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 brokerages offering binary options do exist. So is binary options legal?
If the brokerage was unregulated – meaning it was unlicensed and unsupervised by a government oversight agency – it was operating illegally. That is a red flag. Unregulated brokerages that offered binary options based their business models on swindling unsuspecting and inexperienced investors over the internet. How did 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 online binary options trading sites promised you that they deposit your money in a segregated bank account. They did that so that you would think that they have integrity. There’s no better way to do that than by convincing you that they guarantee your access to your funds. However, no such personal account existed. That also was a fiction. Your money went straight into their own bank account instead.
Sure, they promised that you could withdraw your money whenever you wanted. But you soon found out that was easier said than done. Some firms ignored your requests to access your funds outright. Others bounced you back and forth between different departments in order to exasperate you. To the point when you just gave up. And then there were those that pointed to the small print on the Terms and Conditions page. Squint your eyes and you would 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 trading was ubiquitous. The damage these sites inflicted on consumers was enormous. In response, a growing number of countries banned binary 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 1 July 2019. By then the last online binary options trading site registered in the EU finally shut itself down. In addition, Google and Facebook ceased accepting ads linked to online binary trading. 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.
Nonetheless, online binary trading continues to pop up. In February 2021 a Serbian man was extradited to the United States. He was charged by the FBI with operating more than 20 fake online binary options trading and cryptocurrency mining platforms, together with six other individuals. Five of them were under arrest in Serbia and the sixth was arrested in California in 2000. They are accused of scamming $70 million out of victims around the world from locations in Serbia, China and Texas. Remarkably, each one of their phony binary options sites claimed to be ‘the world’s market leader.’