Crypto Investors Ask if DX.Exchange is Phishy? Nasdaq-linked Exchange's Questionable Past Surfaces

DX.Exchange generated positive attention from across the crypto community last week for offering tokenized versions of Nasdaq-listed US stocks. This week, however, that same exchange is being linked to a shady binary options trading platform.

Binary options trading platforms have become synonymous with online scams. Some countries – like Canada – have even banned binary options trading. That’s why the crypto community is concerned with an apparent connection between DX.Exchange and a binary options trading platform called SpotOption.

SpotOption was a controversial binary options trading platform based in Israel. The exchange has since shut down. However, sleuths in the crypto community have spotted questionable ties between SpotOption and the recently-launched DX.Exchange platform.

The news broke on CCN.com this past week. DX.Exchange has already responded to the report and claims they did nothing wrong. However, CCN.com lays a comprehensive case that seems to connect DX.Exchange with convicted financial criminals in Israel.

Let’s take a closer look at this story as it continues to unravel this week.

DX.Exchange and SpotOption Have Direct Connections

As reported by CCN.com, a woman named Limor Patarkazishvili is the listed owner of the DX.Exchange platform, a new crypto-style exchange powered by Nasdaq’s Matching Engine Technology. The platform made headlines after launching in 2018 for listing Nasdaq US stocks on the platform.

Users could trade Nasdaq stocks on the same platform as cryptocurrency tokens as easily as they would trade tokens.

An investigation into Patarkazishvili, however, has revealed some shady ties to scam exchanges in the past. Patarkazishvili previously owned 90% of the shady binary options trading platform called SpotOption, which closed earlier this month amidst controversy.

The most recent claim to fame of SpotOption is that it co-sponsored a crypto summit with financial media giant Bloomberg in December 2018.

Unfortunately, SpotOption was found to be more of a scam than a legitimate crypto trading platform. The binary options software provider was identified by the Times of Israel as one of more than 100 firms that scammed countless customers around the world.

Binary options platforms aren’t a scam by nature, but they are traditionally linked to some of the most prevalent online scams. Even the more legitimate binary options trading platforms tend to engage in shady marketing tactics to attract users to the platform.

Last year, the government of Israel decided the market for binary options trading was so problematic that they decided to ban the industry entirely. Since January 2018, binary options trading has been banned across Israel.

Why Was SpotOption Forced to Close Down?

We know that the owner of DX.Exchange previously owned 90% of SpotOption. That’s a problem because SpotOption engaged in some extremely problematic practices in the past. CCN.com dug deeper into the shady past of SpotOption:

“Founded in 2010, SpotOption enjoyed meteoric growth over the next five years. Indeed, it processed so much volume that its CEO Lee Elbaz bragged in a 2015 interview, “We are the industry.””

At its peak, SpotOption provided back-end services to at least 300 global affiliates, many of which were based in Israel. Firms could white-label the SpotOption platform and offer binary options trading to their own users.

The business looked legit from the outside. However, the business was described as “a murky cesspool of rampant fraud behind the scenes.”

In one Times of Israel report on the shady company, Raoul Wootliff explained how the company engaged in fraudulent practices:

“Fraudulent Israeli binary options companies ostensibly offer customers worldwide a potentially profitable short-term investment. But in reality — through rigged trading platforms, refusal to pay out, and other ruses — these companies fleece the vast majority of customers of most or all of their money. The fraudulent salespeople routinely conceal where they are located, misrepresent what they are selling, and use false identities.”

In other words, this wasn’t just one or two instances of fraud; SpotOption repeatedly engaged in problematic business practices to enrich itself – at least according to the Times of Israel.

The FBI Raided SpotOption Headquarters in January 2018

SpotOption’s fraudulent practices allegedly became so prevalent that in January 2018, the FBI was forced to take action. In January 2018, the FBI raided SpotOption offices in Israel while pursuing a case against Yukom CEO Lee Elbaz.

Yukom was one of many brokers using SpotOption’s software. Yukom had white-labeled the binary options trading software and offered the platform to clients. The FBI had built a case for fraud against Elbaz to get cooperation from local law enforcement.

The FBI case dated back to September 2017, when Elbaz faced an indictment from a U.S. federal grand jury. She was accused of conspiracy to commit wire fraud and three counts of wire fraud for trying to defraud investors in the United States with a binary options trading scheme. Elbaz was arrested while trying to enter the United States, and her case is currently nearing its conclusion.

In a follow-up story in October 2017, SpotOption drew further backlash amidst revelations that the Israeli government had awarded the company over $270,000 in grants to expand its operations in China.

Israel’s Economic Ministry granted the loan to SpotOption even after the organization learned about the problematic binary options trading industry.

Overall, at its height, SpotOption claimed to be processing over $5 billion in volume per year. However, this revenue claim has never been verified.

Founder of SpotOption Convicted of Embezzling $68 Million

The founder of SpotOption was Israeli entrepreneur Pinchas Peterktzishvilly, who usually goes by the name Pini Peter. Pini Peter was convicted of helping to embezzle around $68 million USD (254 million Shekels). Specifically, Peter forged signatures while helping to embezzle the money at TradeBank. He was convicted by an Israeli court in 2007.

Meanwhile, SpotOption co-founder Oren Shabat Laurent also reportedly engaged in fraudulent financial activities. Here’s how CCN.com explained Laurent’s work:

“SpotOption’s co-founder is a self-professed Israeli crypto advocate named Oren Shabat Laurent. He has been in trouble for hiring experts to help mask the way both SpotOption and his own company, Banc De Binary, used affiliates and brokers to facilitate the billions of dollars gleaned in their fraud scheme.”

In some countries, being convicted of a financial crime prevents you from opening a financial business in the future.

In Israel, however, this is not the case. Peterktzishvilly launched SpotOption five years after being convicted of helping to embezzle $68 million, eventually growing SpotOption to be a $5 billion business.

How is DX.Exchange Linked to SpotOption’s Shady History?

So far, we’ve detailed how SpotOption and its founding team have engaged in fraudulent activities over the years. We’ve explained that SpotOption’s founder was convicted of helping to embezzle $68 million, for example.

But how is DX.Exchange linked to this? What did DX.Exchange owner and SpotOption founder Limor Patarkazishvili do?

Well, in mid-2017, when the government of Israel was exploring clamping down on binary options trading, Pini Peter (the founder of SpotOption) gave the majority of his stake in SpotOption to his wife, Limor Patarkazishvili.

“He must have realized that a shake-up was on the cards, since his offices had been raided, and he had seen colleagues get arrested,” reports CCN.com.

Fearing further crackdowns, it appears that Pini Peter gave 90% of the ownership stake in SpotOption to his wife, Limor Patarkazishvili.

Today, Limor Patarkazishvili is the only registered owner of DX.Exchange’s parent company. Here’s what the business registration document states, as spotted by CCN.com:

“Dx.Exchange is owned and operated by Coins Marketplace Technologies OÜ. Roosikrantsi 2, 10119 Tallinn, Estonia. Licences numbers FVR000051 and FRK000039.”

The owner of DX.Exchange is called Coins Marketplace Technologies. It’s a Tallinn, Estonia-based business. The only registered owner of the business is Limor Patarkazishvili.

DX.Exchange Denies Any Connection to SpotOption

DX.Exchange has been a media darling over the past few weeks, quickly generating positive media attention from across the crypto community.

That’s why CCN.com’s report from this past week came as a shock: could one of the crypto community’s brightest new stars be linked to serious financial fraud?

DX.Exchange quickly responded to the story. In a post on Reddit, here’s what the exchange had to say:

“We received several questions about a company called SpotOption and we wish to clarify that Dx.Exchange is not associated to SpotOption in any way.”

DX.Exchange admitted that it hired former SpotOption employees at its Israeli branch. However, the company insists that “we hire people, we don’t hire companies”.

How does DX.Exchange explain the connection to SpotOption between MPS Marketplace Technologies? Here’s how they responded:

“In regards to MPS Marketplace Technologies Ltd., it is our understanding that MPS has done an agreement with the defunct Spotoption group to obtain their market maker license. We have done our due diligence and found MPS comply with all regulations, therefore we were comfortable forming the partnership with MPS.”

The comments were made on a post called, “Be aware of this, the truth behind DX exchange.” The post was featured on ETHTrader in January 2019.

It’s unclear how DX.Exchange explains the connection between MPS Marketplace Technologies and Limor Patarkazishvili, including the fact that she appears to be married to a convicted criminal who transferred business assets to her to allegedly avoid being seized.

Ultimately, this whole issue with SpotOption and DX.Exchange continues to unravel. DX.Exchange continues to be one of the best stories in the crypto community in recent weeks, although the exchange’s connections with financial criminals in Israel may need to be addressed moving forward. We’ll keep you posted as the story continues to unfold.

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Andrew Tuts
Andrew is a Canadian cryptocurrency analyst who has spent the last seven years writing about digital marketing, science, and technology for hundreds of online publications. Andrew breaks down the latest news from across the crypto and blockchain space in a way anyone – even his parents – can understand.

[Alert] Use the author's self-conducted information at your own risk, do you own research, never invest more than you are willing to lose.

[Disclosure] The published news and content on BitcoinExchangeGuide should never be used or taken as financial investment advice. Understand trading cryptocurrencies is a very high-risk activity which can result in significant losses. Editorial Policy \\ Investment Disclaimer

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