Much of the binary options market operates through Internet-based trading platforms that are non necessarily complying with applicative U.S. 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 yeah/no proffer and typically relates to whether the price of a particular nugget volition ascension above or fall below a specified amount. Once the pick is acquired, there is no further conclusion for the holder to make regarding the exercise of the binary option because binary options exercise automatically. Unlike other types of options, a binary option does not give the holder the correct to buy or sell the specified asset. When the binary option expires, the option holder receives either a pre-adamant amount of cash or cypher at all.
Investor Complaints Relating To Fraudulent Binary Options Trading Platforms
The SEC has received numerous complaints of fraud associated with websites that offering an opportunity to buy or trade binary options through Net-based trading platforms. The complaints fall into at least three categories:
- Refusal to credit customer accounts or reimburse funds to customers
These complaints typically involve customers who accept deposited money into their binary options trading account and who are so encouraged by “brokers” over the phone to eolith additional funds into the client account. When customers later attempt to withdraw their original deposit or the return they have been promised, the trading platforms allegedly abolish customers’ withdrawal requests, refuse to credit their accounts, or ignore their telephone calls and emails.
- Identity theft
These complaints allege that sure Net-based binary options trading platforms may be collecting customer information (including copies of customers’ credit cards, passports, and driver’due south licenses) for unspecified uses. Practise non provide personal data.
- Manipulation of software to generate losing trades
These complaints allege that the Internet-based binary options trading platforms dispense the trading software to distort binary options prices and payouts. For example, when a client’south trade is “winning,” the countdown to expiration is extended arbitrarily until the trade becomes a loss.
Beware of Overstated Investment Returns for Binary Options
Additionally, some binary options Net-based trading platforms may overstate the average return on investment by advertizement a college average return on investment than a client should wait, given the payout structure.
For example, a customer may be asked to pay $fifty for a binary option contract that promises a l% return if the stock price of XYZ company is above $5 per share when the option expires. Assuming a l/50 risk of winning, the payout construction has been designed in such a way that the expected return on investment is actuallynegative, resulting in anet loss to the customer. This is because the consequence if the pick expires out of the money (approximately a 100% loss) significantly outweighs the payout if the option expires in the money (approximately a 50% gain). In this example, an investor could await — on boilerplate — to lose money.
E’er Bank check the Background of a House or Financial Professional
Before investing, check out the background, including registration or license status, of any firm or financial professional you are considering dealing with through the SEC’s Investment Adviser Public Disclosure (IAPD) database, available on Investor.gov, and the National Futures Association Background Amalgamation Status Information Center’due south Bones Search. If you cannot verify that they are registered, don’t merchandise with them, don’t requite them whatever coin, and don’t share your personal data with them.
Additional Information
Investor Alert: Don’t Invite Investment Scams to Find You
Investor Warning: Binary Options Websites may be Used for Fraudulent Schemes
Investor Alert: Beware of Authorities Impersonators Targeting Fraud Victims
Investor Alert: Binary Options and Fraud
The Role of Investor Teaching and Advocacy has provided this data as a service to investors. It is neither a legal interpretation nor a statement of SEC policy. If you have questions apropos the meaning or awarding of a particular law or rule, please consult with an attorney who specializes in securities police.
Source: https://www.investor.gov/protect-your-investments/fraud/types-fraud/binary-options-fraud
