TEL AVIV (Reuters) - Banc De Binary, one of the biggest and best-known providers of online trading in binary options, which allow investors to bet on short-term moves in financial assets, said it is winding down its business, citing regulatory pressures.
“Banc De Binary will be gradually downsizing its operations due to regulatory constraints,” the Israeli-owned and Cyprus-registered company said in a statement emailed to Reuters.
“For clients that have eligible funds in their account, we are encouraging them to withdraw the remaining balance.”
Banc De Binary paid $11 million in restitution and penalties in the United States last year over allegations it had signed up U.S. investors illegally.
Israel’s chief securities regulator Shmuel Hauser said in November he was working with authorities in the United States, Britain, France and Belgium to investigate complaints against Israeli firms selling the risky online options internationally.
More than 100 such firms are estimated to be working in Israel.
Hauser said the scale and reach of the online binary options business meant regulators must coordinate more closely.
A Reuters special report published in September shed light on the extent of the industry and accusations by clients of London-based lawyers who say they have been duped out of vast sums of money by some Israeli firms.
While the industry markets itself as a legitimate investment, clients of some firms say they are little more than high-pressure scams. They accuse the companies of transferring money between accounts without approval and in some cases of preventing them from withdrawing funds.
Because they are based online and allow trading from smartphones or tablets, the industry has attracted a vast number of users who are not professional dealers.
Binary options usually involve betting on whether individual shares, indexes, currencies or other securities will go up or down in a given period of time. The time for the option to “mature” is short - as little as a minute.
The industry is growing fast, with trading in binary options soaring over the last decade in China, Japan, the United States and Europe. Two Israeli trading platforms that supply technology to online brokers say they handle a combined $8 billion in volumes annually.
Securities regulator Hauser banned companies from selling binary options in Israel in March and has asked the attorney general to consider changing the law so he can ban Israeli companies from selling binary options abroad.
Officials told a parliamentary hearing last week that draft legislation allowing him to do that will be ready in a matter of weeks. An Israeli parliamentary committee that oversees government is expected to meet again on the issue in February.
Reporting by Tova Cohen; Editing by Catherine Evans