Banc de Binary is Closing Down Due to Regulatory Pressures in Isreal

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Exclusive: Banc De Binary to Close Down

A company official has explained that all arrangements have been made to stop accepting new customers.

Mega-quake in the binary options industry: Finance Magnates has learned Banc De Binary, one of the biggest global providers, is shutting down its operations, winding down its business and leaving the binary options industry for good.

A high level official at the CySEC-regulated binary options provider has confirmed the news, explaining that the move was taken by the firm’s owners following the consistently negative press that the company faced over the past year.

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“It’s become the wild west in the past few months,” the company official told Finance Magnates. “Its just not worth the tarnished reputation. I don’t see how we can continue operating under such scrutiny and public image.”

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The official explained that all arrangements have been made to stop accepting new customers. “All client funds are being sent back to their original source. We’re just waiting for the official announcement from the board to begin the process. They are literally about to kill a five hundred million dollar company, but even worse – the icon of the binary option industry,” he concluded.

Sponsorships and inquiries

Banc De Binary was founded 2009 by Oren Laurent and at its peak employed hundreds of employees. Its headquarters are located in Israel, with an office in Limassol Cyprus. The first signs of trouble could be seen last September after England premier league club Southampton revoked a sponsorship deal that it had signed with Banc De Binary only a few weeks earlier. The British football club didn’t elaborate on its reasons for backing off from the deal, but mounting pressure from local newspapers must have played at least some role.

Since its establishment, Banc De Binary has been a high profile binary options provider, even sponsoring Liverpool FC for one year. On the other hand, it was the center of few press inquiries, including a special report by Finance Magnates about the way UK tabloids were duped by a sophisticated affiliate program – Banc De Binary was one of the sites traders were being diverted to.

The firm has been under the scrutiny of many regulators recently. Last February, the provider was forced to pay $11 million to US authorities after several years of investigations regarding the illegal targeting of US customers.

As part of the settlement Banc De Binary reached with the American Commodities Futures Trading Commission (CFTC), its founder had to pay $150,000. Just a month before, in January 2020, Banc De Binary faced another blow when CySEC fined it €350,000.

Major Israeli binary firm, Banc de Binary, lays off employees, said to be shutting down

Blacklisted and fined in several countries, company has voluntarily renounced its Cyprus regulation; some insiders speculate it will relocate to eastern Europe and operate under a different name

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Simona Weinglass is an investigative reporter at The Times of Israel.

Banc de Binary, one of the first binary options firms to be established in Israel, has reportedly shut down its Israeli call center and renounced its Cypriot license. The firm has been forced in the past by US courts to pay millions of dollars for illegally soliciting customers there. It was also fined last year by its Cyprus regulator and has been cited for illegal activity by regulators in Australia, New Zealand and Canada.

Reports in the Hebrew daily TheMarker and the trade publication Finance Magnates cited tighter regulation of binary options by the Cyprus Securities and Exchange Commission (CySEC) and increased media scrutiny of the company’s questionable practices as reasons for the shutdown. As of Thursday, the firm’s website was still operating.

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The Times of Israel, which focused on Banc de Binary in an article last August, has been exposing widespread fraud in the Israeli binary options industry for the past 10 months. As a direct consequence of this reporting, the Knesset’s State Control Committee earlier this month held a special session to deal with the fraud, and demanded urgent police action against the fraudsters and expedited legislation to close down the entire industry. Israel’s securities authority has vowed to “eradicate” the fraud, which has seen victims worldwide fleeced out of billions over the past decade.

On January 9, CySEC announced that Banc de Binary, which is regulated in Cyprus and has offices in Israel, had voluntarily renounced its Cyprus registration, which allowed it to legally solicit European customers through the web site eu.bancdebinary.com.

The Cypriot securities regulator added that Banc De Binary Ltd “remains under the supervision of the CySEC until it settles its obligations arising from the investment services or/and activities that will lapse.”

At least one client of Banc de Binary who received a judgement in August from the Cyprus Ombudsman that the company owes him €170,000 ($180,000) is still waiting anxiously for his money.

The Australian Securities and Investment Commission has listed the banks where Banc de Binary keeps their money as Piraeus Bank Cyprus Limited, West East Bank, Credit Suisse, Wirecard Bank AG and TBI BANK EAD.

Is the company really shutting down?

Several sources with knowledge of Banc de Binary told The Times of Israel on Tuesday and Wednesday that reports of the company’s closure are true, and that many employees have been fired. Others were more skeptical. Posts on social media speculated about what this meant for the future of the binary options industry in Israel.

“Wow,” wrote one Israeli poster on Facebook, “Banc de Binary was one of the first and largest in Israel. I know how most people feel about Binary Options as being scam; etc etc. but this is a huge hit to the economy — to Ramat Gan.”

Ramat Gan is a town adjacent to Tel Aviv which hosts dozens of binary options firms.

Other online commenters, presumably employed in binary options, lamented the closure as the beginning of the end of the binary options industry in Israel.

“You got what you wanted,” wrote one commenter in TheMarker, “Are you happy now? Thousands of unemployed workers, a drop in purchasing power, taxes that won’t be paid, service providers that will go bankrupt. But, hey, great job, you shut down binary options. Idiots!”

To which another commenter responded, “Sorry but I have no tears to shed for scammers who committed legal and moral crimes and who helped to generate anti-Semitism against Israelis and Jews.”

Some sources with knowledge of the binary options industry told The Times of Israel they did not believe Banc de Binary was shutting down for good, but perhaps rebranding. One woman had heard the company was relocating its call center to Romania while keeping other functions in Israel.

“I heard from my friend who worked there that they are doing a relocation to Europe but will continue to sell binary options,” a third source told The Times of Israel. “Maybe they will continue to work from Israel as well but will keep a low profile.”

The Times of Israel contacted ETBO Services, the company’s headquarters in Ramat Gan, to ask if they were indeed shutting down their entire operation. After repeated phone calls, a woman responded, “I cannot tell you. You have to call our legal department.”

No one in ETBO’s legal department could be reached prior to publication.

Banc de Binary first appeared online in about 2020. In the same year, a man by the name of Oren Shabat registered the Israeli firm E.T. Binary Options Ltd., which was the Israeli company that operated a call center and managed Banc de Binary. The company, which later changed its name to E.T.B.O. Services, is owned by Oren, Hezi and Lior Shabat, according to Israel’s corporate registry. A smaller portion of the company’s shares are held in trust for Yossi Almaliach, Ronen Tubul, Ohad Tzori and Yoram Menachem.

In March 2020, the company was ordered by a US court to pay over $11 million in restitution and penalties for illegally soliciting US customers.

John Berry, a senior lawyer for the US Securities and Exchange Commission, said in a May 2020 interview with BBC radio that not only had Banc de Binary sold ostensible financial products to investors without being licensed to do so, but it had also deceived those investors as well.

“We presented evidence to the court that Banc De Binary was telling US-based investors that Banc De Binary was actually based on Wall Street, and we had evidence of online chat discussions where a Banc De Binary broker would tell a US investor, ‘Hey, I live, you know, right down the street from Wall Street, I’ve got a Wall Street address, I work there,’ and so they had repeatedly lied to US-based customers about being in the United States and being based in the United States with a US address on Wall Street and a New York-based phone number.”

Regulators in Australia, New Zealand and Canada have issued warnings against Banc de Binary for illegal activity. Another brand that appears to be associated with Banc de Binary, Option.fm, has been blacklisted by financial regulators in Ontario, Hong Kong, Australia and New Zealand.

The company has faced an onslaught of media scrutiny in the last year, including articles in The Times of Israel as well as the British Daily Mail and Sunday Times newspapers. It is speculated that the Southampton Football Club in England dropped Banc de Binary’s sponsorships after being questioned on its association with the company by the media.

Banc de Binary was fined €350,000 ($370,500) by CySEC last January and has been under investigation by the regulator ever since. On November 30, the regulator instructed companies that they could no longer offer “bonuses” to clients whereby they are offered monetary incentives to continue trading but must achieve a certain high volume of trades before they can withdraw their money.

The Times of Israel has been exposing Israel’s largely fraudulent binary options industry in a series of articles since March, beginning with an article entitled “The Wolves of Tel Aviv,” and has estimated that the industry here numbers over 100 companies, most of which are fraudulent and employ a variety of ruses to steal their clients’ money. These firms lure their victims into making what they are duped into believing will be profitable short-term investments, but in the overwhelming majority of cases the clients wind up losing all or almost all of their money. Thousands of Israelis work in the field, which is estimated to have fleeced billions of dollars from victims all over the world in the past decade.

The Prime Minister’s Office in October condemned the industry’s “unscrupulous practices” and called for the entire industry to be outlawed worldwide.

Responding to The Times of Israel’s reporting on the widely fraudulent industry, on January 2, the Knesset’s State Control Committee held a hearing on the government’s failure to shut down binary options fraud. The committee chair, MK Karine Elharar (Yesh Atid) demanded that the police begin enforcement activity against fraudulent binary options firms in the next month and that the Israel Securities Authority urgently advance legislation to shut down the entire industry. A follow-up hearing will take place in February.

Despite these developments, the possible closure of Banc de Binary was a voluntary step taken in response to pressure from CySEC and the media, not a response to Israeli law enforcement, which has so far taken scant enforcement action against the industry. Even with the layoffs at Banc de Binary, more than 100 binary options companies are still operating without hindrance from within Israel’s borders.

As one woman posted on an Israeli Facebook page on January 10, “Worked at Banc De Binary? Looking for a new home? Regulated company looking for the BEST OF THE BEST.”

SEC Regulations Killing Innovation: Major Stablecoin Shuts Down Due to Regulatory Risk

Let me start today’s article by saying, I think most people that work for the SEC are good people who genuinely want to make society better. I’ve met many SEC lawyers over the years and they have all been smart, competent and concerned about doing things right.

While I haven’t fully agreed with the SEC’s approach to crypto regulation to date, I do understand the difficult situation it’s faced with. On the one hand, the SEC wants to protect investors. On the other hand, the SEC wants to encourage capital formation and efficient markets. This is a tough balancing act to get right and its difficulty should not be ignored or dismissed.

Until now, one could say that the SEC had done an acceptable job of going after bad actors without stifling innovation. This is in stark contrast to some other US federal agencies that spend their time arresting people for the “crime” of buying and selling bitcoin.

But last month, something happened that changed my opinion about the SEC’s approach to crypto regulation and its ability to manage a conflicting mandate. Read on to find out what happened and why I’ve never been more pessimistic about the SEC’s ability to effectively regulate crypto without killing innovation.

Why major stablecoin Basis shut down

Let’s take a look at the once-promising crypto project, Basis, a stablecoin intended to solve the extreme volatility faced by most cryptocurrencies.

In order to prevent price fluctuations of its token, Basis was designed to operate like a central bank. Essentially, this meant that it would ‘intervene’ to maintain stable prices. When demand for Basis rose, it created more tokens. When demand fell, it would buy back these tokens.

The project was comprised of three separate tokens, all of which played an important role in its ecosystem. Basis tokens were at the core, which were to be pegged to the US dollar. This was supplemented by bond tokens, which would facilitate the seamless and safe auctioning of finances. And finally, share tokens, which would help users redeem bond tokens while deriving their value from dividends.

This sophisticated stablecoin ecosystem had the potential to rival the likes of stablecoin giants such as Tether and MakerDAO, and the core team had raised $133 million in venture capital to make it happen. To all spectators, the project appeared to be poised for takeoff, when suddenly Basis leadership announced that they were voluntarily shutting the project down. All of the project’s funds were returned to investors and the impressive team that was behind the project simply walked away.

Fear and uncertainty of SEC regulation.

In an open letter published on its homepage, the Basis leadership accepted the conclusion of its general counsel that the project’s supplementary bond and share tokens would inevitably be categorized as securities by the SEC.

This would make them subject to the SEC’s onerous demands for registration and compliance. Not only would this cost a fortune, but it would also severely affect the project’s activities.

As unregistered securities, the core team would have to take steps to ensure that the bond and share tokens were only made available to “accredited investors.” This would mean creating a “centralized whitelist” of acceptable investors and monitoring each transaction to make sure it matched the SEC’s specifications.

This undermined the fundamentals of the project. Centralized trading restrictions would greatly reduce liquidity in the market, which was essential to maintaining the peg. On top of that, it would allow authorities to censor transactions, contrary to the principles of the project. Ultimately, the team was left with no other option but to shut down.

SEC is killing innovation

Basis was providing a truly innovative solution for the crypto ecosystem. It was not a shady operator trying to defraud investors. Its finances were raised via sophisticated VCs, not through an ICO. Its investors were given transparency and treated with respect. This is precisely the type of project we need within the cryptocurrency industry. And this is what makes the story so tragic.

Basis did not shut down because of poor finances or poor management. It was forced out of business by rigid regulatory constraints that are trying to apply 80-year-old case law to a novel technology system.

Though the SEC claims that its application of archaic rules are necessary to protect investors, it’s easy to see how overprotection can often do more harm than good. Basis’ investors were VC’s who understood the stablecoin and wanted to put their money into the project, but they were ultimately denied the opportunity.

Make no mistake, I am all for SEC regulation in regards to shutting down fraudulent activity and scams. This level of oversight helps legitimize the industry while providing a gateway for institutional capital. But, I draw the line when it punishes companies for being innovative and bringing much-needed solutions to the market.

The SEC’s approach to crypto regulation is making legitimate entrepreneurs and VCs nervous as nobody wants to end up on the wrong side of an SEC investigation. But this fear either leads them to shy away from launching new projects or to move to other jurisdictions to start their businesses. Either way, the result is to severely stifle innovation in the US.

What does this mean for Crypto Law Insiders?

Insiders need to understand the rules and play within them. Despite how much we disagree with the SEC’s approach, there is no point fighting the system. If you want to make money and be successful you’ll need to play within the rules set by the SEC.

And the rules are getting stricter!

One very connected Insider told me that the SEC is going to ‘hammer’ existing projects that underwent ICOs. It has already sent out numerous subpoenas to industry participants, and Basis clearly got the message: ‘Innovative financial systems are not welcome in the US.’ So its leadership took the painful and disheartening act of voluntarily shutting down and returning $133 million to investors.

On a personal note, I still have hope that legislators will see the money and businesses leaving the US and decide to enact new laws that will do a better job than those currently in place. But I’m not holding my breath. Instead, I’m helping people find jurisdictions that want crypto innovators. The world is big. Go where you’re wanted.

Basis Shutting Down Due to Regulatory Pressure

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Konstantin Rabin, financial expert and crypto enthusiast, unveils what hides behind the recent shut down of once promising stablecoin project – Basis.

Regulation can be a real pain in the neck for financial companies, but it is the one thing protecting customers from fraud and scams. Having a strict regulation could, however, spark some controversy as already existing companies face terrible adversities to overcome the adaptation of their business model to the new laws.

This is the case with Basis , a stable coin crypto network. The company was able to amass more than $130 million from private as well as institutional investors back in April this year and was hoping for an early launch. The investors included big names such as Kevin Warsh from the Federal Reserve and Stan Druckenmiller a hedge fund manager.

Because of the serious restrictions that the new regulatory framework from the SEC has rendered the Basis business model unworkable. Because of this, the company is now forced to return all of the invested funds back to the investors, a fate no company wants to face.

SEC on the Hunt

The fact is that the new regulations are mostly towards Securities and Bonds. This may seem weird as to why would a stable coin have anything in common with these assets? The thing is that the Basis business model was built in a way that their tokens would not be able to avoid being named as securities and share tokens. Because of this, the company would not be able to register them with the SEC, therefore rendering the tokens illegal, and the network completely useless.

Turning into a Habit

This is nothing new from the SEC as it has been quite hostile to the cryptocurrency market in the past when it rejected Bitcoin ETFs despite numerous tries from the brothers Winklevoss. As a matter of fact, the SEC has been the recipient of numerous criticizing quotes from the US community, especially when it accused Elon Musk , the billionaire tech philanthropist of fraud and charged him a fine of $20 million.

Despite the criticism, the SEC continued its strict relationship with cryptocurrencies which is now illustrated in this case of Basis. Quoting a representative from the company it was said that the way the US monetary policy works is that, for every new bond and share token a centralized whitelist is required. Because the Basis network model was completely based on continuously issuing tokens, it would put them in a loop of endless paperwork and whitelist applications, which would have been just unsustainable.

Stablecoins are Indeed Stable

Stablecoins mostly align themselves with a unit of fiat currency. For example, the USDT which is maintained on a 1 USD ration. Basis had a different idea for its stablecoin. Their network would rely on an algorithm in order to adjust the supply of the stable coin to maintain its price on the $1 position.

Despite the primary reason of closing down being unworkable regulations, it’s rumored that the software behind this network was also incompetent. This rumor was born when Al-Naji an executive of Basis struggled to answer the question of when the Basis stable coin would actually go into circulation.

However, there are also numerous theories as to why Basis was stopped in its tracks. Most prominent being the number of stablecoins on the market right now. The popularity of Basis would be under question as people could stray away from it, which would initially make it unmaintainable and outright unprofitable.

Konstantin has been working in the financial services industry since 2020. He is over-viewing various updates in the technology, regulation, and market movements. He’s passionate about cryptos and all things financial.

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