In court battle, blockchain firms reveal ties to banned binary options industry.
Shareholders of Invest.com allege malfeasance by the company’s director, Moshe Hogeg, who owns the Beitar Jerusalem soccer team; Hogeg is countersuing.
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On November 23, a Tel Aviv judge appointed a temporary liquidator for the company IDC Investdotcom Holdings, better known as Invest.com, after it failed to mount a defense in court against a November 15 petition to wind it up. The petition to liquidate the firm, which is run by the owner of Jerusalem’s Beitar soccer team, reveals the close ties between Israel’s recently outlawed binary options
industry and the country’s newly thriving cryptocurrency scene.
The November 15 petition was brought by 17 former shareholders of the now-defunct Israeli binary options company AnyOption. It asked the court to wind up IDC Investdotcom Holdings Limited, binary options a Cypriot company that the petitioners allege was run from Israel. The former AnyOption shareholders claim that they were also shareholders in IDC Investdotcom Holdings, but allege that one of the company’s directors, Moshe Hogeg, has systematically robbed the company of its assets and profits in such a way that the firm, binary options strategy which should have been highly profitable, has become insolvent and cannot cover its basic operating costs.
A spokesman said Hogeg is countersuing AnyOption in a Cypriot court.
The 17 petitioners claimed that despite the fact that the company, better known as Invest.com, has carried out two successful ICOs (Initial Coin Offerings), each of which netted tens of millions of dollars, Hogeg has not shared the revenues from these public offerings with the petitioners, as they claim he was contractually obliged to do, but instead has unlawfully taken money for his own use.
Hogeg, one of Israel’s highest-profile cryptocurrency entrepreneurs, has in recent months gone on a multimillion-dollar spending spree. On June 20, 2018, it was reported that he had purchased $19 million of land in the wealthy Tel Aviv suburb of Kfar Shmaryahu from businessman Ilan Ben-Dov, paying for part of it in Bitcoin. In August, he bought Beitar Jerusalem, one of Israel’s top soccer teams, for $7.2 million. In October, Tel Aviv University announced that it had accepted a $1.9 million donation from Hogeg to establish the "Hogeg Institute for Blockchain Applications" at the university’s Coller School of Management.
Invest.com has yet to file a response to the petition, but a spokesman for Moshe Hogeg told the Times of Israel that the company is not insolvent. “Nevertheless there’s no way to anticipate what will be the court’s order in a legal procedure,” he added.
Hogeg presides over a network of companies registered both in Israel and abroad. He is the co-founder and managing partner of Singulariteam, a private venture capital fund that invests in Israeli technology firms. He is a founder of the Alignment Blockchain Hub, a company that consults and helps develop blockchain early-stage projects. Singulariteam’s portfolio, according to its website, includes such companies as Invest.com, binary options strategy Sirin Labs, GetStocks, Yo and Mobli.
According to the court petition, Singulariteam owned 18.69 percent of IDC Investdotcom Holdings Ltd., and Hogeg was a director of the company.
According to Hebrew media reports, Singulariteam has claimed in response to the allegations that it sued AnyOption and binary options its shareholders in Cypriot court on May 14 for fraud and forex breach of contract. A spokesman for Hogeg confirmed to The Times of Israel that such a lawsuit had been filed. He added that AnyOption has received all the tokens in Stox to which it was entitled.
From binary options to cryptocurrencies.
Israel outlawed the binary options industry in October 2017, in part as a result of enormous pressure experienced by representatives of the Israel Securities Authority at meetings of the International Organization of Securities Commissions (IOSCO).
A binary option is an option contract whose payoff depends on the price of another asset, like gold, wheat, or Apple stocks. If the holders of the options guess correctly about the direction that the price has moved at the time of expiry, they earn a predetermined amount of money, and, if not, they lose the money "invested" in a particular trade. In the case of the Israeli binary options industry, however, companies offering these contracts were largely fraudulent. They would dupe victims worldwide into believing that they were successfully investing and earning money, encouraging them to deposit more and more into their accounts, until the company eventually cut off contact with the investor and disappeared with all or almost all of their money. The industry is estimated to have stolen billions of dollars from victims worldwide over a period of 10 years. Since Israel banned the industry, many former binary options operatives have pivoted to other financial products, including initial coin offerings or ICOs.
An Initial Coin Offering is a form of fundraising where a startup, instead of issuing shares to the public, issues a special token, or digital coin, that can be used within that company’s platform to access goods and services. The startup thereby acquires both users and funding, and the hope is that if the startup is successful, the value of the token will rise on secondary markets, enriching its holders.
Until it merged with Invest.com in June 2017, AnyOption was one of Israel’s longest-lived binary options firms, with a history of warnings from foreign regulators.
In December 2009, Argentinian regulators ordered the company behind AnyOption.com to stop soliciting customers in Argentina. In December 2011, Italian regulators issued a warning about the company for operating without authorization. In December 2012, binary options strategy the company received regulation in Cyprus, giving it license to operate throughout Europe. Despite its regulation in Europe, in September 2015 the Ontario Securities Commission issued a warning to investors about AnyOption.com and in the same month the Financial and Consumer Affairs Authority of Saskatchewan in Canada issued a cease trade order against the company.
According to an affidavit filed by Shy Datika, one of the primary shareholders of AnyOption, Invest.com merged with AnyOption in June 2017, when it became clear that Israel would soon pass a law banning binary options and it would no longer be legal for AnyOption to sell binary options. Datika’s sister, Liora Shimoni, happens to be a top official in the office of the State Comptroller, the government body whose role is to be a watchdog against corruption.
"On the eve of signing the merger with IDC Investdotcom, AnyOption had millions of customers, licenses to carry out its activities in Europe and elsewhere, and cash of more than a million dollars. It had professional and well-trained sales people, an advanced trading platform and intellectual property,” reads the petition.
According to Datika, Invest.com was interested in acquiring all these assets for its own business. In the beginning, claimed Datika, Invest.com offered forex and CFD trading to investors, but later it decided to try to raise money through Initial Coin Offerings of cryptocurrencies.
According to Datika, despite the fact that IDC Investdotcom is a Cyprus-registered company, most of its employees and senior management, including Hogeg, operated out of the offices of its Israeli subsidiary at 2 Jabotinsky Street in Ramat Gan.
In February 2018, according to Datika, AnyOption and Invest.com changed the terms of their merger agreement. Both agreements stipulated that AnyOption shareholders would own 35 percent of Invest.com, but the new agreement stipulated that instead of paying the company $7 million, Invest.