Tax evasion arrests in Israel for tycoons using Scots firm

The men, Haim Toledano and Saar Pilosof, were detained amid an ongoing major international investigation in to unregulated “binary options” websites officially regarded as scams in several countries.

Such sites offer punters the chance of an all-or-nothing bet on financial markets, such as the movements of two Latin American currencies. 

Almost all binary options websites are scams, warn regulators, and very few are regulated in any way, existing online outside any national jurisdiction.

Mr Toledano and Mr Pilosof are suspected of hiding millions of shekels from Israel’s tax authority using shell companies in tax havens.

The Herald can reveal that one of their main websites – ubinary.com, described as a “scam” by Australia’s financial regulator – is fronted by a Scottish limited partnership or SLP.

The firm, UB Innovative Partners LP, of Edinburgh, is one of thousands of such firms registered in recent years whose owners, under a controversial loophole in Scots law, are able to remain secret, file no accounts and pay no taxes.

Revelations by The Herald about the firm’s role in Israel’s growing binary options scandal come as SNP MP Roger Mullin once again called in the House of Commons for the UK Government to review SLPs, which are widely advertised as tax avoidance and secrecy vehicles, especially in the former USSR.

Mr Mullin said: “This is further proof of need for urgent action on SLPs. It is good that there are some arrests, but this is merely the tip of the iceberg.”

The Herald has previously named three other SLPs acting as fronts for three other binary options websites – Finpari, Barclays Traders and Solution-Capital – all of which have been condemned by international regulators.

Binary options websites, and related forex gambling sites, are often run out of Israel, as revealed earlier this year by a detailed investigation by the Times of Israel.

Roger Mullin MP

Investors, sometimes cold-called from Tel Aviv by people saying they have previously worked at a Scottish bank, are offered incentives to bet on the movements of financial indicators. The businesses employ thousands in Israel and are believed to turn over hundreds of millions of pounds a year.

However, watchdogs in France, Canada and other nations have warned investors are the victims of scams. Belgium banned binary options this summer.

Mr Toledano and Mr Pilosof were named in the Panama Papers and, according to Israeli news reports, have been accused of failing to declare income funnelled through offshore firms in Anguilla, Belize and the British Virgin Islands.

Their two main websites were UFX and ubinary.com, which the Australian Securities Commission advised “could be involved in a scam”.

The ubinary.com site provides two corporate addresses, UB Innovation Limited in the Marshall Islands and UB Innovative Partners in St Vincent Street, Edinburgh.

Ubinary's website uses Scottish address

The former is one of two opaque partners in the latter, according to Companies House filings. The SLP was set up by a London-based agency which generates large numbers of similar businesses.

The Herald estimates that the UK has 27,000 firms with opaque tax haven ownership, of which two out of three are Scottish. Company law is reserved.

The SNP, Labour, Liberal Democrats and Greens have called for changes to the law to close the SLP loophole.