Australian investors have reported the loss of $3.0 million in total to binary options scams since the beginning of 2016, according to data by Scamwatch, a scam recognition service by the Australian Competition and Consumer Commission (ACCC).
In comparison, in 2015 losses in Australia from investment scams, binary options included, amounted to $229 million in total, or double that a year earlier. The sum is supposedly higher, since in reality many people never report that they have been scammed.
Many Australians complain that they have been convinced, even pressured, by brokers to open a trading account for binary options and to fund it. Once they invest, their money “begins to disappear quickly” and they find themselves unable to withdraw their money.
“The scammer does everything they can to keep the victim in the program but inevitably they stop taking the victim’s calls and, after a short period of time, it is common for the firms to disappear,” Scamwatch said in a statement.
The regulator refers to binary options as being speculative and risky. It warns that there are groups of scammers who use binary options to lure investors into making money through asset price movement and steal their money.
“Although they may be a legitimate financial product with many licenced firms trading in them, binary options are speculative, high risk products that are almost impossible to predict, even for professionals,” the Scamwatch statement read.
In the online trading world, binary options are the closest thing to gambling. In this type of trading, investors guess whether the price of a certain instrument, would go upwards or downwards within a pre-determined time frame. Once the time is up, the option is deemed expired and the bet is settled. Depending on the outcome, a trader either collects a profit, or loses money.
This type of trading is very controversial since it is strictly regulated in some countries, forbidden in others, and not regulated at all in third countries. In Canada, for instance, trading in binary options are not forbidden, but there are no authorized brokers that offer this type of service. Just last week, the Canadian authorities issued a statement once again to remind investors of that. Earlier this year, in Cyprus, where binary options are strictly regulated, the financial authority body introduced tougher rules on brokers that offer this type of instrument.
Last month the Belgian financial regulator banned the online distribution of over-the-counter (OTC) forex, contracts for difference (CFDs), and binary options among Belgian retail clients. Meanwhile, France is considering a ban on advertising of “highly speculative and risky financial contracts” to the general public in France.
Brokers are also split on the issue. Some reputable brokers have binary options in their offering and even put an emphasis on this type of instruments, while others have ceased offering them. Recently, multi-regulated forex brokerage RoboForex suspended binary options trading and wound up RoboOption, its binary options business.
In Australia, the financial products markets are supervised by the Australian Securities and Investments Commission (ASIC). Financial investment companies, including binary options and forex brokers, are forbidden to operate without a local license. The regulator keeps a register with all licensed entities authorized to provide financial services in the country. It also maintains a register with some companies that are potentially harmful. Investors can use these registers to research a company before engaging with it.
Here are some of the advices of the ACCC that could help investors protect themselves from becoming scam victims:
- be suspicious of investment opportunities that promise a high return with little or no risk
- always check whether a financial service provider is authorized to do business in Australia before engaging with them
- refrain from making rushed decisions or being pressured by various sales tactics
- be careful when providing personal information and financial details
We strongly advise you to only deal with regulated forex brokers, authorized by reputable regulatory bodies like ASIC, CySec, FCA, and CFTC/NFA, among others.