“I always wanted to move to Israel,” says Guralnek, who attended a Jewish day school in Sydney.
He was working in the administration of a factory in Australia when his boss died suddenly, and, at the age of 28, he realized it was a good time for him to move to Israel. “I thought, ‘I’m free, no strings attached, I can go.’”
Guralnek enrolled in Jerusalem’s Ulpan Etzion to learn Hebrew, then moved to the vibrant and bustling city of Tel Aviv, where he landed a series of minimum-wage jobs for NIS 25 (a little over $6) an hour: chopping vegetables in a restaurant, driving a disabled person, working the night shift at a hot-dog stand.
But in a city with sky-high rents and a cost of living relative to salaries second only to Japan, Guralnek could not survive. He heard that jobs in an industry called binary options paid twice what he was earning, plus commission.
‘It’s gambling and we’re a bookie’ — ex-binary options salesman
“As soon as I started looking for a job, I was getting calls from binary options companies every day,” he recalls. “They dominate the job advertisement space.”
Nor did Guralnek have any difficulty landing a job.
“You walk in and they make a big show like they’re assessing whether or not they want you. But they want you.”
On the day Guralnek stepped into the lavish offices of his new employer in the seaside town of Herzliya Pituah, he knew he had arrived.
“There was free coffee, free food,” says Guralnek. “My salary was 7,500 shekels ($1,900) per month, plus commission.”
Guralnek sat in a call center with about 50 other employees, many of whom were new immigrants fluent in a variety of languages. His job was to call people around the world and persuade them to “invest” in an ostensible financial product called “binary options.” The clients would be encouraged to make a deposit — to send money to his firm — and then use that money to make “trades”: The clients would try to assess whether a currency or commodity would go up or down on international markets within a certain, short period of time. If they predicted correctly, they won money, between 30 and 80 percent of the sum they had put down. If they were wrong, they forfeited all the money they put on that “trade.” Guralnek soon saw that the more trades a client made, the closer they came to losing the entirety of their initial deposit.
He had been instructed to present the binary option as an “investment” and himself as a “broker,” even though he knew they would most likely lose all their money. “The client isn’t actually buying anything. What he’s buying is a promise from our company that we will pay him. It’s gambling and we’re a bookie,” he says now.
Before he started the job, the company gave Guralnek a week-long sales course in which he was taught enough financial knowledge to sound good to a customer who knew less than him. He was also instructed in high-pressure sales tactics.
“They taught us how to make people uncomfortable, how to answer objections, how to keep them on the phone.”
The training session was known as a “conversion course” and the goal was to learn how to turn a telephone lead into a customer by taking their first deposit. At his company, salespeople were not allowed to take a deposit of less than $250.
During the sales course, the company’s management gave Guralnek advice that haunted him later. “They told us to leave our conscience at the door.”
As the weeks passed, more and more questions formed in Guralnek’s mind — questions that underlined the bizarre financial netherworld he had entered. Why didn’t he know the surnames of his managers? Why were workers prohibited from speaking Hebrew or bringing cellphones into the call center? Who was the company’s CEO? Why was it okay for the company’s Arab-Israeli staff to sell binary options in places like Saudi Arabia while other countries, like Israel, the United States and Iran were off-limits?
Even worse, Guralnek began to suspect that beyond the poor odds customers had of actually making any money, and beyond the aggressive sales tactics, what the company was doing was downright illegal.
For instance, every salesperson was asked to invent a fake name and biography. The call center used Voice over Internet Protocol (VoIP) technology, which displayed a local phone number to customers anywhere in the world. The company’s website listed an address in Cyprus.
“I was told to tell people I had years of experience in the market, that I had studied at Oxford and worked for the Bank of Scotland.”
Guralnek says he was told to present himself as a broker who made a commission on the trades and to emphasize how much money the customer could make while downplaying the risk. In fact, rather than helping customers to make smart trades, the “broker’s” true interest was for them to make unsuccessful predictions and lose their money.
Guralnek says he was also increasingly disquieted by what happened when the clients tried to quit. That’s when they would be asked for a lot of paperwork.
“We would say, ‘You want to withdraw? OK. We need to verify your identity before we can release the funds. You need to send us a photocopy of your utility bill, your driver’s license, your passport, your credit card’” — requirements, needless to say, that had not been mentioned when the client put money in.
While the customer was gathering and submitting this paperwork, a “retention” agent would call them and go through their trades, purportedly figuring out what went wrong and convincing them to continue trading. “We could delay that withdrawal for a long time.”
‘Why should I be blamed for selling something to stupid people? If someone is over 18 and wants alcohol, cigarettes, a knife, a binary option account, it’s his own responsibility’ — Facebook post
If a customer was persistent, says Guralnek, very often the company would stop taking their calls, or send them an email saying ‘we suspect you of fraud’ and freeze all their funds. Because the customer didn’t know the real name or location of their salesperson, “they had nowhere to turn to get their money back,” explains Guralnek.
But the grimmest part of the job for the young immigrant was asking for money from people who seemed poor and dejected.
“They believe they’re doing something good: They’re making an investment, doing something responsible. And they’re not. Every story is sad. Everyone’s got people depending on them. Lots of people are finally getting back on their feet after a drug problem or something.”
The worst was when a client told him, “I’m in hospital.”
“When someone says ‘I’m in hospital and I have cancer,’ we’re supposed to still sell them. But I would throw the sale every time. I couldn’t do it.”
If you type the words “binary options” or “forex” into Facebook groups that cater to new olim (immigrants to Israel), you will encounter long threads of heated exchanges.
“Do any of you who are involved in Forex/Binary options realize that this is a highly unregulated business that it is soliciting gambling to misinformed or uneducated persons?’ reads one such post in the popular Secret Tel Aviv group.
“Why should I be blamed for selling something to stupid people?” a woman replies. “If someone is over 18 and wants alcohol, cigarettes, a knife, a binary option account, it`s his own responsibility.”
“Would you sell it to your grandmother?” the original poster fires back.
In the “Keep Olim in Israel Movement” Facebook group, a woman writes, “Hi all, can someone explain to me what are Binary and Forex jobs and why people are so anti-working in these industries in Israel?”
“This field is dishonorable,” reads one reply. “I’ve done it and I felt nothing but shame and self-loathing for harassing people who never asked for this call and trying to get money out of them that they’re unlikely to ever get back.”
“If you don’t like it, don’t do it,” reads another. “Work what you feel is an ‘honest’ job, make your 6,000 shekels (approx $1,500) a month take away, spend it half on rent and live like a rodent with the rest of it.” He continues, “While the Binary and Forex industry and I pay 50% taxes on our salaries to pay for your health care, social security, and security, I can speak for all of us, we don’t need to be judged.”
No one seems to know precisely how big the binary options and forex industries are in Israel. Not even the Israel Securities Authority, which, when posed the question, responded via text message, “As the industry is still unregulated, we don’t have the full picture.”
But conservative estimates put the number of people employed in the industry at several thousand, mostly in Tel Aviv and its suburbs like Herzliya and Ramat Gan, while annual revenue could be anywhere from hundreds of millions to over a billion US dollars.
Globally, the term forex normally refers to legitimate trade in foreign currency, while binary options is the name of a financial instrument. In Israeli popular parlance, however, “binary options” and “forex” are often lumped together as part of the same industry: When Israelis refer to forex companies, they often mean companies that “trade” the binary options on currencies. Sometimes the terms Forex and binary options are used interchangeably to refer to rapid, all-or-nothing trades on a range of assets.
At some binary options firms, the online platform is manipulated to provide false results that ensure the customer loses
The “trading” process can work as follows, The Times of Israel was told. Having transferred their first financial deposit to the company, customers log in to an online trading platform, as directed by the company’s salespeople, and place money on a prediction that the price of a currency or commodity will go up or down on international markets in, say, the next five minutes. If the customer predicts correctly, he makes a profit of a certain percentage and the company loses money. If the customer is wrong, he loses all the money he placed on the trade, and the company keeps it. Professional options traders consulted by The Times of Israel said that even a financial genius cannot predict with any confidence what, say, the price of gold will do in the next five minutes; rather than an investment, the transaction is really nothing more than a gamble.
The misrepresentation of gambling as responsible investment would be bad enough.
What’s worse, though, and blatantly corrupt, The Times of Israel was told, is that, at some companies, the house is bent. A variety of ruses are used. The potential payout for a correct prediction is complex, opaque and calculated to minimize the company’s loss. If an asset is behaving in a predictable way — say, the price of copper starts to climb following an earthquake in Chile — the company will pull that asset from the online platform. At some binary options firms, the online platform is manipulated to provide false results that ensure the customer loses.
Estimates of the number of binary options and forex companies in Israel vary from 20 to several hundred. The IVC Research Center, a company that provides information about Israel’s technology sector, estimated in its 2015 yearbook that there are 100 online trading companies in Israel, the overwhelming majority of which fall into the categories of forex and binary options. IVC estimates these companies employ more that 2,800 people in Israel. However, the yearbook states, “it’s difficult to gauge the actual size of the online financial trading industry in Israel,” in part because the industry is “low-key” and its “Israel nexus is often understated.”