23Traders Update – Giora Tal, Sotar International, Market Giants, and some tax considerations

We have received further information since the publication of our initial report on the background of the 23Traders Binary Options scam. The involved Israeli tax lawyer Adi Mantel contacted us and tried to explain his involvement. He would only have been involved in the establishment of the scam in his capacity as a tax lawyer (for a client). Read the FinTelegram report here.

Giora Tal was part of the team

In addition, we have received information confirming a 2017 report by Simona Weinglass in The Times of Israel. The Israeli Giora Tal is said to be one of the founders of 23Traders along with the Austrian Hans Brabenetz. They purportedly managed to obtain $1.85 million in funding from the Israeli Founders Group. In a 2016 Founders Group prospectus, 23Traders’ founder is named as Giora Tal:

On the grounds of the emails available to us, the participation of Giora Tal in the 23Traders scheme can be confirmed beyond doubt. For example, he was involved in emails discussing payment matters between Market Giants Ltd and Payobin (Payotech Ltd). According to the documents available to us, he conducted his tax-efficient offshore business through Sotar International Ltd, registered in the British Virgin Islands in 2012.

To what extent Tal was advised in this regard by tax attorney Adi Mantel cannot be said at present. The fact, however, is that Adi Mantel stated that he was a nominee shareholder in the formation of Hermes Ventures Ltd.

Business Process Outsourcing

The company and/or its UK subsidiary Decimol Ltd, in turn, have entered into agreements with Market Giants Ltd to acquire clients victims for 23Traders. Consequently, the actual activities – Marketing, Boiler Rooms Agents, Conversion Services, Retention Services, Affiliate Services – were carried out by Market Giants in Tel Aviv. In the scene, this process of outsourcing business activities to the boiler room operators is also often trivially referred to as business process outsourcing BPO).

The Market Giants staff not only acquired the clients victims and their money for the 23Traders schemes. They also coordinated payment transactions with the Israeli Payobin. People from Hermes Ventures (Decimol) were hardly involved. Instead, we see Nir Digmi from Market Giants on many emails.

Payobin founders Eyal Nachum and his partner Tamir Zoltovski established the licensed financial services provider Moneta International UAB in Lithuania, and Hermes Solution Podgorica DOO in Montenegro.

In addition, 23Traders was allegedly operated as a white label solution by SpotOption in Israel.

Tax and legal issues

On the basis of the available documents and statements, it can be concluded that the schema’s operation was located in Tel Aviv. It can also be noted that a large part of 23Traders’ operational activities was actually carried out by Market Giants Ltd, a company registered in Tel Aviv. The Panama Papers have shown us how offshore constructions are used to conceal the realities of operating facilities, revenues, and tax implications.

In the opinion of a tax consulting firm consulted by FinTelegram, Israel should be considered the place of business and taxation due to its complete construction. According to the “Substance over form” principle applicable for taxation purposes, offshore constructions are to be considered as mere “form” only and of no use under most tax laws.

It is a known fact that the legal entities behind the binary options schemes have been dispersed around the world to disguise the real circumstances. New offshore destinations such as the Marshall Islands were developed, but also less developed jurisdictions such as Montenegro or Serbia were used to hide the money from the authorities and investors, i.e. for money laundering purposes.

Fund Recovery and damage claims

This also applies to the questions of compensation for the victims of 32Traders. A lawyer consulted by FinTelegram represents the (preliminary) legal opinion that the companies and persons in Austria, Israel and the UK involved in the scam of the 23Traders can be held liable for damages.