The "Wolves of Tel Aviv" — how the binary options industry robbed the world of $5–10 billion a year

Imagine an industry that year after year drained billions of dollars from people's pockets around the world — and did so almost openly, from office towers in the heart of Tel Aviv. That is how Israel's binary options industry emerged in an investigation by The Times of Israel journalist Simona Weinglass, published in 2016 under the title "The Wolves of Tel Aviv." The investigation documented more than 100 companies that had operated for years under practically identical fraudulent schemes, robbing millions of people worldwide. The combined annual losses of victims were estimated at $5–10 billion a year.

A binary option is an "all or nothing" financial instrument: the trader bets on whether an asset's price will rise or fall by a certain point in time. In the mid-2000s, Israel became a global hub for selling this product to online clients: hundreds of companies opened offices in Tel Aviv and surrounding cities. Outwardly, the business looked like an ordinary fintech startup with a trading platform and promises of easy earnings. In reality, the vast majority of these platforms never routed clients' trades onto a real market — the "trading" results were generated by the company itself, so the more a client lost, the more the firm earned. The industry grew so large that it became one of the main employers of young Israelis: thousands of staff, mostly without any financial education, were hired into call centres as "account managers" and "financial advisers."

The way it worked was almost identical across the vast majority of companies. The call centres — essentially classic "boiler rooms" — hired young salespeople and trained them in high-pressure scripts: calls made under invented foreign names, promises of guaranteed profit, and persistent demands to deposit more and more money after the first "successful" trades. When a client tried to withdraw money, new obstacles appeared — additional commissions, "verification" requirements, bonuses that first had to be "worked off" through turnover. Victims were deliberately sought among foreigners in North America, Europe and Australia, since the geographic and jurisdictional distance made it substantially harder for Israeli or foreign police to pursue the fraudsters.

The turning point came in 2016, when The Times of Israel journalist Simona Weinglass published the series of articles "The Wolves of Tel Aviv." She documented more than 100 companies operating under similar schemes, exposed the inner workings of the call centres and presented testimony from former employees and victims in various countries. The investigation forced the Israeli authorities, who had effectively ignored the problem for years, to publicly acknowledge the systemic nature of the fraud.

The lawmakers' response was not long in coming. In October 2017, the Knesset passed a law that completely banned the sale of binary options products within Israel, regardless of to whom or to which country the product was sold, under threat of actual imprisonment for violators. The ban did not, however, close the story: according to subsequent reports by the same Times of Israel, some of the industry's operators simply moved their business abroad or switched to adjacent fraud schemes, while the prosecution of specific ringleaders remains rare.

Published 5 March 2024