You can lose big on offbeat investments
Too often, common sense goes unheeded when trading complicated options online
A red-hot stock market gives the impression that anyone can make big money these days. But if you’re convinced you just spotted a sure-fire way to trade complicated options online, get ready to lose big cash.
Earlier this year, a Troy, Mich., resident came across an outfit online called Tenoption.com.
The man invested $2,000 with a broker who advised him that “they were going to make a lot of money and that he could take out his money at any time,” according to a Troy Police report.
Five weeks later, the man called to withdraw some cash and was told he would receive the money in five days. He’s still waiting. The Tenoption phone is off the hook.
And the website is useless. The site notes: “This site is no longer available. Any questions or concerns should be directed to support@tenoption.com.”
Good luck getting a response. 401(K)S CAN BE A TARGET Maybe it starts online or with a phone call out of the blue about a quirky way to make an all-ornothing bet on whether gold or oil prices will go up or down by a set date. Maybe an old friend from a fraternity suddenly has a trading scheme to help you rebuild your retirement nest egg.
Maybe you’re about to lose anywhere from $2,000 to $2 million.
Doug Shadel, lead researcher for AARP’s Fraud Watch Network, says that many times consumers think they cannot become a target for an investment scam because they don’t have much money to start.
“Really?” he asks. “Do you have a 401(k)? Because they go after that 401(k).”
Too often, common-sense advice goes unheeded. Tips for avoiding a scam include staying away from unregistered securities, unregistered sales people and online outfits that have strange names.
Regulators say investors are being lured into complex trading schemes by plenty of outfits that operate overseas and aren’t regulated in the U.S.
The Commodity Futures Trading Commission added 71 names in late April to an online list that warns about foreign entities illegally soliciting U.S. residents to trade foreign currency and binary options. The list now has more than 110 names — including names like 10Markets, WinOptions and Planet Option.
The Securities and Exchange Commission has received complaints of fraud associated with websites that offer binary options.
What’s a binary option? It’s essentially a strange way to gamble on whether a price of something will go up or down by a certain time. Sometimes it’s dubbed “allor-none options.” Sometimes, you’re betting on the future of oil prices or gold or silver.
Options are risky enough. But bad actors often refuse to credit customer accounts or give customers money when they request a withdrawal. The trading platforms also may be involved with identity-theft schemes and request photocopies of your credit card, driver’s license or other personal data.
The Internet Crime Complaint Center received calls from hundreds of consumers who reportedly lost millions of dollars last year relating to complaints about binary options. OFF-THE-RADAR INVESTMENTS No doubt, we’re able to do plenty of research online before we invest our money.
BrokerCheck at www.finra.org allows you to research the background and experience of financial brokers, advisers and firms. The Financial Industry Regulatory Authority also has a help line for seniors at 844-574-3577.
Another option: State regulators can offer insight, too. The Michigan Department of Licensing and Regulatory Affairs can help you determine whether a security is registered in Michigan. See www.michigan.gov/lara.
But here’s an odd revelation: Many times, victims are tempted to go with off-the-radar investments.
In an AARP survey that included fraud victims, as well as the general population, about 48% of victims agreed with this statement: “The most profitable financial returns are often found in investments that are not regulated by the government.”
By contrast, about 30% of general investors agreed with the statement.
Fraudsters play up the notion that government regulations only create more fees — fees that cut into how much money you might be able to make on an investment.
Another interesting point: About 58% of fraud victims reported receiving at least one investment sales telephone call each month compared with 32% of the general investors. Con artists may advertise on social networking sites or various message boards. Or potential investors can be called by high-pressure sales people who promise “once-in-alifetime” opportunities, according to an alert by the FBI in March.
Take that Tenoption.com. Research on the IP address for Ten Option shows that the site is registered in London and housed on several servers in California. Googling the company online indicates that plenty of other consumers lost money with that outfit, too.