Why investors should avoid binary options
Be extra careful if you’re on the hunt for high-performing investments online. You could fall victim to fraud, especially by way of binary options. The Autorité des marchés financiers (AMF) has been watching these products very closely since they first started appearing online and on mobile platforms in 2013. No company is authorized to sell them; so all binary options offers are illegal.
Binary options platforms generally promise quick returns on investments, though these never come through. On top of seizing their victims’ funds, those who develop binary options are doing so illegally. The so-called professionals you end up dealing with are usually employees located in call centres around the world.
WHAT ARE BINARY OPTIONS?
Binary options are similar to a game of chance or the lottery. You’re invited to bet, usually with a credit card, on the increase or decrease of an asset’s value within a very short time frame, like 10 minutes. The asset could be equity, a commodity or a currency. At maturity, there are two possible outcomes: a virtual gain that was determined before your bet or you lose your money.
Before asking for actual money, several platforms ease investors into the transaction by allowing them to place simulated bets with fictitious amounts. In the most common scenario, an investor opens an account and starts winning by betting small fictitious amounts.
“We noticed that once people feel comfortable, they often put up real money, which quickly increases to several thousand dollars,” said Annie Leblanc, an investigator with the AMF. “The results shown on the platforms are in no way linked to market fluctuations, and they’re manipulated in favour of the platform operators. Simply put, it’s fraud.”
PROTECTING YOUR MONEY AND YOUR IDENTITY
In most cases, investors have provided fraudsters with photo ID, including their passport and driver’s license, to claim their virtual earnings. In addition to never receiving the money they were promised, these investors put themselves at a high risk of becoming victims of identity fraud.
This type of fraud is becoming more prevalent. In fact, the number of calls the AMF Information Centre received regarding binary options fraud almost doubled between 2014 and 2016. According to data compiled by the Canadian Securities Administrators, the losses incurred by those who invested in these products in 2016 totalled $4,677,000. Plus, due to under-reporting, it’s believed that this massive figure is just the tip of the iceberg.
Because of these substantial losses and the mounting risks posed to the general public, the AMF recently announced its plan to prohibit the marketing and sale of all binary options with a maturity of less than 30 days in Quebec.
“No matter what you read on binary options platforms or how aggressively their salespeople try to convince you to invest, selling binary options to the general public is very suspicious,” Leblanc said. “The risk of losing everything, with little chance to recover it, is very real.”
AN INTERNATIONAL ENDEAVOUR
“We’re making great strides in the fight against fraudulent binary options,” Leblanc said. “Our frequent warnings and recent plan to ban them from the general public in Quebec are part of those efforts. Because binary options easily operate across borders and oceans, the AMF actively works with various organizations like the FBI and Europol, the European agency specializing in crime prevention, to put a stop to this global problem.”
For more information, visit lautorite.qc.ca.