Warning over binary options fraud as investors lose over £87k a day

The Financial Conduct Authority has urged the public to beware of online investment fraud.

The FCA advice is to be vigilant when offered investments in binary options, contracts for difference (CFDs), forex and cryptocurrencies (such as Bitcoin), which often promote themselves online and via social media channels, such as Facebook, Instagram and Twitter.

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They typically promise high returns and use images of luxury items, like expensive watches and cars, to entice people to invest in their scams.

After someone has invested, they distort prices on their website, tie people in with extreme pay-out clauses and even close customer accounts, refusing to pay back their money. This call comes as the regulator reveals that last year investors lost £87,410 per day to binary options fraud.

Investment fraud is changing

This rise in people being targeted online means that the profile of investment fraud victims is changing. While historically over-55s have been most at risk to investment fraud, the FCA’s latest study conducted as part of its ScamSmart campaign, found those aged under 25 were six times (13%) more likely to trust an investment offer they received via social media, compared with over 55s (2%).

Figures from Action Fraud, the UK's fraud and cyber-crime reporting centre, reinforce this trend, showing that under-50s are significantly more likely to fall victim to a binary options scam versus other types of investment fraud (34% v 21%).

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More than one in five (23%) respondents said that online customer testimonies and reviews increase their trust in an investment company. Yet, fraudsters are known to create highly professional looking online investment platforms that feature fake customer reviews, logos, and statements, to lure in prospective investors. A further one in ten (11%) said they wouldn’t conduct any of the listed checks at all, such as checking whether the firm was regulated by the FCA or registered with Companies House, before parting with their money.

Binary options are now regulated

Binary Options are called ‘Binary’ because there can be only two outcomes – win or lose. To trade, all you need to do is bet on whether the price of something will rise or fall below a certain amount - if it is correct, you win and get paid. If not, you lose all of the money you originally invested.

You can choose various commodities to trade in such as gold, oil or stocks etc. The value of a Binary Option is made up from the value of the asset you want to trade.On 3rd January 2018, binary options became a regulated investment product, meaning that all firms trading in binary options will need to be authorised by the FCA.

To reduce the chance of falling victim to investment fraud:

Reject unsolicited investment offers whether made online, on social media or over the phone.Before investing, check the FCA Register to see if the firm or individual you are dealing with is authorised and check the FCA Warning List of firms to avoid.Get impartial advice before investing.

If you think you have been a victim of fraud you should report it to Action Fraud by calling 0300 123 20 40 or by using the online reporting tool.