It’s a question we at MyChargeBack hear frequently from the public. Binary options and forex trading sites in particular are responsible for having ripped off anywhere between $5 and $10 billion dollars a year from innocent investors around the globe. It’s a worldwide plague, so why can’t it be eliminated like, say, polio was?
The answer, in short, is that there’s no way to develop a vaccine.
More and more countries, in fact, are prohibiting binary options from being offered to retail traders. The first were Belgium, Canada and Israel. In addition, both France and The Netherlands had prohibited advertising binary options. Most recently, the European Securities and Markets Authority (ESMA) has instituted a trial three-month ban on the marketing, distribution and sale of binary options in all European Union (EU) countries. A similar ban on contracts for difference (CFDs, which include forex) will enter into force on 1 August. It is presumed that these bans will be extended or even made permanent at the end of their trial periods.
But the lack of bans do not prohibit action. Take, for example, the case of Magnum Options, a notorious binary options scam that was closed down in October 2017 by the British High Court. In the United Kingdom, binary options firms may operate as long as they have gaming licenses, Magnum Options, however, was unlicensed. It was charged with using aggressive internet marketing to offer guaranteed fixed returns that were never delivered. Moreover, customers were not made aware of terms and conditions, which the High Court found to be onerous and unfair because they required trades totaling 30 or 40 times the account balances in order to withdraw their funds. Nonetheless, customers who agreed to do so were unable to recover their money.
Needless to say, the scammers who own and operate binary options sites read the newspapers. So to make it more difficult to close them down they make it more difficult for the authorities to find them.
Virtually all online binary options, forex and CFD scams, for example, are registered in small, isolated, underpopulated island nations far from Europe’s shores, where they maintain mail dumps that serve as ersatz offices. The most popular venues are the Marshall Islands and Vanuatu in the Pacific, the Seychelles in the Indian Ocean and St. Vincent and the Grenadines in the Caribbean. What all these countries have in common, apart from being small, isolated and underpopulated, is that they lack strong financial enforcement regulatory agencies. None of them ban these online investment scams because they significantly benefit from them. Small island economies that may be too far off the beaten path for the tourist industry have very little else left to sustain an economy. Providing a simple registration process to overseas businesses puts people to work and brings in a modicum amount of taxes.
Now suppose that you, the consumer, want to sue them. How do you find them? How do you find a barrister to represent you in the Marshall Islands, Vanuatu, the Seychelles, or St. Vincent and the Grenadines? Where do you file suit? Go try. For the online scammer, in contrast, hiding behind the fig leaf of a mailbox on some island paradise has significant benefits.
What about their banks? Can’t pressure be applied to them? Most binary options scammers will purposely choose banks beyond the reach of powerful Western financial regulatory authorities as well. None of them opens an account at Citibank, The Royal Bank of Scotland or BNP Paribas. They tend to shop for their banks further east, beyond the former Iron Curtain.
So the bottom line is that there is no magic formula that would make it easy for governments or international agencies to shut down binary options and other online investment scams completely. Actually, an easier solution would be for more and more scam victims to step forward and take advantage of the various services that can force the scammers to cough up their money, first and foremost by filing for a chargeback.
Scammers are in the business to make big money. Deprive them of their big money and they’ll have to find something else to do and somewhere else to go.