The ‘cocaine’ of scams

Why has Israel failed to crack down on binary options fraud? And why does it matter?

We posed this question to three experts. First, Ronen Bar-el, an economist who specializes in the shadow economy, compared the export of binary options to the export of a hard drug like cocaine, albeit on a much smaller scale.

“Imagine if Israel were the world’s number-one exporter of cocaine,” he said. “Would that be good or bad for Israel?”

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Bar-el emphasized that Israel’s exporting of binary options, like Colombia’s exporting of cocaine, hurts the country on three levels. First, because it weakens society’s values, second, because it likely will cause foreign countries to retaliate, and third, because it weakens the rule of law and strengthens organized crime.

“In terms of morality, there are markets that you don’t want to have in your country even if they are very profitable, like child prostitution,” he said. “Even if it earns a lot of money and brings tourism to your country you don’t want it, because it leads to general moral decay.”

Second, Bar-el said, if you export something illegal to the other countries, some of them might get angry and enact sanctions against you.

Third, an industry like binary options makes criminals richer, more powerful, and less afraid of police. It sends the message to law-abiding citizens that crime pays.

“Look at Italy, which has paid a high price for its mafia. You have a state within a state. The mafia began to buy real estate and take over business, then to appoint prime ministers and judges and even to blow up judges they don’t like. If Israel doesn’t crack down hard on this, our country could become a criminal nation like Italy or Latin American countries.”

In fact, Bar-el wondered aloud whether the Israeli police haven’t been corrupted by organized crime already.

“In every country one of the primary goals of organized crime is to buy law enforcement,” he said. “Don’t you find it odd that an industry worth billions has sprouted up in Israel without anyone knowing it exists? In the best case scenario, the police haven’t tackled this because they’re lazy. In the worse case scenario, it’s for reasons I don’t want to contemplate.”

Doron Navot, a political scientist at Haifa University who studies corruption, thinks that Israel is a strong enough society to pull itself back from the brink.

“I hope and believe the Israeli government will tackle binary options,” he said. “A country can’t make peace with spreading criminality. If more and more people in society become criminals, it threatens everyone, because those criminals live among us.”

Haggai Carmon, an Israeli-American lawyer who represents U.S. interests in Israel and who has recovered money for American victims of the fraud, said he believes the Israeli government has been slow to take action because the victims are abroad. He is not certain that Israel will tackle binary options without foreign pressure.

“Israeli law enforcement are busy and do not have enough manpower or budget,” he said. “It’s a matter of priorities. If the U.S. government were to approach Israel and say, look, thousands of Americans are victimized and this is happening from Israel, I think the Israeli government would listen.”

The fact that so many new immigrants work in this fraudulent industry is particularly disturbing to Navot.

“We are turning Israel into a center that attracts crime,” he said. “Israel will attract not immigrants but criminals. This is something we can’t allow to happen.”

But it is happening. And tomorrow morning, like every morning, thousands of Israelis will wake up and go to their jobs in gleaming office towers, stealing money from people all over the world.

Special to the Jewish Standard