New Binary Options Fraud Alert Released by FINRA
In case you needed another reason to limit your binary options trading to the regulated exchanges in the United States, FINRA (the Financial Industry Regulatory Authority) has just released a new alert for investors who trade binary options. Even binary options traders who play it safe and always use the regulated exchanges will want to keep their wits about them at all times to prevent being scammed by these fraudsters.
Binary options scams more common than ever
The increasing popularity of binary options trading has created a market for scammer and criminals to try to take advantage of investors. Binary option contracts, being all-or-nothing propositions, are risky enough without having to worry about fraud. The SEC and CFTC have released similar alerts in the past, and now FINRA has released a report about the different types of scams that they have received complaints about on their hotline. You can prevent being a victim of binary options fraud by only trading on the regulated Nadex, CME or the Cantor Exchange, which are overseen by the CFTC and subject to strict rules designed to protect investors and their money. You should also be aware of the specific tactics used by scammers so that you can spot fraud without before it’s too late. Here are the most common scams reported to FINRA according to the October report.
Refusal to credit binary options traders’ accounts
This is the most common tactic by unregulated, fraudulent binary options trading firms. Often these scammers are located outside of the US, but they prey on US investors by pretending to be a legitimate means to trade binary options contracts. However, after you have invested your money in an account with them, you’ll be lucky to ever see it again.
A spinoff of this scam is requiring investors to pay a fee before they can withdraw money from their account. As you probably guessed, this is just a way to steal an extra $25 or $100 from you on top of all of the money you put into your account, which they now have complete control over.
Impersonating government financial authorities
This scam is closely related to a common IRS scam, where investors are contacted by a fraudster claiming to be working for one of the government regulatory agencies. They then accuse the investor of participating in illegal binary options trading and threaten them with imprisonment if they don’t immediately pay a fine.
Stealing personal information from binary options traders
In addition to stealing your money, some fraudulent binary options trading firms are interested in stealing your sensitive information, too. If you trusted them as a legitimate financial institution, you wouldn’t think twice about handing over your full name, billing address, social security number, bank account information, etc. which the criminals will then use for their own purposes.
Software manipulation to cheat traders out of their winnings
This is the most subtle of the scams mentioned in the FINRA report. You might have registered a trading account with an unregulated binary options firm that is using software to turn your winning trades into losing ones without you even knowing it.