I lost £27,000 at risky trader banned in US
Probes a world of scams and scandals
R.G. writes: I opened a small trading account with Banc de Binary and was contacted by broker Simon Sachs. He convinced me that I needed a VIP trading account, but this meant investing $100,000 (about £60,000).
I only had $45,000 (the equivalent of £27,000) but he said if I deposited this, Banc de Binary would add a $55,000 bonus. The bonus system would require me to trade 20 times the $55,000 before any money could be accessed.
A few days later Sachs telephoned and after a few trades nearly all my $45,000 was gone. I never heard from him again.
I was later called by a second broker, Ryan Hudson. He had heard tapes of my conversations with Sachs and would put things straight. I never was a VIP customer, I learnt. Hudson said if I deposited a further $5,000 (£3,000) he would open a VIP account, and cancel the restrictive bonus.
I borrowed $5,000 and sent it, but then found the VIP account had minimum trades of $1,000. I asked when my account would be updated and was told two weeks but nothing has changed except Hudson has also left and all my money is locked up inside Banc de Binary. YOU told me that in December you filed a complaint and Banc de Binary agreed to return your $5,000. It also offered to cut the bonus scheme restrictions, so that before withdrawing anything you would only have to make trades worth $1.5million.
But none of this answered your basic complaint. You were offered a VIP account, with professional trading help.
Only after losing almost all your money did you learn that you never had the promised VIP account and without that promise you would never have parted with the $45,000.
Banc de Binary is an unusual company. It offers ‘binary options’ on commodities, currencies and other investments. You bet on whether those investments will rise or fall within a set period. For example, you could say the dollar will fall against the yen in the next 60 seconds. Binary means there are only two outcomes: you win or you show a total loss, just like spinning a coin. This is very high risk stuff.
In September, I reported that Banc de Binary was in deep trouble in the US, where the Securities and Exchange Commission and the Commodity Futures Trading Commission were taking it to court for operating without authorisation.
They also alleged the firm falsely advertised that it and all its staff were based in Wall Street, New York.
The court banned the firm from trading with Americans, but the main legal case has yet to be heard.
According to recent court documents, Banc de Binary’s boss Oren Laurent, also known as Oren Shabat Cohen, refuses to go to the United States because a judge at an earlier hearing noted that he may be ‘criminally liable’ under the country’s Racketeer Influenced and Corrupt Organisations law, which can carry stiff jail terms. Nonetheless, Banc de Binary is legally authorised by the Cyprus Securities and Exchange Commission. European Union rules let it be ‘passported’ throughout Europe without being vetted by each state.
It can trade in Britain even though it has never been vetted by our Financial Conduct Authority (FCA), and its clients have no access to the Financial Ombudsman Service or the official compensation scheme.
Banc de Binary uses a City address and it cold calls potential investors from a British phone number, but it has no genuine presence in this country. It is represented here by a public relations firm, Mattison PR.
I asked it to comment on what you told me about the deposits needed for VIP status. It said: ‘We apologise if there was any misunderstanding about these figures.’
But it blamed you for failing to complain at the time that you had not been treated as a VIP customer, though of course it was only after the event that the second broker revealed this.
You always had two options, it said. You could carry on trading using the bonus until you had met the required turnover to be allowed withdrawals. Or, you could request a withdrawal of your own money, without the bonus, ‘subject to a handling fee’.
Meanwhile, you clearly annoyed Banc de Binary by persuading your bank to snatch back the last $5,000 under debit card chargeback rules.
With your consent, I asked Banc de Binary for copies of the tape recordings of calls, so it would be clear what its brokers promised. I received no reply to this from either the company or Mattison.
However, just over a week ago the Cypriot firm had a change of heart. Shane McKenzie of customer relations told you a refund was on its way, and on Wednesday your entire $45,000 reappeared in your bank account. You said: ‘It’s like a 100lb weight has been taken off me.’
In a statement issued through Mattison, Banc de Binary told me: ‘We are happy to have resolved the issue, but would like to stress that the same outcome would have been achieved had the client approached us directly and made a withdrawal request at an earlier date.’
So there you have it, you only had to ask and you would have got all your money back months ago.
A final puzzle remains. On Wednesday, Banc de Binary stressed that as well as being licensed in Cyprus: ‘The company also has authorisation by the FCA to operate in the UK.’
Not according the FCA, it doesn’t. The regulator assured me: ‘This firm is authorised by the Cypriot authorities, not the UK authorities.’
Its name appears on the FCA Register of investment firms because it has a licence in Cyprus, and European rules say this is enough to get its name on to the register. It does not mean that it has been vetted or authorised by the FCA.
In fact, the FCA does not regulate binary options. It regards binary options as betting, not investing.
It may suit Banc de Binary to give the impression it has passed some sort of acceptability test and been admitted to Britain by the FCA, but the truth is that it has not.