In Israeli “high tech,” all that glitters isn’t gold (or ethical)

The Azrieli Center Circular Tower. Photo: Wikipedia

I don’t claim to be able to predict the future. But I wanted to commit one prediction to writing anyway. And sadly — for a few reasons, including defamation law— everything will have to be framed in very vague terms.

It has been my longstanding contention (a belief borne out of working with the sector for the past five years) that there is a significant tranche of the Israeli high-tech scene that is of dubious integrity and which is engaged in morally questionable ways of generating revenue. Largely, this is a story that hasn’t yet come to public attention.

When the Times of Israel’s Simona Weinglass broke her ‘Wolves of Tel Aviv’ piece almost five years ago (which kicked off an investigation into the sector), many assumed that the illicit forex/binary industry Israel was home to represented the totality of the white collar crime headquartered in Israel, or at least close to it (and it should be noted: forex/binary hasn’t been totally stamped out in Israel; the Knesset passed a watered down version of the legislation).

About that they would be wrong.

There are some companies — and industries — that are prevalent in Israel which have not yet been written about, whether in Hebrew or English.

If not criminal in nature, they derive their profits in ways that most people would find morally problematic if the images the companies were portraying to the world were not the stuff, essentially, of fiction.

Like the forex/binary scheme, a lot of these companies operate under imaginative legal structures, often pretending to be based elsewhere in the world (particularly tax havens) while their operations are in reality firmly rooted in Israel. Like forex/binary, these companies disproportionately employ olim (Jewish immigrants to Israel).

What fascinates me about this ‘world’ is how easily and seamlessly it sails under the vaunted banner of Israeli high-tech. ‘Hiding in plain sight’ is not only a delightful oxymoron but a fitting description. If nobody thinks about the idea of asking questions, then questions don’t get asked.

Companies with business models that are predicated upon deception, and which raise hundreds of millions of dollars in revenue or which are bought out by publicly listed entities, can receive glossy coverage in the media without anybody batting an eyelid. I find the fact that this can happen quite extraordinary.

Having observed this dynamic repeatedly, the lesson I’ve learned is this: if you can rent a nice office, ideally in Tel Aviv, photograph some cute dogs roaming around an office, and throw some decent photos of it on a Facebook page, you send out a very convincing message to the world that your company is “legit.”

Doesn’t this happen everywhere? Possibly. But there is a thirst in Israel to trumpet up the country’s achievements in technology. I believe that questions about the provenance of revenue sometimes go out the window amid the flurry of excitement.

For those interested in learning more about this whole dynamic, my recent interview with Simona Weinglass, the reporter who broke the forex/binary option, might be of interest.

In that interview, Simona charges that Israeli journalism — in both languages — is too superficial. And that investigative journalism is under-resourced.

Weinglass alleges:

“High tech is kind of like a vortex that sucks them [olim] in. But I believe there’s an embarrassing percentage of olim that are working in organizations that are connected in some ways to scams.” she says. Weinglass also alleges that there is a high cross-over between the ownership of the ethically dubious companies to which I am alluding and the world of organized crime.

I write the foregoing not to bash Israeli high tech.

Rather I say this because I care about the country and its image. And when truth finally emerges from behind a web of lies — which it has a habit of doing — ultimately these escapades will make Israel look bad. We’ve already seen this happen with forex and binary. It can happen again.

The majority of companies based out of Israel are bringing real innovation to the world and their revenues are the result of selling bone fide products and services to international customers. I’m talking, rather, about a few cases in which there is a glaring asymmetry between actual business models and information in the public domain.

There are not only bad actors in every pond but dubious ones too. The swamp of somewhat illicit companies based in Israel hasn’t yet been cleared. There are stories that have yet to come to light. One day that will likely change.



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Daniel Rosehill

Daniel Rosehill

Daytime: writing for other people. Nighttime: writing for me. Or the other way round. Enjoys: Linux, tech, beer, random things.