AT LEAST a dozen unregulated financial gambling sites – many derided as scams – are now being fronted by Scottish shell firms.
Online brokers which offer all-or-nothing bets on currency and stock markets have set up shop in Aberdeen, Glasgow and especially Edinburgh as they take advantage of Scotland’s soft-touch corporate registration regime.
Gamblers make fixed-odd bets on financial markets via so-called “binary options” websites.
The Herald yesterday revealed that the now arrested owners of one such website had used a controversial Scottish limited partnership (SLPs) to run their business.
Haim Toledano and Saar Pilosof were detained in their native Israel, believed to be the global hub of the industry after being accused of a multi-million-shekel tax evasion.
Their site, www.ubinary.com, had already been described as a scam by regulators in Australia.
An investigation by this newspaper has also identified 11 other websites offering similar unregulated market gambling through Scottish shell firms, mostly SLPs.
An analysis of binary options websites suggests that their formal ownership is migrating to Scotland from other jurisdictions.
This revelation comes as SNP MP Roger Mullin in the House of Commons on Wednesday once again urged the UK Government to review the century-old reserved Scots Law which allows the secret owners of SLPs to pay no tax and file no accounts.
Another critic of the current regime, Andy Wightman MSP of the Scottish Greens, said: “The extent to which an obscure legal entity established in 1907 is now, over a century later, being used for an exotic cocktail of nefarious schemes around the world is breathtaking.
“I am continuing to press the Scottish Government to sit down with me and explore how the criminal law of Scotland can be amended to increase the powers of law enforcement agencies in Scotland.”
Andy Wightman MSP
Binary options sites with Scottish links include Imperial Options, which claims to be owned and managed by an SLP registered at the same Edinburgh virtual office as www.ubinary.com’s owner.
Imperial Options, which uses a Russian domain name but has sites in English and Russian, has been the subject of international warnings. One of Canada’s regulators, the British Columbia Securities Commission, has urged investors to “exercise caution” with the site.
However, this warning was made nearly a year before Imperial Options’ formal owner, Global Transactions, was incorporated this April, suggesting the website has switched its “brass plate” ownership to Scotland.
Other similar websites citing Scottish legal addresses and fronted by SLPs include Stack Options, HBC Broker, St Binary, Nexcapindex, Sigma Option, Expert Option, and RW Markets. The Herald has previously named Finpari, Barclays Traders and Solution-Capital as binary options trading sites using Scottish shell companies. All three were the subject of warnings from French regulators.
Some of the nominally Scottish binary options traders feature warnings that investments are high risk. These includes St Binary, whose website is covered in British symbols, including red Routemaster buses and signage for the London Underground. It is formally owned by a newly created SLP called Smith and Taylor Financial Services, one of whose partners is an entirely opaque firm called Optimal Success Limited, of the Marshall Islands. The only contact for Optimal Success is an address on Majuro, a tiny atoll in the Pacific.
Binary options sites have historically used the Marshall Islands, not Scotland, as their official places of registration. British watchdog the Financial Conduct Authority believes such sites should be regulated – but by gaming authorities, not financial ones. Other states are moving to ban the sites altogether.