31 Cf. Pape 2010; cf. SEC Office of Education and Advocacy 2013: 2
32 Pape 2010
33 Cf. Murphy 2018; cf. Saks 2016
34 Saks 2016
35 Cf. Newman 2016
36 Cf. ASIC 2019: 2
37 Cf. SEC 2013; cf. FSMA 2016: 1. Why this regulation?; cf. Weinglass 2018
38 Cf. Newman et al. 2016; vgl. Murphy 2018
39 Mizrahi 2016
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The French financial authority AMF writes that most investors are inexperienced, which makes
them completely dependent on the advice of their “consultants”, who only benefit when the investor
makes a loss.40 For some, the dependency goes so far that the investment advisor can use AnyDesk
or TeamViewer to gain remote access to the customer's computer and directly manage their
business.41
In case of remote support, however, there is already a risk of abuse at an early stage of the business
relationship:
„They told us to look up people’s homes on Google Maps to see how rich they seemed and to
check their credit card information to see if they had gold or platinum status. Also, when we
offered training to them, we would share their desktop and walk them through the website. We
were told to [abuse that access and] look around their desktop for pornography or online slots
or other signs of compulsive behavior, because that means they’re more likely to make a
deposit“42
The Central Bank of Ireland has prohibited the entire offer for Ireland with explicit reference to the
40 Cf. AMF 2017: 2
41 Cf. Murphy 2018; siehe hierzu Carlsson 2020
42 Weinglass 2016a
Illustration 10: One of numerous examples on Youtube (https://www.youtube.com/watch?v=ofHk0mFbu1I)
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educational level of binary options customers.
In Australia, one third of all complaints to national financial authorities relate to the rather small
investment field of Binary Options and CFDs.43 In France, forty percent of all investor complaints
in 2016 related to Binary Options and Forex trading.44 In Canada, they were temporarily considered
to be the greatest investor threat by the authorities.45
2. Fraudulent binary options and the watchdogs
In the USA, the SEC and CFTC supervise trading in binary options. As early as 2013, they
published together a not-to-be-misunderstood Investor Alert entitled: "Investor Alert Binary options
and fraud" to warn investors about fraudulent promotions with binary options and binary options
trading platforms in general.46
According to SEC/CFTC, customer complaints can be divided into three categories at least:
1. trading platforms refuse to credit profits to client accounts or pay out their funds.
2. data abuse and identity theft; or
3. software manipulation to generate losses.47
In the first case, clients open accounts on the trading platforms and transfer funds to them. After a
certain initial phase, customers are encouraged by call center "VIP advisors", "account managers"
43 Cf. ASIC 2019: 3
44 Cf. AMF 2017: 4
45 Cf. Weinglass 2017a; cf. Martin 2017
46 Cf. SEC Office of Investor Education and Advocacy 2013
47 Cf. SEC Office of Investor Education and Advocacy 2013: 2
Illustrat
ion 11: Central Bank of Ireland 2019: 1
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etc. to increase their deposits and to bet more money ("foot in the door").48 Once customers request
a withdrawal, they're either put off until they start making losses again, or email and phone contact
is terminated, i.e. everything is done but the money won't be paid out unless as a bait into higher
investments.49 One way to refuse payouts is the "don't ask, don't tell" trick: as long as the customer
doesn't state in any written form that he lives in a country where it's forbidden for his trading
partner to offer binary options transactions to consumers, transactions will be made with him. As
soon as he wants his money paid out, he must state his whereabouts and is accused of fraudulent
trading, because he was forbidden to accept the trader's offer from the very beginning. His money
will therefore be withheld as compensation.50
48 See Nikolova 2017c; cf. AMF 2017: 13
49 See Dahlkamp et al. 2020: 72-74
50 See Newman 2016
Illustration 12: "Don't ask, don't tell"-Ansatz (vgl. Newman 2016)
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In the second case, the personal data of the customers are collected and used for own purposes, for
example driving licence and credit card data, which are requested at the latest when the customer
inquires a payout. In this case, the trader charges the credit card, for example, without customer's
consent, but because the customer provided the data voluntarily, he won't be compensated by his
Illustration 13: AMF 2017: 13
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bank or credit card provider.51
In the third case, software is manipulated in such a way that the outcome of the bet is artificially
influenced, for example by a quotation system that works with a time delay, so that the advice given
by the consultant is always correct, which builds trust with the customer. As an example: The
customer opens a trader account for 250 Euro and bets on rising and falling prices (call/put binary
options). The trading platform provides him with a consultant as upgrade. The software is set up
with a time gap between the live price and system display, for example one hour, because the share
is traded in Portugal and the customer lives in Germany and isn't aware that British time applies in
Portugal. Alternatively, the trading platform could also transmit the live quotes with a time lag, or
the program could have a back door to manipulate prices just before the finish line:
„Let’s say 70 percent of the traders are for some reason betting that oil is going to go up. So
then the companies say, gee, if we make just 30 percent win, we’ll be able to keep a lot more
money. And the algorithm does that. It’s very easy to tell the customer, oh, the line fell a little
bit below your position. If the customer brings proof that the price of oil did actually go up to
where they predicted it would, the company will point them to the fine print, which states that
the company has its own algorithms which may differ from real-time.“52
In case of software manipulation, the trading platform definitely knows in advance how the bet will
develop, and telephone trading consultants at least gain more influence on the customer if they give
correct tips with knowledge of the betting outcome. They tell them when a bullish or bearish period
is about to come and how to react to it by counter bets to get back into the black. This allows you to
feed the customer until at some point the customer runs dry and doesn't add any more money. In the
end, they motivate him to bet in such a way that he crashes completely or they take care of it
directly by controlling his account themselves.53
The Swedish newspaper "Dagens Nyheter" wrote about this in a recent article about the Ukrainian
Milton Group:
“Soon their investments were multiplied, often without the victim understanding what was
going on. Through the remote control software quick loans with high interest rates – up to 39
percent – were taken out in their names. On a website they saw their money increasing at an
enormous rate. But when they wanted to withdraw the money it disappeared.”54
51 See Newman 2016
52 Weinglass 2016a
53 Cf. SEC Office of Education and Authorities 2013: 2f.; cf. Weinglass 2020b; cf. Weinglass 2016a
54 Carlsson 2020
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In August 2016, the Belgian Financial Markets Authority FSMA became the first EU country to
regulate the distribution of certain derivative financial instruments such as binary options, CFDS,
etc. The regulation came into force on 18 August 2016.55 It consists of two parts.
First, from a ban on distribution to consumers via electronic trading platforms of:
− Binary options;
− derivative contracts with a maturity of less than one hour; and
− leveraged derivative contracts, such as contracts for difference (CFDs) and rolling spot
foreign exchange contracts.
Secondly, it prohibits a number of aggressive or inappropriate sales techniques such as "cold
calling", inappropriate forms of remuneration, fictitious gifts or credits, etc., used in the distribution
of OTC products to consumers.56
Especially the bonus offers were quite a challenge: For example, if you accepted a bonus of five
thousand dollars, you had to wager twenty-five times the bonus value in binary options bets within
a given period of time. If you did that, it was almost one hundred percent for sure to lose your
investment, if you didn't, the small print would say that all funds in your account are frozen and
100% of the money was gone.57
Because of the coronavirus, the Republic of Ireland has introduced a two-week quarantine regime
for each arriving traveller. The message of the regulation is "Don't travel now, it's dangerous!" and it
was introduced to protect citizens. Nevertheless, Germans from Germany are constantly asking in
the Facebook group "Deutsche in Ireland" how they can circumvent the quarantine regulation.
Because many want to spend there their holidays despite the pandemic.
55 Cf. FSMA 2016: 3. When did the regulation enter into force?
56 Cf. FSMA 2016: 2. What is prohibited under the regulation?; see for this also ESMA 2016: 1f.
57 See Newman 2016
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The Binary Options FSMA Regulation applies only to so-called OTC instruments,58 which are
traded electronically and offered to Belgian residents. And therein lies one of the major problems:
each financial watchdog can only regulate what's offered to the citizens of its own country. What's
offered to foreign citizens from their own soil isn't regulated.59
The European Securities and Markets Authority ESMA also published an investor warning on its
website in 2016 against CFDs, binary options and other speculative products, after the number of
complaints from non-professional investors, who have suffered substantial losses when trading in
these products, had significantly increased. In addition, also the problem that these products are also
58 Cf. FSMA 2016: 2. What is prohibited under the regulation?; see for this also ESMA 2016: 1f
59 Cf. FSMA 2016: 6. Whom does the regulation apply to? Does it also apply to foreign providers?; cf. ibid. 7. Does
the prohibition apply to all forms of distribution of derivatives?
Illustration 14: Prohibition of Binary Options & CFD marketing in various countries (see ASIC 2019:
6)
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offered by unauthorised and unregulated traders, which further increases the risk of investor harm.60
In May 2018, ESMA decided to prohibit European brokers temporarily and completely from
offering and selling binary options to retail investors with effect from 2 July 2018.61
To loophole the Irish quarantine regime for travellers, you can fly to Belfast in the UK and take a
bus from there to Dublin, as there is an exception for travellers coming from Northern Ireland.
Similarly, binary options rules can be circumvented.62 And that people are interested in bypassing
the Binary Options ban is already indicated by the sheer quantity of Google search results within
0.55 seconds.
On 1 July 2019, ESMA announced that it wouldn't extend the temporary sales ban because most
national financial supervisory authorities in the EU countries have in the meantime taken permanent
measures against binary options, which is why ESMA steps back in its observer role for first.63 The
French AMF, for example, introduced the "Sapin 2 Law" on 9 December 2016,64 and the Central
Bank of Ireland enacted a similar regulation in mid-2019.65
60 Cf. ESMA 2016
61 Cf. ESMA 2018
62 See Daytrading.com 2020
63 Cf. ESMA 2019
64 Cf. AMF 2017: 4; cf. Nikolova 2017b
65 Cf. RTÉ 2019
I
llustration 15: Google.com, 27.07.2020
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Nevertheless, a uniform EU ban is better for many reasons. Firstly, it's easier to monitor what
advice brokers and their "education sites"66 give to consumers, because "Binary Options Ban" is an
international search term. And consumers will try to check it through search engines before they
circumvent something. With regulations on a national level, the search engine offer is smaller, if it
exists at all. And no verifiable data under simple search terms will strengthen call center fraudsters.
Secondly, EU regulations provide clarity regarding infringements that otherwise do not exist, for
example when traders from one EU country offer binary options to consumers from another EU
country - this way you can persuade people that EU law beats national law: at EU level it's allowed
because it's not forbidden, and therefore it's also allowed nationally because national law is
subordinate to EU law.
Many consumers would buy this explanation. A uniform EU ban is therefore preferable to all
national regulations because of greater clarity.
3. Binary options fraud victims feel helpless; stronger prosecution by the authorities is needed.
For the vast majority of victims worldwide, the impact of boiler room fraud and binary options
fraud on their financial situation is devastating. Many lose their lifetime savings, others are forced
to sell their lifelong dream of an own house, and some become so desperate that they commit
suicide.67
The feedback from the national supervisory authorities is often suboptimal in the context of seeking
support to compensate the financial losses of victims and in prosecuting companies for their illegal
activities. This is because those who appeal to the national financial supervisory authorities are
passed over, while law enforcement agencies have the frustrating feeling that their investigation
reports fall on deaf ears at higher levels. This is sometimes due to the very limited ability of
national supervisors to provide assistance, because their authority ends at the national border and
criminal traders are often not based in the same country as their victims. Or the company isn't
properly registered with the authorities in the country where it's allegedly based. In both cases, there
66 cf. Nikolova 2017b
67 See Weinglass 2017a; cf. Nikolova 2017b
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is no regular supervision by the relevant national financial authority, which prevents victims from
making claims based on national compensation legislation, as this applies only to legally registered
companies.
For this reason, victims seeking help are often encouraged by the Financial Authorities to report to
the local prosecution authorities, which often gives victims the impression that the law cannot
sufficiently enforce itself against companies that are obviously operating fraudulently from the
victims' point of view. The unfortunate fact that the people behind mass online scams, such as those
involving binary options, are rarely caught, has much to do with the international scope that such an
investigation requires, for which there are insufficient resources. To make matters worse, the use of
fake IDs and addresses is commonplace. Another problem is that many victims don't report the
crime, many because they feel embarrassed and ashamed that they have fallen for an offer that was
sometimes obviously too good to be true. Others don't even notice that they have been cheated, but
believe that they have lost and leave the issue on their own. The criminals profit from both
considerably without having to fear many consequences.
In April 2020, the Financial Mail on Sunday published an article by journalist Tony Hetherington, in
which he described how the UK's Financial Conduct Authority (FCA) isn't doing enough to inform
banks and third parties about the numerous complaints they have about allegedly dubious brokers,
fraudulent websites and their bank accounts. Hetherington writes that he fails to understand that six
weeks after the FCA posted warnings on the Internet, the malicious websites are still active and that
phone numbers and email addresses remain unblocked even though banks and other service
providers were capable of doing so. Hetherington concluded from this that the warnings on the
FCA's website are virtually useless unless action is taken by anyone.68
4. Recent legal actions against binary options scams related to Israel
4.1 Israel
Unlike most of the rest of the world, the Israeli binary options industry hasn't emerged from the
ranks of blue chip or investment companies. They were spin offs of the Israeli gaming and sports
68 Cf. Hetherington 2020
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betting industry and aimed to bypass the Israeli ban on gambling. They didn't recruit their personnel
from the financial sector, but from the ranks of affiliate marketing and the many immigrants who
came to the Holy Land primarily only with foreign language skills.69
Life in Israel is very expensive, while at the same time there is a lack of qualified work. For many
immigrants, the only choice is either to pick oranges for the minimum wage or to find well-paid
work in the financial betting industry thanks to their foreign language skills. This is one of the
reasons why the Israeli judiciary hasn't done anything against binary options Made in Israel for a
long time, although the problems associated with them were well known.70
In the meantime, however, disaster struck the Israeli binary options industry: first, an Israeli binary
options trader picked up, of all people, the chief investigator of the Canadian Financial Supervisory
Authority on the phone and demonstrated to him, how binary options fraud works.71 Shortly
afterwards, one of Toronto's most popular citizens killed himself because his existence was ruined
by binary options fraud.72
Internally stirred up by the reporting of Israeli journalist Simona Weinglass and externally by
pressure from third parties such as the Canadian government and International Organization of
Securities Commissions (IOSCO), the Israeli Parliament Knesset unanimously passed a law in
October 2017 making it the second country in the world after Canada to ban binary options
transactions in principle. The reason given was that binary options are fraud and damage the
reputation of the state from whose soil they're offered. In future, anyone who does business with
them risks up to two years' imprisonment.73
„To act against Israeli companies that were allegedly fleecing foreign customers, the securities
authority needed its enforcement powers expanded. It drafted the bill and persuaded the
government to back it, and got the tax authority on board as well, so that the bill could define
marketing binary options as a source offense under money laundering laws.“74
As a result, many binary options firms have switched to Forex products and cryptocurrencies or
have left the country, for example to Bulgaria, Cyprus, Albania or Ukraine.75 Others have simply
69 Cf. Saks 2016
70 Cf. Weinglass 2016
71 Cf. Weinglass/Horovitz 2016
72 Cf. Weinglass 2017a
73 Cf. Reuters 2017; cf. Tomer 2017; cf. TOI Staff 2017
74 Tomer 2017
75 Cf. OCCRP 2020: Policing a global boiler room; see also TOI Staff 2017
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continued to do so despite the new laws. Binary Options software giant SpotOption officially went
bankrupt in 2019.76
There haven't been any criminal convictions yet in Israel,77 but Israeli civil courts have now
responded, where a judge recently described the investment transactions of the Israeli online
investment website www.B4Binary.com as systematic fraud and granted almost $600,000 in
damages to plaintiff victims from abroad.78 Judge Ron Sokol wrote in his verdict:
„I am persuaded that all of the defendant’s activity in establishing the companies and
structuring the trades was intended to deceive investors, including the plaintiffs,” the judge
wrote. „There is no doubt in my mind that the defendant’s behavior fulfills all the fundamental
criteria of fraud.“79
According to Weinglass, dozens of civil lawsuits of alleged victims are currently going through
Israeli courts. However, most of these cases will eventually be solved through a settlement in which
the plaintiffs receive some or all of the money they claim, often in exchange for withdrawing their
lawsuit and signing a non-disclosure agreement. Nimrod Assif, an Israeli lawyer who is suing
several Israeli binary options companies on behalf of alleged victims from abroad, said in a Times
of Israel article that he is encouraged by the ruling in the B4binary case:
„The court understood that the practices of the binary options operation in question —
including the solicitation tactics, the evasive responses to withdrawal requests, and the use of
offshore companies to conceal the identity of the perpetrators — were nothing but fraud.
Anyone who knows anything about this industry can tell that these practices were common
among many binary options operations in Israel.“80
4.2 USA
4.2.1 Bloombex Options und Partnerfirmen vor Gericht
The United States Securities and Exchange Commission (SEC) has initiated several ongoing
lawsuits against binary options companies and their management. For example, in a press release in
September 2019, the SEC announced that it accused the three foreigners Gil Beserglik, Raz
76 Cf. Tomer 2017; vgl. Weinglass/Wootliff 2019
77 Siehe Weinglass 2019a
78 Cf.. Weinglass 2020b
79 Weinglass 2020b
80 cf. Weinglass 2020b
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Beserglik and Kai Christian Petersen of deceiving US investors, including pensioners, and causing
them losses in the double-digit millions through fraudulent online sales of risky binary options.
According to the SEC complaint, the fraud was carried out by three binary options online brokers:
Bloombex Options, Morton Finance and Starling Capital. All lured their victims by promising easy
and quick profits. This was done using "boiler room" call centers in Israel and Germany, which used
aggressive selling techniques to push customers to make large investments.81 The investor damage
caused by the three companies amounts to nearly one hundred million US dollars.
„According to the complaint, conversion agents in the call centers typically made up to 200
calls a day, reached 30-60 customers and got three to eight people to deposit daily. Call center
employees allegedly lied about their names, location, titles, experience, and the fact that they
made money when the client lost money. At their height, the three call centers employed 200
people altogether, the complaint claims.“82
4.2.2 Verdict against CEO of Yukom Communications
Also in 2019, the 38-year-old Israeli Lee Elbaz was convicted by a US district court in Maryland as
the driving force behind a binary options fraud. Elbaz was found guilty of conspiracy to commit
wire transfer fraud in one case and guilty of wire transfer fraud in three cases. The decisive point for
the prosecution was that the Yukom traders of their websites BinaryBook and BigOption not only
concealed from their customers the fact that they make profits from their losses, but also pretended
to represent investor interests.83 It was possible to prove this because five also accused Yukom
employees made deals with the authorities and testified against their former boss.84
Elbaz was arrested immediately after landing at the JFK airport in New York in September 2017.85
According to the Israeli trader online magazine Finance Magnate, since then the fear has been
spreading in the Israeli trader industry that anyone who's involved in business with binary options
or cryptocurrencies and travelling abroad could be arrested.86 The Ukrainian Milton Group has
therefore instructed its employees to avoid contacting customers from Israel, Belgium, the USA and
81 cf. SEC 2019
82 Weinglass 2019a
83 Cf. U.S. Department of Justice 2019
84 The 31-year-old Lissa Mel worked as a senior agent in a Yukom call center and was sentenced to twelve months
imprisonment and three hundred thousand US dollars in damages (see Abdel-Qader 2019; see Cortellessa/Weinglass
2019).
85 See Cortellessa/Weinglass 2019
86 Cf. Weinglass 2019a
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Ukraine.87
„Elbaz, who proudly called herself a “money-making machine,” trained employees to lie to
investors and rigged the odds against them, while falsely guaranteeing returns of up to 40
percent.“88 Like the Milton Group in 2020,89 the Yukom scammers targeted senior citizens,
pensioners, veterans and welfare recipients.90 They caused investor losses of 145 million US
dollars.91
4.3 Canada
In October 2017, Canada became the first country in the world to ban all transactions relating to
binary options in general if the expiry period is less than 30 days.92 „Our goal is to make every
Canadian aware of binary options fraud and make it a toxic word here. When people hear the term
they will immediately know it’s more than likely a scam and that they should contact us,” said Jason
Roy, chairman of Canada’s Binary Options Task Force and a senior investigator with the Manitoba
Securities Commission.93
In May 2020, the Canadian Ontario Securities Commission filed a civil suit against three brothers
with Canadian-Israeli dual citizenship for recruiting illegal Ontario residents to trade binary options
and defrauding them of $1.4 million.94 The Commission filed a civil suit against Joshua Cartu,
Jonathan Cartu and David Cartu alleging that the brothers and their companies engaged in the
illegal distribution and unregistered trading of securities from July 2013 to April 2017 by soliciting
deposits from Ontario investors and opening and operating trading accounts for Ontario-based
clients through their online trading platforms www.beeoptions.com and
www.glenridgecapital.com.95 The defendants also operated an Israeli call center under the name
Tracy PAI Management Limited (Tracy PAI), which was responsible for selling their binary options
87 Cf. OCCRP 2020: Policing a global boiler room
88 Abdel-Qader 2020
89 See Carlsson 2020; cf. OCCRP 2020
90 Cf. Weinglass 2018
91 Cf. Weinglass 2019a; cf. Abdel-Qader 2020
92 Cf. TOI Staff 2017; cf. Martin 2017
93 TOI Staff 2017
94 Cf. Weinglass 2020a
95 Cf. Morzaria 2020: 1-4
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by telephone. As usual, the customers were deceived about the location of their contacts and got
promised profits of 60-85 percent.96
The accused brothers also set up two companies as intermediary payment service providers and
concealed from their customers the fact that they were the owners by appointing fictitious directors.
The accounts of these two companies - UKTVM Ltd. and Greymountain Management Ltd. -
received a total of 233 million dollars in deposits from customers around the world between 2013
and 2017.97 In 2017, Greymountain declared bankruptcy and was itself covered by lawsuits because
the Irish puppet directors were also engaged in binary options transactions on their own, allegedly
cheating customers out of at least 4.1 million euros.98
The brothers themselves are considered in Israel as persons of public interest. Josh Cartu, for
example, has one million followers on Instagram and has dated the ex-girlfriend of Prime Minister
Netanyahu's son's ex-girlfriend in 2018.99
4.4 EUROJUST arrests in Europe
In July 2019, it became known that the German and Austrian police had conducted an international
criminal investigation of suspected online financial fraudsters. They investigated ten suspects in
connection with five allegedly fraudulent online trading websites. The police carried out raids on
call centres, offices and apartments in Kosovo, Germany, Austria and the Czech Republic. The five
trading sites are Option888, TradeInvest90, XMarkets, ZoomTrader and TradoVest.
According to the German report, operators of the five websites could have been responsible for up
to 400 fraudulent websites.100 In this context, Simona Weinglass is convinced that most of the five
websites are linked to Tradologic, an online trading platform provider established and operated by
Israelis and based in Bulgaria.101
96 Cf. Morzaria 2020: 5f
97 Cf. Morzaria 2020: 7f.
98 Cf. O'Faolain 2018; vgl. The Irish Times 2019; vgl. hierzu O'Faolain 2020
99 Cf. Weinglass 2020a
100 Cf. Deker et al. 2019
101 Cf. Weinglass 2019b
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In April 2020, raids were carried out on three other Tradologic websites. Ten suspects were arrested
in Serbia and Bulgaria who were connected to the trading websites XTraderFX, SafeMarkets,
OptionStarsGlobal, Cryptopoint, GoldenMarkets, Trade Capital, Fibonetix, Nobel Trade and
Forbslab.102 „German police said they were all “top brokers” who were especially skilled at
allegedly stealing large sums of money.“103 In total, the gangs supposedly got away with more than
a hundred million euros.104 The average damage was 40,000 euros per investor.105
According to ongoing investigations, criminals have enticed thousands of victims from several
countries to invest in non-existent financial products. Across Europe, banner ads and mass e-mails
promising above-average returns have been used to lure investors to register on unlicensed online
trading platforms and deposit 250 euros as seed money. Customers were then contacted by alleged
agents or brokers from call centres, who announced the possibility of even higher profits and
tempted victims to transfer more money to various accounts or have additional amounts debited
from their credit cards. Subsequently, the perpetrators simulated the alleged trade in financial
products and deceived the victims with fake positive results that were displayed on their online
trading platforms. In reality, no actual trade took place. Instead, the money was distributed to a large
number of participants in a complex money laundering network throughout Europe. The companies
102 Cf. Ritzer 2020; cf. van Lierop 2020; cf. Weinglass 2020c
103 Weinglass 2020c
104 Cf. Ritzer 2020; cf. van Lierop 2020; cf. Weinglass 2020c
105 Cf. Weinglass 2019b
Illustration 16: https://www.binaryoptions.co.uk/tradologic
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at the end of this chain were under the control of the criminals and allowed them to withdraw the
money for themselves. Thousands of investors suffered a total loss. It's unknown how many people
got affected, as many investors believe that they actually lost and therefore didn't turn to the
authorities.106
„The truth is that there is no investment or placement of options and no repayment or profit
distribution of investor funds. The deposited funds are never added to an investment, the
trading platform visible to the customer as well as the alleged customer account are pure
deception,” the German police press release concluded.”107
According to the website FinTelegram, the raids were related to the cyber crime organisation E&G
Bulgaria of the Israeli Gal Barak and his wife and accomplice Marina Barak (formerly Marina
Andreeva).108 In June 2019, the Bulgarian press already reported that Barak had commissioned
murders of former associates and the publisher of FinTelegram: „Gal Barak and his partners were
never squeamish in their choice of means. Bribery, threaths and assassination missions are
apparently part of the arsenal of this organization.“109
5. Private asset tracking and recovery companies related to Israel
5.1 Legal asset recovery firms
In recent years there has been an increase in the number of private investigation agencies
specialising in the search and recovery of assets and the assertion of civil law claims. This is
because many fraud victims feel that the authorities haven't done enough for them.
An Israeli asset recovery company that initiates legal proceedings on behalf of Binary Options fraud
victims is www.combatscam.com, a working group founded by Israeli lawyers Haggai Carmon and
Nimrod Assif. Their website is very professional and transparent about how binary options fraud
works. It also clearly explains why binary options investors almost always end up losing their
money. The law firm behind the website is Carmon & Carmon and has specialized in representing
the interests of American plaintiffs in Israeli civil litigation for more than thirty years.
106 Cf. van Lierop 2020
107 Weinglass 2020c
108 Vgl. Tamir 2019b
109 cf. Tamir 2019a
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According to our opinion, www.combatscam.com is recommendable.
Another interesting asset recovery project is the European Funds Recovery Initiative (EFRI). EFRI
is a private initiative to recover funds for binary options, foreign exchange trading and
cryptocurrency fraud schemes. Its network of lawyers and law enforcement agencies covers a wide
range of jurisdictions and enables them to effectively prosecute fraudsters and recover investor
funds. In July 2020, EFRI is led by former Ernst & Young partner Elfriede Sixt and boardmember
Nigel Kimberly.
EFRI was recently registered in Austria as a foundation representing the interests of fraud victims.
It's called "Initiative to Combat Cybercrime against Consumers and Small Investors in Europe"
(EFRI European Funds Recovery Initiative). Its activities focus mainly on the following areas:
• Preventive education/information/training on the dangers of cybercrime for consumers;
• Coordination and contact point for authorities, non-government organisations and private
initiatives for data exchange and warnings regarding scams and investment fraud;
• Public early warning system against scammers and investment fraud in cooperation with
media partners and operators of social media;
• Development of a cybercrime database for statistical analysis;
• Ombudsman and contact point for victims of cybercrime and scams;
• Support for victims in recovering their losses.110
We believe that EFRI is evolving into a respectable organisation in the fight against (mass) online
(investment) fraud and in supporting fraud victims who are trying to get their money back from
fraudsters, banks and payment service providers (PSPs).
As of the end of June 2020, they represent 822 victims who were cheated out of 35 million euros.111
EFRI also has a very informative blog.
5.2 Suspected illegal asset recovery firms
Asset recovery is somehow an illogical business: you pay money to get back money you already
had. If you do it right, it's okay, because that's the day-to-day business of civil courts. But if you do
it with Binary Options Business Asset Recovery Companies, it means that you are offering them
110 See EFRI 2020: §2 Purpose
111 Cf. Sixt 2020
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money to get money back from them that they already possess. The best outcome would be that you
pay ransom, the worst outcome would be that they keep both. Because these companies have no
interest in giving anything back.
As early as 2016, the United States Security and Exchange Commission (SEC) issued "Investor
Warnings", urging investors and fraud victims to think carefully before spending money on asset
recovery services that may prove to be fruitless. Many companies often charge a substantial fee for
providing such services. These fees depend on the amount of damage and can range from several
hundred to thousands of dollars.
In the meantime, fraudulent asset recovery has developed into a scam of its own, which Frans Roest
called "following up fraud", "boiler room fraud phase 2" and "advance fee fraud" in his global
boiler room fraud study published in 2018.112 The UK Financial Conduct Authority (FCA) calls
them "clone of claims management firms" if they imitate an existing recovery firm.113
It's important to note that some binary options firms are also active in the lucrative asset recovery
market. Our research into these scams revealed that certain specific asset recovery websites link to
the exact same address where fraudulent binary options providers are (or have been) located.
Calling fraudulent recovery companies by their names is actually pointless, because the names are
constantly changing. In addition, EFRI has published an extensive list of names of fraudulent
recovery companies. Nevertheless we want to introduce at least one suspected fake organization:
"FundsRecovery". Illustration 17
112 Cf. Roest 2017
113 See FCA 2020
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According to its website, FundsRecovery is an international company specialized in the recovery of
assets through fraudulent online activities. Their website is very professional and underlines their
global focus by offering four local hotline numbers for the USA, Israel, Sweden and Australia.
The only country in which they explicitly do not offer their service is the United Kingdom, where
they have been banned from trading.
Funds Recovery is writing: „We help you investigate, review and dispute the fraudulent
transactions. We find the liable entities including financial institutions, in order to claim lost or
stolen funds on your behalf.“114
Illustration 17 & 18: www.funds-recovery.com.
114 Source: https://funds-recovery.com/ viewed July 2020.
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According to its website, Funds Recovery is registered with the Israeli Ministry of Justice and is
licensed to offer customer advice on how to recover stolen funds.
The business model of the organization is based on a success fee, which is paid after the victim gets
his money back. However, they charge a fee for operating costs based on the specifics of each
individual case. According to its website, Funds Recovery is registered with the Israeli Ministry of
Justice and is licensed to offer customer advice on how to recover stolen funds.
At first glance this seems to be professional and trustworthy. However, Funds Recovery is
registered at 38 Ben Gurion Road in Ramat Gan, Israel, 5257354, an address that is virtually the
epicenter of the Israeli binary options fraud industry. Other recovery companies are also registered
at the same address. This is a clear warning sign for us - in addition to the FCA ban - and the first
screen is already talking about how to pay.
Another warning sign are the Trustpilot recommendations of the company: 54 of 54 are very
positive, which is extremely unusual. What is even more unusual, however, is that all the evaluators
generally only made one to three ratings. From a purely statistical point of view, there should be at
least a few experienced evaluators among them, who have made several dozen to a thousand
ratings. The FXReviews rating also sounds less like a rating and more like a sales pitch.
The other companies at the same address as Funds Recovery are "Money Back Ltd", founded in
2017, and "Pay Back Ltd". The latter is a company registered in Israel as LTD. 515711653. The
alleged purpose of Pay Back Ltd. is to help anyone who is a victim of online fraud. One of their
specialized services, according to information on their website, is "refunding stock trading fraud".
The FCA issued an investor warning about the pay-back website on 12 December 2019. According
to the British watchdog, Payback Limited isn't registered in the UK and uses instead the registration
number of a real company of the same name registered in the UK.115 A warning of the same content
was also issued by the FCA against funds-recovery clone www.funds-recovery.co.uk.116
115 Cf. FCA 2019
116 Cf. FCA 2020
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Illustration 19: https://beta.companieshouse.gov.uk/company/11401638
According to the British commercial registrar Companies House, the offshore company Payback
Limited was first registered on 6 June 2018. It's a small private company with a total nominal value
of GBP 10,000 and states property trading as its business purpose. However, although the company
is listed as "active", there is no website or telephone number.
This is also a clear warning sign for us.
6. Recommended fraud victim initiatives
In 2017, Frans Roest wrote in his global study:
„Despite recent efforts by authorities worldwide, a large number of boiler room fraud victims
feel helpless and lack the full support of national oversight institutions, law enforcement and
the justice department. Hence they organize their own crusades against the criminals whom
they suspect of swindling them. This is done through blogging, internet messaging, newspaper
articles, and through calls to action and requests for information in television programs.”117
Several websites and forums against fraud in general and investment fraud in particular can be
found on the Internet. Many of the operators of these websites and blogs have been victims of some
form of investment fraud or binary options and want to take action against the culprits. They also
want to warn other potential investors. Many of them are disillusioned victims who put a lot of
117 Roest 2017
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energy into their "work" and have acquired a great deal of expertise, also in terms of the feelings
victims experience.
On the website www.investmenthoax.com, for example, you can read:
„NOTE! These criminals try to convince you that I am just another disappointed customer
trying to blame them for my losses in the market. Challenge me directly! I try to answer all
mails as soon as possible.“118
The „All About Scams“ sub site explains how these criminals operate.
On Facebook there is an action group called „Group Financial Fraud Victims International“. It's a
closed group, only members can see the discussions, concerns, cries for help and warnings about
alleged con men.
7. What to do?
7.1 What can cheated investors do?
To the deceived investors we would say: "Try not be deluded again!"
Don't let the alleged investment or recovery companies make you a victim once again and don't
throw even more cash after the money you burned. Fraud is based on hope and the misbelief that
spending a few more Euros won't make the roast fat anymore. A whole industry has been living on
it.
Accept your losses and go to the authorities. Don't act alone, but seek contact with other victims.
This will also help you to tell your relatives about the damage. Because you are part of the rule and
no exception.
Before investing, check these companies with due diligence and pay attention to warnings published
on the official websites of national financial authorities and supervisors. And do not respond to tips
"off the record". Because even if it were true, it would be illegal - proper investment doesn't work
that way. This is a clear warning sign that someone only wants to get access to your money and is
trying to trap you so that you feel complicit and don't press charges.
118 Source: www.investmenthoax.com
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Try to initiate chargeback procedures with your bank and file a complaint with your national
watchdog and report to the local police.
7.2 What can police do?
Don't blame the victim! Online fraudsters' websites today look so professional that even smart and
educated consumers can be fooled by them. At the same time, the scams are becoming more and
more psychologically sophisticated and bring ordinary people into a kind of dependency that makes
them to act strangely for themselves. Fraud investigator Jason Roy writes about this:
“People don’t get involved with a criminal company and the next day call us. It’s usually six
months later or eight months later. Often the scam being run is not ‘Let’s get the first amount
of money and stop talking to him.’ It’s an ongoing pitch to get as much as they can and
sometimes that lasts six months or more before the investor realizes that they keep asking for
money and every time he asks to take money out they ignore him. At some point they have a
moment of realization and they say, ‘Oh no,’ and that’s when they call us.”119
The police must take this into consideration and deal seriously with every allegation. People feel
bad enough as it is and should be motivated to file charges.
The compilation of these reports serves as an indicator of the extent of fraud and can be used to
determine analytically the extent of the financial damage caused. In this way, it's possible to
coordinate better the reactions of law enforcement authorities in terms of their investigative
capacity and availability. At the same time, it's easier to gain public interest in the issue and - as
Simona Weinglass did - to exert social pressure on fraudsters.
7.3 What can financial watchdogs do?
To the financial regulators, we would say: don't sit back and do nothing after you have published
details of a fraudulent company. Instead, contact financial institutions and similar payment service
providers regularly with a blacklist of unregistered brokers and companies about which complaints
and fraud reports have been received. Tighten the regulations so that it becomes mandatory for
banks and other financial institutions not only to follow the fraud warnings of the watchdogs, but
119 TOI Staff 2017
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also to implement them through their Know Your Customer (KYC) policies and incorporate them
into their customer list. Local authorities must pass on the warnings they publish to IOSCO and
watchdogs in other countries, as fraud is a cross-border business.
Prepare a bill such as the Israel Securities Authority ISA, which makes trading in Binary Options a
criminal offence. Because just because the law is lax there, it doesn't mean it will be the same for
you. The ISA solution shows the right way.
7.4 What can financial institutions and payment service providers do?
Financial institutions and asset management platforms (PSPs) may terminate client relationships
with business clients on the basis of their terms and conditions as soon as it's evident that these are
being violated. They may terminate the banking relationship, freeze accounts where appropriate and
submit mandatory reports to the national Financial Intelligence Units (FIUs) on suspicion of fraud
and money laundering.
If this is not done for any other reason than proven negligence, the financial institutions will be
liable themselves and risk being punished for non-compliance with anti-money laundering rules and
aiding and abetting criminal organisations. In addition, they may subsequently be held liable in a
civil court for providing inadequate KYC supervision and ignoring red flags. Recovery and class
actions in Ponzi fraud cases in the United States are examples of how these matters could be dealt
with.
7.5 What can website hosting companies and internet providers do?
Website hosting companies, Internet service providers and search engines can remove fake
messages and fake advertising, they can blacklist sites and remove them from search results based
on their own terms and conditions. They can also immediately terminate contractual relationships
with fraudulent companies.
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7.6 What can telecommunication companies do?
Telephone companies and other communications providers may block the telephone numbers of
business customers on the basis of their own terms and conditions and terminate the business
relationship immediately if the customer violates the agreement. (Including unlawful and fraudulent
practices.) In addition, they may submit mandatory reports of suspected fraud and money
laundering to the appropriate Communications Committee.
7.7 What can binary options software operators do?
As we saw in the beginning, the binary options industry claims to have created the perfect financial
game. Thus, no one but the "honest" binary options providers usually have a greater interest in
making their industry fraud-free.
Most Binary Options traders operate with the same software that is provided to them along with
extensive services. The binary options trading sites only build their own façade around these
purchased engines. The software providers are called "white label brokers", the trading operators
"black label brokers".120
The binary options-Big3 are: TradoLogic, SpotOption and TechFinancials. All three were or are still
located in Israel.121 Their software is used by at least ninety percent of all binary options trading
sites.122 Next to this, MetaTrader4 and MetaTrader5 are also important platform providers.123
Independent engine sites include IQ Option and Binary.com.
The structure of a trading page can usually be easily assigned to its engine provider. TechFinancial
sites offer for example High-Yield Options, Long-Term Options, Boundary Options, Early Closure
and Yahoo News Feed.124 Spot Option pages have particularly large buy and sell buttons - a green
one to invest in rising prices and a red one to invest in falling prices. They also offer an indicator
calculator that shows what percentage of other traders have recently invested in rising or falling
120 Cf. binaryoptions.co.uk o.D. B
121 Cf. binaryoptions.co.uk o.D. C; vgl. binaryoptions.co.uk o.D. B
122 Cf. binaryoptions.co.uk o.D. A
123 Cf. Saks 2016
124 Cf. binaryoptions.co.uk o.D. A
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prices.125
Binary options software providers should therefore cooperate with foreign financial supervisory
authorities and block software access to the websites concerned in the event of incoming warnings.
Without an engine, binary options fraud can't work.
By the way, this suggestion doesn't come from us: Spot Option founder Pini Peter himself suggested
125 Cf. binaryoptions.co.uk o.D. C
Il
lustration 17: https://www.binaryoptions.co.uk/spotoption
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it.126 And that's why you should take the Binary Options godfather at his word and put the cheaters
on a leash.
8. Biography
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26.07.2020.
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