In the US the trade in binary options is regulated but the FBI in March warned that much of it was taking place on websites that weren’t. “Many of those unregulated websites are being used by criminals outside the U.S. as vehicles to commit fraud,” it cautioned.
The use of online trading platforms links the practice to Israel’s booming financial technology industry. Some of the most-used social trading platforms also offer binary options, albeit that they have committed themselves to regulation in the jurisdiction where they’re registered and are not associated with fraud.
The link between technology and the binary options trade was underscored recently when Apple included a warning in its app developer guidelines under section 3.2.2, ‘unacceptable’: “Apps that facilitate binary options trading are not permitted on the App Store.”
While Israel’s share in the binary options trade has caused reputational damage, the investor who wished to remain anonymous said that it had not hurt the country’s high-tech investments: “It hasn’t had an impact on the legitimate investment field because most people understood that this was something entirely different.”
Yet, the Securities Authority in a statement did mention damage to investments as a reason to extend the ban on trading binary options from Israel to investors worldwide: “This phenomenon has assumed much larger proportions, and has generated a major negative worldwide impact, while significantly damaging Israel’s image in general, and that of the capital market in Israel in particular.”
Israel has taken steps in recent years to distance itself from the binary options trade and has cooperated with other countries against fraudulent practices. Earlier this year the head of what the police said was a binary options trading firm was taken into custody after a foreign client had complained of having lost $500,000.
Many binary options traders have relocated from Israel since the first measures were taken last year and some social trading platforms have stopped taking investments from Israelis. In one high-profile case, Banc de Binary stopped operations in January this year and surrendered its Cyprus trading license after, among others, having settled a lawsuit in the U.S. in 2016 for $11 million.