Online Binary Options Schemes
What is a Binary Option?
A binary option is a type of all-or-nothing investment contract, similar to placing a bet. Like the flip of a coin, there are only two possible outcomes: heads you win or tails you lose.
When an investor purchases a binary option contract, the investor predicts the value of an underlying asset (such as a currency or stock) at a predetermined time or date in the future. If the investor correctly predicts the asset price at the end of the contract, which can be just a matter of minutes, the investor receives the payout agreed upon in the contract. If the investor is incorrect, there is no payout and the investor loses the amount invested in the binary option.
Common Investor Complaints
Much of the binary option market operates through internet-based trading platforms. These platforms often are not compliant with U.S. regulatory requirements.
In recent years, the number of unregistered platforms offering binary options has surged, resulting in an escalation of complaints to securities regulators. Complaints include:
- Investors’ funds not being deposited into their accounts.
- Firms refusing to return deposited funds to investors.
- Salespeople using high-pressure tactics or financial threats.
- Unauthorized charges found on credit cards used to invest through a binary options website.
- Representatives demanding excessive fees when withdrawal requests are made.
- Follow-up calls offering to recover losses for an excessive fee.
- Calls from people claiming to work for, or on behalf of, a government agency.
Offering binary options contracts through a website is attractive to scammers because they can reach potential investors while masking their true identities and locations. They will use a number of tactics to get you to invest.
Be alert for these warning signs:
- Unsolicited investment offers – emails or phone calls from an unknown person or firm directing you to a binary option website offering high returns.
- High-pressure sales tactics – threatening calls or emails from representatives of binary options websites.
- Personal information requests – claims from representatives of binary options websites that the government requires copies or photographs of your passport, driver’s license, credit cards or other sensitive personal information.
- Lack of management/firm information – websites that are vague on details about who manages or works at the company or where it is actually located.
Binary Options Reload Schemes
In binary options schemes, it is common for scammers to target the investor a second time by claiming to be affiliated with a government agency. For a fee, they will offer to help the investor recover money previously lost in the binary options scam. This is called a “reload” – and it is just another scam.
Offering investment services or products, whether online or in-person, is a regulated activity overseen by securities regulators.
In the United States, some binary options list on regulated exchanges or trade on a designated contract market and are subject to regulatory oversight.
Before making an investment decision, investors should check all of the following: