Court Criticizes Capital Market Authority for "Helplessness" in Investigations

"The helplessness of the Capital Market Authority in conducting investigative actions" led to a 90% reduction in the administrative fine, which stood at 1.7 million shekels and was imposed on the crypto site Bitin, which the Authority claimed provided crypto services without a license. This emerges from a ruling by Tel Aviv Magistrate's Court Judge Adi Hadar, published over the weekend.

The site was operated by Bar Mittelman, a well-known crypto trader, who together with his father previously paid a fine of 15 million shekels to the Tax Authority as part of a plea bargain for offenses of fraud and providing false reports. According to the ruling, in March 2025, the Commissioner of Capital Markets, Amit Gal, announced the cessation of the activity of Mittelman's site and the imposition of an administrative fine of 1.74 million shekels on him personally, as the operator of Bitin, claiming that he operated without a license to provide virtual currency trading services, as required by law.

In a press release published by the Authority, it was written that: "From information available to the Authority, Mittelman's request for a license was rejected in 2022 due to his criminal conviction. Despite this, he continued to engage in providing financial services without a license, and to offer buying and selling services of virtual currencies contrary to the law."

Mittelman appealed the fine to the Tel Aviv Magistrate's Court. Through his lawyers, Gilad Baron and Shelly Rosen, he argued, among other things, that the Authority "relies on an incorrect interpretation and erroneous conclusions from the information it relied on." According to him, after his request for a license to provide services in financial assets was rejected, he "liquidated his business and ceased providing services in a financial asset. In February 2023, he left Israel, ceased to be an Israeli resident, and since then has had no business activity in Israel of any kind, has no business bank accounts in Israel, and has not even been present in Israel, except for a short family visit that lasted a few days."

The Authority, through attorney Shlomo Cohen, argued in contrast that "despite the Authority's decision to reject the appellant's request for a license, the information in our possession showed that he continued to offer a wide range of financial services in virtual currencies to clients in Israel, without a license and contrary to the law, among other things through the site bitin.co.il." The Authority further claimed that "the financial services the appellant offered were provided through several channels, including over-the-counter (OTC) trading services, door-to-door service, and via bank transfers or cash, including buying and selling Bitcoin. The services were provided through the site, WhatsApp, and Telegram."

The Authority's fine calculation was based on a fine of 2,000 shekels for each day of activity without a license, apparently, plus a fixed fine of 100,000 shekels.

Court to Authority: "Examine the way investigations are managed"

Judge Adi Hadar noted at the beginning of the ruling that, unlike a criminal proceeding, the threshold of evidence required from an administrative authority to impose a fine is lower. However, under the heading "The helplessness of the Capital Market Authority in conducting investigative actions," the judge sharply criticized the way evidence was collected and determined that the Authority's failures justify a 90% reduction in the fine — from 1.74 million shekels to 174,000 shekels.

"Even in light of the significant relief in proving the violation for the purpose of imposing a sanction, it is still expected of the Authority to perform basic investigative actions," the judge wrote. According to him, "It was expected that if it bases the suspicion that the appellant is performing operations in financial assets through a site, someone on behalf of the Authority would call the phone number appearing on the site, send a text message to that number, or contact online, in order to check who answers, ask to perform an operation in financial assets, and thus obtain a 'golden piece of evidence'."

He further wrote that "this expectation is not excessive, as this is how other authorities act, such as the Consumer Protection Authority, which sends inspectors to supermarkets posing as buyers, making purchases, and identifying themselves as investigators only after it turns out they have documented violations, such as a situation where at the checkout they ask to charge a consumer a price higher than that displayed on the shelf."

According to the ruling, during the discussions in the case, "when the court wondered why basic investigative actions of contacting the site by phone or online for the purpose of receiving a service in a financial asset were not performed, it was answered by the Authority's representatives with the answer: 'We are not allowed to pose as consumers of services in financial assets'."

Regarding this, the judge wrote: "Whether the Authority refrains from performing investigative actions due to legal limitations, or due to an erroneous application of the legal provisions, it has fallen into a state of helplessness in fulfilling its role to protect the public from the provision of services in financial assets. The relevant parties should examine the way investigations are managed by the Authority, which refrains from performing basic investigative actions. In our case, despite the helplessness in performing basic investigative actions, other evidence was collected that established a reasonable evidentiary infrastructure. However, it is possible that in other cases, when the suspect in committing the violation has not been convicted in the past, as the appellant was convicted in this proceeding for serious offenses — in a way that tipped the scales in favor of the Authority's position — the result will be the cancellation of the Authority's decision."

Although in this case the judge decided not to cancel the Authority's decision, he found it appropriate to intervene significantly in the amount of the fine. "Unlike the very determination that the appellant violated the Supervision Law, the court finds it appropriate to intervene partially in the amount of the sanction. The sanction consists of a fixed amount of 100,000 shekels for the violation itself, and in this part there is no room for intervention. However, the lion's share of the sanction is based on a multiple of 2,000 shekels for each day of violation."

"In this matter, the court finds room for intervention, as from the central evidence for committing the violation — the reviews that documented prohibited activity on the appellant's site, which the Authority determined, and rightly so, remained under his control — it appears that for a long period there is no documentation of activity. The Authority argued that this does not prove that activity did not take place during that period, but one cannot have it both ways," the judge concluded the ruling.