Much of the binary options market operates through Net-based trading platforms that are non necessarily complying with applicative U.South. regulatory requirements and may be engaging in illegal activity.
Investors should be aware of fraudulent promotion schemes involving binary options and binary options trading platforms.
What is a Binary Option?
A binary option is a type of options contract in which the payout depends entirely on the outcome of a yes/no proposition and typically relates to whether the price of a item asset volition ascent above or autumn below a specified amount. In one case the option is acquired, there is no further decision for the holder to make regarding the practise of the binary selection because binary options exercise automatically. Dissimilar other types of options, a binary option does not give the holder the correct to buy or sell the specified asset. When the binary pick expires, the selection holder receives either a pre-adamant amount of cash or nothing at all.
Investor Complaints Relating To Fraudulent Binary Options Trading Platforms
The SEC has received numerous complaints of fraud associated with websites that offer an opportunity to purchase or merchandise binary options through Cyberspace-based trading platforms. The complaints fall into at to the lowest degree three categories:
- Refusal to credit customer accounts or reimburse funds to customers
These complaints typically involve customers who have deposited money into their binary options trading account and who are then encouraged past “brokers” over the phone to deposit additional funds into the customer account. When customers afterwards attempt to withdraw their original deposit or the return they have been promised, the trading platforms allegedly cancel customers’ withdrawal requests, refuse to credit their accounts, or ignore their telephone calls and emails.
- Identity theft
These complaints criminate that certain Net-based binary options trading platforms may be collecting customer information (including copies of customers’ credit cards, passports, and driver’s licenses) for unspecified uses. Do non provide personal information.
- Manipulation of software to generate losing trades
These complaints allege that the Net-based binary options trading platforms manipulate the trading software to misconstrue binary options prices and payouts. For example, when a client’s trade is “winning,” the countdown to expiration is extended arbitrarily until the merchandise becomes a loss.
Beware of Overstated Investment Returns for Binary Options
Additionally, some binary options Net-based trading platforms may overstate the average render on investment past advert a college average return on investment than a customer should expect, given the payout structure.
For case, a customer may be asked to pay $l for a binary option contract that promises a 50% render if the stock cost of XYZ company is above $v per share when the option expires. Assuming a 50/50 gamble of winning, the payout structure has been designed in such a manner that the expected return on investment is actuallynegative, resulting in acyberspace loss to the customer. This is because the result if the selection expires out of the money (approximately a 100% loss) significantly outweighs the payout if the pick expires in the coin (approximately a 50% gain). In this example, an investor could expect — on average — to lose money.
Always Check the Background of a Business firm or Financial Professional person
Earlier investing, check out the groundwork, including registration or license status, of whatsoever business firm or financial professional person yous are considering dealing with through the SEC’due south Investment Adviser Public Disclosure (IAPD) database, available on Investor.gov, and the National Futures Clan Background Amalgamation Condition Data Center’s Bones Search. If you cannot verify that they are registered, don’t trade with them, don’t requite them any coin, and don’t share your personal information with them.
Additional Data
Investor Warning: Don’t Invite Investment Scams to Find You
Investor Alarm: Binary Options Websites may be Used for Fraudulent Schemes
Investor Alert: Beware of Government Impersonators Targeting Fraud Victims
Investor Alert: Binary Options and Fraud
The Role of Investor Pedagogy and Advocacy has provided this data as a service to investors. It is neither a legal interpretation nor a statement of SEC policy. If yous have questions concerning the significant or application of a particular law or rule, delight consult with an attorney who specializes in securities law.
Source: https://www.investor.gov/protect-your-investments/fraud/types-fraud/binary-options-fraud
