In the first two decades of the 21st century the internet became Ground Zero for binary options scams and binary options fraud.
Perhaps what first drew you to their website was a pop-up ad. Or a social media post. You clicked and found an attractive, professional -looking presentation promising you:
You asked for more information and soon their representatives contacted you. They introduced themselves as your “brokers.” And then you transferred funds, most likely using your Visa® or Mastercard.® Soon, you found yourself trading stocks or foreign currencies, indices and commodities. To help you out, your “broker” courteously provided personal coaching. And timely recommendations. (Real brokers cannot do that because it’s patently illegal.)
Yes, legitimate, government-regulated online brokerages do exist. And in certain countries they may offer binary options. So is binary options legit or a scam?
If the brokerage is unregulated – meaning it is unlicensed and unsupervised by a government oversight agency – it is operating illegally. That is a red flag. Unregulated brokerages – especially those offering binary options – base their business models on swindling unsuspecting and inexperienced investors over the internet. How do they do it?
You assumed the unregulated broker’s state-of-the-art site would allow you to trade. Actually, however, it was nothing more than a video game. The binary options platform it featured did not follow obligatory trading rules and procedures. In fact, it was not even plugged into a true market exchange. The gains you supposedly made and the losses you supposedly suffered were all imaginary. Nothing more than smoke and mirrors intended to convince you it’s for real. Oh, and that bonus you supposedly received? It was just as imaginary as everything else. You were scammed by binary options.
Unregulated brokers promise you that they deposit your money in a segregated bank account. They like to think that they will prove their integrity and convince you that they guarantee your access to your funds. However, no such personal account exists. That also is a fiction. Your money went straight into their own bank account instead.
Sure, they promised that you could withdraw your money whenever you want. But you soon found out that was easier said than done. Some firms ignore your requests to access your funds outright. Others bounce you back and forth between different departments in order to exasperate you. To the point when you’ll just give up. And then there are those that will point to the small print on the Terms & Conditions page. Squint your eyes and you see that you agreed to first reach an unattainable amount of trades. Or repay that huge bonus they gave you before you even apply to withdraw your money. Or both.
For about ten years, online binary options scams were ubiquitous. The damage they inflicted on consumers was enormous. In response, a growing number of countries banned binary options trading by retail investors. In 2018 the European Union (EU) enacted a temporary ban as well. It renewed that ban on an ongoing basis until July 1, 2019. By then the last online binary options site registered in the EU finally shut itself down. In addition, Google and Facebook ceased accepting ads linked to binary options sites. These actions, as welcome as they were, however, merely encouraged many operators of phony binary options sites to re-brand themselves. They now claim to be online forex brokerages and even private banking firms.
Beware. The terminology changed but the scam remains the same.