The ruthless betting scam that cheats investors out of millions

THOUSANDS of Britons, many of them pensioners, have lost millions of pounds in a secret fraud known as binary options investments. Police are receiving an average of two fraud reports every day and victims are losing up to £200,000. Insiders at one call centre behind the scam revealed staff were ordered to ‘rape the clients’ of their cash.

Some of the brokers involved have swapped tales of people committing suicide after realising they have been ripped off.

The schemes are regulated or banned in the US, Israel and Belgium – and other nations are looking at following suit. But the British Government has – so far – refused to take action to protect UK consumers.

Binary option investments effectively involve betting on whether financial assets, such as shares, currencies or commodities, will rise or fall over a specific time period. The schemes are presented as regulated investments, a better option than a savings account or pension. The trades are financed by taking money from credit or debit cards. But fraudsters are creaming off vast sums from the cards without proper authorisation or with any intention of giving it back.

Pensioners are not the only targets. An increasing number of young adults have been duped by bogus ‘get rich quick’ promises, images of fast cars and piles of cash.

Investors who have tried to get access to their ‘winnings’ have been met with a brick wall.

The scandal has been revealed in a joint investigation by the Bureau of Investigative Journalism and the Daily Mail. The Bureau has received leaked files giving the details of hundreds of British victims and how much they have lost.

The National Fraud Intelligence Bureau’s head of crime, Detective Chief Inspector Andy Fyfe, said the sale of binary options by offshore operators is now the biggest fraud in the UK. He said two reports a day are being made to police, with the average investor losing £16,000, but this is just the ‘tip of the iceberg’.

MR Fyfe warned: ‘People have been persuaded to cash in some of their pensions and invest in rubbish. From our inquiries, the vast majority of the non UK-based binary firms are operating from Israel. Many are also registered in Cyprus as this gives them an air of legitimacy.’

Once registered in an EU country they are, in theory, allowed to target Britons and others from hard-sell call centres. A loophole in the law means there is no effective regulation of the firms involved.

City watchdog the Financial Conduct Authority (FCA) has made clear it wants to regulate this sector. But the Government and the Treasury have failed to act.

The FCA is extremely worried about the scam. A spokesman said: ‘We have received an increasing number of reports from consumers about their experiences with illegitimate binary options firms that do not appear to be regulated by any agency, either in the UK or abroad.

‘Many consumers report having been scammed by these firms and we have concerns that UK consumers are being increasingly targeted by fraudsters who offer opportunities to invest in binary options.

‘Most consumers describe having lost substantial sums of money. While this might be expected given the high risk win or lose nature of the activity, we are particularly concerned about the experiences many consumers report to us when trying to deal with unauthorised or unlicensed binary options firms.

‘We regularly hear about such firms suddenly closing consumers’ trading accounts, refusing to pay back their funds and ceasing any further contact with the consumer.

‘Fraudulent firms operating in the binary options market without the necessary authorisations or licenses tend to be based outside the UK; yet often claim to have some kind of presence here, often at prestigious City of London addresses.’

In theory, binary option investments are policed by the Gambling Commission – but its powers are redundant as they only cover businesses registered in the UK.

The Bureau has seen internal documents from some of the companies listing the names and phone numbers of hundreds of British victims.

One investor put in £200,000 and many had lost tens of thousands. Typically, they invest small sums to start with and are then drawn in with a

series of false promises. Most victims do not want their names published, in part because they fear being targeted again. Brokers sell what they call ‘mug lists’ on to other traders.

One victim, ‘George’, originally put £250 into an account linked to a binary options company called Inside Option.

AHARD sell trader persuaded him to add another £500 on a promise that this would insure him against any losses. All the payments were made on a credit card and George thought this would provide protection if it turned out to be a fraud.

He watched the trades on his electronic account grow and persuaded his girlfriend and mother to invest their savings too. After eight months they had invested £80,000 and, astonishingly, this had grown to £500,000. But, as soon as he attempted to withdraw the money there were problems.

He was told the trader who set up the account had left to look after his sick mother. George has since struggled to contact the company and has been unable to access his money.

Staff at Inside Option told one client it was based in the Gherkin in the City of London. Another said it was regulated by the British authorities. Both of these statements are untrue.

On its website, Inside Option says it is owned by The Masters Association, a company based in St Vincent and the Grenadines. It was previously registered in Anguilla, where last year the regulatory authorities issued a warning that it was not licensed to trade in binary options.

In fact, the company operates from a call centre in Israel.

InsideOption.com’s domain is registered to Emir Yedibaslar, a Turkish businessman whose Facebook profile once featured an image of Leonardo DiCaprio in The Wolf of Wall Street. He has also used Facebook to recruit traders for a number of organisations, including Inside Option, with images of piles of cash and promises of huge bonuses.

He wrote: ‘Do you want to make a lot of money every month while having mad fun in the office?? Come get our training and become one of our brokers and make tons of cash in commission !!!!!! ’

Mr Yedibaslar denied any connection with Inside Option. He said he was involved in many businesses, including registering and selling domain names, one of which was Inside Option. ‘I haven’t had any involvement with them for over two years now,’ he said. ‘I have not worked there, never in my life.’

He insisted he was entirely innocent of any wrong-doing and added: ‘I have never in my life not earned a straight dollar.’

Inside Option did not respond to several requests for a comment.