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What is Binary Options Fraud and what are the law enforcement doing about it?

31st March 2017

Last year we warned the public about the threat that ‘investments’ in Binary Options pose after receiving reports. Now we are giving an update on the fraud and what law enforcement is doing about it. 

What are Binary Options?

Binary Options are called ‘binary’ because there can be only two outcomes – win or lose. To trade, all you need to do is bet on whether the price of something will rise or fall below a certain amount - if it is correct, you win and get paid. If not, you lose all of the money you originally invested.

Action Fraud has received multiple reports whereby Binary Options companies have refused to credit customer accounts despite the customer believing they had made a profit. It is our belief that the software controlling the trading platforms is being manipulated by the companies to distort prices and payouts, showing customer accounts to be in profit whilst they are paying in; but then ‘losing’ all the accumulated funds in a series of trades when the customer tries to withdraw their money. It is unlikely that any money was ever traded on behalf of the customer and their ‘profits’ never actually existed. The brokers were simply trying to get the victims to invest further money.

The current situation

Advertisements for Binary Options traders appear online with many companies aggressively targeting social media platforms with flashy commercials promising impressive returns. Binary Options websites are often well-designed and professional looking – no expense is spared in trying to look legitimate.

Brokers and traders, often working from scripts, will sound friendly, professional and knowledgeable. They will be paid on commission and have no interest in ever making successful trades for the ‘investor’. In fact, we believe they will often use the victim’s credit and personal information to access further funds without the victim’s knowledge.

Whilst many Binary Options companies claim to be located in the UK, research has revealed that the vast majority are based abroad and have no physical presence here. Shell companies are registered in various financial jurisdictions and money is routed through multiple accounts, obscuring the perpetrators and hampering law enforcement efforts.

Law enforcement response 

Despite the fact that the majority of Binary Options companies operate from outside of the UK, Action Fraud working alongside the National Fraud Intelligence Bureau (NFIB) continues to work with international law enforcement partners and the banking industry to tackle the issue by implementing changes, either by introducing an outright ban or through rigorous regulations to control this activity. 

We advise UK victims and all those who have been targeted by UK based Binary Options companies or paid money into UK bank accounts, whether residing in the UK or not, to report to Action Fraud

In addition the United States Federal Bureau of Investigation (FBI) are currently developing a global picture of this type of fraud and welcome reports from the victims of Binary Options made via their website www.ic3.gov

How to protect yourself

  • Be suspicious of any approach via social media as many fraudsters tend to operate via social media due to the anonymity it allows. Carry out as much research on the company/details provided as possible. 
  • Do not give out personal or financial details and never agree to anything or send money upfront, without making your own enquires into the company or individual first.
  • Further advice on Binary Options fraud can be found online on Action Fraud and those of our partners at the Gambling Commission and Financial Conduct Authority.
  • If you have been contacted by a suspicious firm or have been affected by this, or any other fraud, report it to Action Fraud by calling 0300 123 2040, or by reporting online.  
  • Please have to hand any contact details for the suspect(s) including addresses, phone numbers and email addresses; and any details of payments made to the suspect(s) bank accounts (these can be obtained from your own bank if required) including account numbers, sort codes, payee names and/or references and IBAN and SWIFT numbers if payments were sent abroad. 
  • Please also consider reporting any suspect companies to the FBI via their website www.ic3.gov.

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