...
(6B) made an offer to trade in a merchant's arena, in contravention of the provisions of section 44To"
Section 4416 of the Law provides as follows:
“)a) A person shall not apply with an offer to trade in a trading arena, unless the arena is managed by a company with an arena license, or by a person who is authorized to manage a trading arena without a license in accordance with the provisions of section 44L.
(b) A person shall not make an offer to trade in a trading platform that is used only by clients outside of Israel, if trading in such an arena is offered in a financial instrument of the type of binary option or in another financial instrument determined in accordance with section 44B1"
- These provisions are found under Chapter G3 of the Securities and Exchange Law, which deals with a merchant's exchange for another's account, which was added as part of Amendment 42, which is intended to regulate the supervision of trading exchanges, and states that in order to operate them, an arena license from the NAA is required in accordance with Section 44C(a) of the Securities and Exchange Law, along with Section 441 of the Securities and Exchange Law, which prohibits, as aforesaid, an offer to trade in a trading arena that is not licensed in Israel.
- The background to Amendment 42 was the activity in Israel of exchanges that enable investors to trade with the operators of the arena in various financial assets (such as foreign exchange derivatives, indices, commodities, etc.). This activity was carried out by investors operating at low financial volumes through designated websites that continuously quote prices for securities that the arena offers to trade. The existence of these arenas is a result of the easy access created by the Internet and the possibility of conducting e-commerce through it. Prior to Amendment 42, the Israeli public had access to dozens of local arenas that were not regulated by the existing law, and hence the need for regulation arose (p. 540 of the explanatory notes to Amendment 42).
- The explanatory notes further noted that in many cases, the instruments traded on the exchanges are intended for sophisticated customers, due to the high level of leverage that exists on these sites. The high leverage and knowledge gaps between the client and the arena may lead to heavy losses for the client in a short period of time. In the explanatory notes, it was emphasized that the arenas do not conduct an individual examination of the eligibility of their customers, and in practice, the instruments are offered to customers whose financial understanding is limited, as evidenced by the low investment amounts required for the investment. This state of affairs creates a risk of loss, and in this regard, it was noted in the explanatory notes that:
"The enormous profit potential inherent in the trading arenas, which stems from the high levels of leverage of the investments made through them, is the main motif in marketing and advertising these arenas. There is concern that the investing public is blinded and does not place on the scales, alongside the enormous prospects, the even greater risks that exist in this trade" (p. 550 of the explanatory notes).
- Pepperstone is a trading arena that operates in Australia under a license granted by the Australian Authority, but this fact does not exempt the defendant from liability, because Pepperstone does not have an arena license within the meaning of the Securities and Exchange Act. Section 44B of the NA Law defines an "arena license" as one granted by the Israeli RNA.
- The argument that Pepperstone is an international arena and therefore there is no impediment to proposing to trade in it should not be accepted. Indeed, the defendant's factual description - that Pepperstone is licensed abroad - is correct, but from here to clearing him of criminal responsibility, there is a long way to go. The arguments raised by the defendant regarding Pepperstone's advantages (inter alia, the fact that it is a reliable arena, enjoys a high rating and provides good service) do not legitimize his actions, since Israeli law has determined that referring customers to an arena that is not authorized in Israel is a criminal offense. It should also be noted that this is not a situation in which the defendant himself traded in the Australian arena, but rather that he referred customers to an unauthorized trading arena.
- In response to the indictment, the defendant does not dispute that the elements of the offense are fulfilled (p. 25 in response to the indictment, section C(1); p. 10, para. 42). For the avoidance of doubt, the evidence before me clearly shows that the defendant committed the factual elements of the offense. During his testimony, the defendant tried to claim that he did not offer the clients but only "[said] that this thing existed, [and enabled] them to make a decision according to their free will" (P. September 10, 2025, p. 464, paras. 28-31). However, the evidence is so clear that we have discussed it at length in the previous chapters. The defendant's own words also lead to the conclusion that he made an offer to trade in Pepperstone. Needless to say, in order to formulate the factual foundations of the offense, there is no need for the free will of the person to whom the defendant turns to be nullified, since according to the definition of the offense, an offer to trade is sufficient.
- The defendant claimed that he should be acquitted of the offense because he did not know that the Australian license was not enough and that it was not enough that the scene was supervised by the Australian authorities. In other words, the defendant's claim that he mistakenly thought that his action was permissible while according to the law his act was forbidden. We are therefore concerned with the claim of error in a legal situation.
- Section 34Y of the Penal Law, which relates to error in the state of law, states as follows:
"With regard to criminal liability, it does not matter if the person imagined that his act was not prohibited, due to a mistake as to the existence of a criminal prohibition or to the understanding of the prohibition, unless the mistake was reasonably unavoidable."
- Section 34Y of the Penal Law enshrines the basic principle in the Penal Law, according to which the prosecution is not required to prove that the defendant was aware of the wrongdoing of his conduct or that his actions constituted an offense (Criminal Appeal 207/20 Ophir v. State of Israel - Antitrust Authority, para. 89). In other words, the rule is that ignorance of the law does not exempt from liability. However, the end of section 34Y of the Penal Law establishes a restriction that allows him to be released from criminal responsibility, to the extent that the defendant succeeds in proving that he made a mistake and that his mistake is "reasonably unavoidable." The defendant is therefore required to prove the existence of two layers of the error: on the subjective level, the defendant is required to point out the existence of an honest error; and on the objective level - that this mistake was "reasonably unavoidable", in other words, that reasonable measures could not have been taken to prevent it (Criminal Appeal 845/02 State of Israel v. Tnuva Cooperative Center for the Marketing of Agricultural Produce, paragraph 31 of the judgment of President (Ret.) Beinisch (October 10, 2007); Criminal Appeal 1672/06 Balili v. State of Israel-Antitrust Authority, para. 12 (March 10, 2008)).
- The defendant failed to lift the burden and raise doubt that he erred in believing that his activity in referring customers to the Australian trading arena was not prohibited, the state of affairs is far from that.
- During his testimony in court, the defendant confirmed that he knew that Preston was not authorized to operate in Israel and even showed proficiency in regulation in Israel in all matters related to commercial arenas (P. 9.2025, p. 462, paras. 4-21; p. 463, paras. 23 ff.). In his interrogation at the NAA, the defendant confirmed that he knew that the arenas must be supervised in Israel and that in order for it to be possible to trade in Israel, supervision in Israel was required (P/2, p. 310, paras. 14 onwards).
It also emerges from the defendant's words that what guided him in his activity was not the law, which he knew well, but rather the subjective insight that the law is inconsistent with the defendant's logic as perceived by him. According to him: