Comment by Animats | Hacker News Reader

Comment by Animats | Hacker News Reader

Is the real purpose of this deal money-laundering by organized crime? DraftKings was supposedly losing money, while SBTech makes money illegally.

The BTi/CoreTech CEO was formerly the CEO (and previously CTO) of SpotOption, the binary option scam run out of Ramat Gan, Israel.[1] That was a big operation. Out front were the fake "binary option brokers", in reality bucket shops, such as Banc de Binary. SpotOption provided the back-end services, while the front companies ran call centers to recruit more suckers. Some of the front companies appeared to be operated directly by SpotOption, although that was never entirely clear.

Until 2017, it was legal for Israeli companies to scam non-Israelis in this way.[2] When the binary option business was made illegal in Israel, the companies were given three months to move to another country. "Officials say that numerous Israeli-owned binary options firms have already begun moving to countries where the activity has not yet been banned." SpotOption moved to Bulgaria.

The scam goes on, under new names.[3] "Since then, some scammers have shifted to schemes involving forex trading, CFD or cryptocurrency speculation."

So that's the back story here.

[1] https://www.timesofisrael.com/sec-charges-israels-main-binar...

[2] https://www.haaretz.com/israel-news/business/israel-bans-bin...

[3] https://www.timesofisrael.com/german-police-raid-call-center...

It's interesting to me that people like this can continue to succeed in modern democracies. There seems to be no consequences for massive financial crimes anymore, and the more brazen you are the more you are rewarded.

If I broke into the homes of millions of people to fleece them of their life savings I'd never be seeing the outside of a prison but these guys do it via a confidence scam and the internet and never see the inside of a prison. Then they become CEO of another company and start all over agin.

I stop believing in democracy when I read stories like these.

it has been said that democracy is the worst form of Government except for all those other forms that have been tried from time to time

https://richardlangworth.com/worst-form-of-government

The nuance is slightly different - it's like the CEO's breaking into the homes of millions of Americans. The fellow participants in his democracy (in Israel) were not affected; there are two separate jurisdictions.

"Well, we barred them from doing it within our borders" is not a great example of a democracy in action. These firms were allowed to operate a criminal enterprise until 2017 on the voters' home soil. Just because it wasn't against the laws at that time doesn't absolve the political leadership of responsibility.

> "Well, we barred them from doing it within our borders" is not a great example of a democracy in action.

It kind of is, though. The voters voted to protect themselves. And while you could think of that as selfish and not be wrong, at least they were able to protect themselves against a well-funded lobby that almost certainly would have liked to prevent them.

The entire Times of Israel series on binary options [1] tells a sad, sordid story. It came out slowly. At first, it just looked like a few minor scammers. But as the Times dug deeper, publishing over 50 articles, it came out that at peak, the binary options scam was 40% of the Israeli financial sector and had enough political connections to stall enforcement.

The Israeli crackdown came only after the scam was starting to hurt Israel's foreign relations.[2] Israel's "public diplomacy" minister:

“Leaving aside the profound moral questions this raises,” [referring to reports estimating that billions of dollars have been stolen from unwitting customers by fraudulent Israeli binary options firms], “I come from the field of foreign policy, protecting Israel from delegitimization and BDS [the boycott, divest and sanction movement]… These activities threaten Israel’s legitimacy. [The industry] will “contribute to those who want to delegitimize us if these charges turn out to be absolutely true. It’s very, very disturbing… horrible.”

So now there's a large community of scammers who, having been kicked out of binary options in Israel, are looking for new areas in which to operate. Forex, contracts for difference, and cryptocurrency scams have been found. DraftKings has some of the same people involved.

This is one of the worst things that can happen to a country - developing a large, successful criminal class. It's really hard to get rid of them, and they may end up running the country, as happened to Russia after the downfall of the USSR.

[1] https://www.timesofisrael.com/topic/binary-options/

[2] https://www.timesofisrael.com/michael-oren-backs-knesset-pro...

These things happen in autocracies too, and often with the blessing of the autocrats in exchange for huge bribes.

Money talks... in all systems of government.

Autocracies don't posit themselves as a model of governance for the rest of the world.

The propaganda coming from autocracies begs to differ.

The difference is that people in a Democracy are supposed to combat corruption like this. In an Autocracy it is just the order of the day, nobody tries to seriously oppose it. Or they die trying.

> There seems to be no consequences for massive financial crimes anymore, and the more brazen you are the more you are rewarded.

Finance is too big to fail.

Number must go up or everything breaks and there is chaos in the streets. If we hold huge scale financial criminals accountable, it could spark financial contagion and number may not go up.

Virtually all countries are in this boat to some extent.

Sorry but how does this relate to democracy? This seems like your issue would be with the sovereignty of the various countries involved.

What does it matter if those countries are democratic or not?

They really mean "un-corrupted government that cares about the concerns of its average citizens".

And that is the root of the confusion. Democracies may be less prone to corruption, but they're certainly not immune to it.

They really mean "governments that uphold the rule of law and apply it equally to all"

White collar law enforcement picks easy targets. They know these guys will outspend their legal budgets.

>in reality bucket shops

Not related to your main point, but I was reading about historical bucket shops on wikipedia yesterday. It's my understanding that they are inherently a scam. They are basically people betting on the movement of stocks without ever taking a position in the stock market. They were outlawed in the US in the 20s.

Are you using the same definition I am, and in practice are modern bucket shops basically always a vehicle for fraud? (I mean, why wouldn't you just buy the stock if you are legit. The barrier in 2021 is so low.)

Yeah, if you're a legit buyer, there's no reason not to use a legit broker. Bucket shops today offer higher leverage, and sometimes binary options. They are also basically a black hole for your money. If you're lucky enough to win, they'll make excuses and never actually return any cash.

The definition of "bucket shop" has not changed. The question is always "who's the counterparty". Who has to pay up if you win? Do they have the assets to do so? Can you make them pay up if they don't want to?

With a real broker, the broker is not taking any risk. They just take a commission between buyer and seller. With a bucket shop, the broker has a risk, so it's in their interest to make the customer lose.

A big market move can wipe out a bucket shop. See "Madoff scam". Madoff was a bucket shop operator. The assets his statements said the investors owned did not really exist.

Sure, but is betfair a scam too? Or what about an OTC desk? Both of these are similar to bucket shops wrt who's the CP.

Market makers in the US are required to have enough capital of their own so that they don't default on their obligations.[1] This requires substantial assets. All countries with significant international market making activity have similar requirements. Institutions will not trade with parties that don't have that kind of backup.

US market makers have to settle and pay within three days. (Was that changed to two days?) Missing that deadline is a huge event and puts a market maker out of business within hours. See Bear Sterns, although that was a slightly different situation. Because the business does not allow long-term outstanding balances, it doesn't lend itself to scams.

British bookmakers are highly regulated. "UK licensed operators are required to hold customer deposits and stakes in ring fenced independent accounts in case they do fail".

The binary options business thrived in the UK for a while because they were considered gambling by the financial regulator and a financial product by the gambling regulator. That ended in April 2018, when they were banned.

[1] https://www.law.cornell.edu/cfr/text/17/240.15c3-1

Bucket shops have historically offered high leverage, something that is not possible when buying equities outright.

There's a whole gamut of different kinds of bucket shops, some being on the less shady side others on the outright take your money and don't let you withdraw it side.

I’d be very interested in any bucket shop wikipedia articles you might have stumbled across if you care to share! Or any historical cases of securities fraud that pre-date/coincide with the Martin Act, ‘33 Act, and ‘34 Act, if anyone happens to know of any worth sharing.

I've also seen bucket shop used somewhat pejoratively when discussing crypto exchanges: not accusing them of never taking a position, but rather that they are under-collateralized or exposed to risk.

An exchange, much like a ponzi scheme, could spend 10% of customer deposits and no one would notice until there is a 'run on the bank'. Similarly, they could choose to not execute orders to effectively take a position in the market - if the market moves in their direction gains can be huge, but if it moves against them it can be disastrous.

EU has poured HUNDREDS of billions in Eastern EU. Corruption there is more honest than in USA: no government contract unless you kickback xx%. Then think of the public land thefts, tones and tones of drugs and you get the idea. That money has to be laundered in industrial size machines.

Drugs in Eastern EU? Did you perhaps mean Spain (cannabis), Italy (heroin), Belgium (cocaine), Netherlands (mdma, amphetamines etc). You can pull rightwing ideas out of tabloids, or you could you know, read some of EU own reports - just google "European Drug Report. Trends and Developments".

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