In 2016 Israel Securities Authority banned trading in binary options for Israeli customers. On Sunday the cabinet approved a new bill extending the ban to overseas customers by online trading firms based in Israel. The multi-billion dollar industry has drawn criticism over allegations of fraudulent.

The bill submitted to the Cabinet by Minister of Finance Moshe Kahlon. The bill also approved by the Ministerial Committee on Legislation, and will now go to the Knesset plenary for a first reading. No special difficulties are expected in the Knesset, and the bill will become effective within three months of its final approval on its second and third Knesset reading.

According to the bill, trading in binary options prohibits any type of trading forum that sells to overseas clients – even if they do not offer binary options, without receiving a license from the country where clients reside.

Breaking the law will be punishable by up to two years in prison and if money laundering is involved, punishment could reach 10 years in prison.

The Securities Authority said that Israeli regulators have received many complaints regarding losses suffered by binary options traders in various countries: “Various enforcement authorities, including the Securities Authority, recently received many severe complaints about many financial losses suffered by customers in various countries throughout the world as a result of activity in Israel trading floors operating with overseas investors, especially involving activity in binary options,” said in the statement.

“This phenomenon has assumed much larger proportions, and has generated a major negative worldwide impact, while significantly damaging Israel’s image in general, and that of the capital market in Israel in particular,” the Securities Authority wrote.

ISA Chairman Professor  Shmuel Hauser said in a statement: “Beyond the severe economic damage to people all over the world, the marketers of binary options are causing ever-increasing severe and destructive damage to Israel’s image, and are fanning the flames of anti-Semitism against Jews in general, and Israelis in particular. For the first time, the bill will authorize the Securities Authority to take action against those parties currently operating from Israel with customers outside of Israel, while imposing severe civil and criminal sanctions, including prison terms.”

The owner of an Israeli binary options firm was arrested on suspicion of fraud and extortion last month after an investor abroad reported losses of more than $500,000 to the online company, the first arrest since authorities announced a crackdown, Reuters report.

London-based lawyers told Reuters hundreds of their clients were duped out of vast sums of money by some Israeli firms. More than 100 operators are estimated to be based in Israel, a technology hub.

Investors have accused some of these Israeli companies of transferring money between accounts without approval and in some cases of preventing them from withdrawing their own funds.