Adam Nujidat showed no little courage when he testified in front of the Knesset on Monday about Israel’s binary option industry, where he once worked.
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Binary trading is a big business in Israel. By some estimates there are about 200 firms offering binary options, employing as many as 15,000 people. Binary trading involves placing a bet on whether the value of a financial asset – a currency, a commodity, a company’s shares or a stock index – will rise or fall in a particular timeframe. If you’re right, you can earn a big return, but if you’re wrong, you lose your investment.
Banned in many countries, it has earned an unsavory reputation for the misleading marketing of financial instruments where investors are almost certain to lose their money. But only in the last year or so has the industry attracted much public attention in Israel.
Until two months ago, Nujidat, a 27-year-old Israeli Arab from Haifa with a high school education, was working for a Ramat Gan binary trading firm he declines to name. He was there for just six weeks. Unusually, he decided to go public with experience in the binary options business and spoke to TheMarker this week as well.
“The company made clear to me that ‘no client makes money – we’re selling dreams to people overseas,’” Nujidat told the Knesset State Control Committee.
Did you say in your CV you spoke a foreign language?
“I said I spoke Arabic and they were looking for Arabic speakers so they could sell to wealthy people in the United Arab Emirates, Kuwait and Saudi Arabia. With Egyptian and Syrians they didn’t work. I came there without knowing what the company did.”
What did they tell you in the interview?
“The manager asked me if I know anything about binary options. I told him no. He explained to me that the company deals in investments, it’s a business where you either make money or lose it. One or zero.
“I asked him an innocent question: ‘Do you tell customers they stand to lose money?’ He answered, ‘No, we sell people dreams.’ I was shocked by what he told me. ... Something pushed me to understand what they were doing, I had to figure out what the dirty business going on here was. He sent me for a polygraph test.”
Nujidat passed the test, which he said involved questions about his reliability. He was introduced to his team and asked to choose a name for his job. “I asked, ‘Why?’ I had always worked in services under my name. He gave me the last name Akram and the first name Aladdin.”
Many of the others took on the name of celebrities from the Arab world, which Nujidat said is common practice in the industry.
How did a standard pitch to a new prospective customer go?
“The conversation would be in Arabic. For example, ‘Hello, Salwa, how are you? Everything okay? I’m Aladdin Akram from binary company X. We’re a stock market company. We want you to invest in the stock market.”
What stock market?
Nujidat confuses stocks markets with the companies that trade on them. “The Apple bourse or the Samsung bourse. We would give them names of companies. We’d explain there are options to trade in companies or a contract for oil or gold.”
You represented yourselves as an investment house?
“Yes. We said we were a bourse company in London. Some customers you tell it’s like a bank account in which you trade securities. Sales reps can say whatever they want. I never made these calls – I only listed in and completed the orders.”
Did you get the impression that the clients you approached understood something about stock market trading?
“They didn’t understand. The rep would say to them, ‘I’ll be working for you. I’m an expert. I’ll arrange your positions. I’ll give you guidance. You’ll hear from me every day for 15 minutes.’”
Did you ever see anyone make money?
“Whenever a customer deposited money he never got it back. The money would go to the company. The rep would convince customers to deposit more money by offering them bonuses, For example, if they deposited $250, the company would kick in another $250. It wouldn’t end there. After they put in the money, the account manager would come back to them that would happen within an hour. He would convince them to put more and more money in – it could reach $100,000.”
How did you get someone to transfer to you $100,000 over the phone?
“On the company’s website there’s a trading account [for each customer]. He looks at his account and he sees he’s earning money, a lot of money. But it’s an illusion. The account manager would take advantage of that and tell the customer to put in more money. 'See how much you’ve made, you’ll be a millionaire.’
“At some stage the client would want to take out his profits and make an order online. That would come to the back office. The department would than tell the sales rep to convince the client not to withdraw and start a war of attrition with him so they would think twice about doing it. They would show him the company added as a bonus another $500 or $1,000 to the account, but it wasn’t real money – just a sum appearing in the system. They would never give the client back his money.”
Do the employees know they’re defrauding people?
“They know, but they say, ‘What do I care? The Saudis spend money on women, why not just take it from them?’ They look for any excuse. I didn’t want to show it, but the work depressed me.”