News sources in Israel, as well as certain blogs close to the Binary Options sector, are reporting that Israel’s new Binary Options law has been challenged to the Israeli Supreme Court.
The appeal has been brought by lawyers representing Yossi Herzog, the major shareholder in binary options group Yukom Communications Ltd which has operated a number of brands over the years including BinaryBook.com BigOption.com. One of the company’s senior managers, Lee Elbaz, is currently under house arrest in the US awaiting trial after being taken into custody in September by US authorities upon disembarking from a flight from Tel Aviv to New York.
The team representing Mr. Herzog and Yukom in the matter are attorneys Zohar Lande, Eyal Nachshon and Moran Bickel of Tel Aviv based law firm Barnea & Co.
And apparently, the Supreme Court is taking Mr. Herzog’s appeal seriously. The court has instructed government authorities to respond to the appeal by January 10. As things stand now the Binary Options law, passed in late October as one of the first Knesset votes following summer break, formally comes into effect on January 23.
According to the sources including Israeli business news site TheMarker, the basis of the appeal is that the law was an over-reaction to public pressure, and goes “too far” in trying to deal with the many scams that have permeated the industry, by banning it altogether.
Mr. Herzog is quoted from the appeal in one of the Israeli news sources as stating (translated from the original Hebrew):
I hope that the Supreme Court in Israel will stop the witch hunt for the exporters of services and technology that operate legally from Israel. These have supported thousands of families over the years, and have put billions of Shekels in taxes into the coffers of the state. The wild witch hunt being carried out by the Israel Securities Authority, which I and others are experiencing, does not distinguish between “weeds” and those who operate according to the law, which in turn gives a tailwind to criminal and extortionist elements.
This incitement has recently reached an extreme point, when it led to the arrest in the US of Ms. Lee Elbaz, the former CEO of Yukom. This arrest was a direct link to public pressure. It is a prize for criminal elements who falsified materials, stole information, and extorted undisturbed in creating a file against Ms. Elbaz. Int his case the requested information has been transferred to the relevant authorities. I believe in the integrity of the Israeli court, which will protect my basic rights and will halt this dance of demons.
We would note that there isn’t really a connection between the Israel Binary Options law, and Ms. Elbaz’s current legal problems. US authorities have detained her because the companies she managed presumably broke US securities law by targeting and taking US clients. Her problems in the US could become more serious if authorities are able to authenticate charges of wire fraud, in which the company supposedly conspired to defraud its clients. More on that can be seen in an article from Israeli financial news site Globes.
We would also note that while the Israeli Supreme Court is notoriously objective and independent, and has been steadfast in annulling laws and government actions it deems illegal or impinging on individuals’ rights, we believe it is unlikely to overturn the law as it stands. One of the key arguments made in the appeal is that other properly-regulated jurisdictions haven’t banned Binary Options. However, that is exactly what pan-European regulator ESMA is planning to do across the EU, with a Binary Options ban introduced as one of ESMA’s initiatives to clean up the online trading sector across Europe.
The new law bans not just running a Binary Options brokerage operation, but also places a ban on all aspects connected to running a Binary Options business – provision of software services required to run a brokerage, provision of payment services for the purposes of binary options trading, and the marketing of binary options services.
The legislation considers the operation of a Binary Options brokerage in Israel, including the related “services” mentioned above, to be a criminal offense punishable by up to two years in prison. It will also be considered a contravention of Israel’s anti-money laundering (AML) laws, which can carry further prison time and monetary penalties.
Most Israel-based binary options brokers and platform operators have been preparing for the new law over the past several months assuming it will indeed come into force at the end of next month. The platform providers, such as SpotOption and TechFinancials Inc (LON:TECH), have moved operations out of the country. Binary brokers have moved or have been sold to elements outside the country, as TechFinancials did with its main brand OptionFair.