Investor Alert: Binary Options

The SEC’s Office of Investor Education and Advocacy is issuing this Investor Alert to warn investors that fraudsters may conduct investment schemes through purported online binary options trading platforms. 

A binary option is a type of options contract in which the payout will depend entirely on the outcome of a yes/no (binary) proposition.  When the binary option expires, the option holder will receive either a pre-determined amount of cash or nothing at all.  Given the all-or-nothing payout structure, binary options are sometimes referred to as “all-or-nothing options” or “fixed-return options.”

Typically, a representative of a binary options website will ask a customer to deposit money into an account where the customer can purchase binary options contracts.  A customer may be asked to, for example, pay $50 for a binary option contract that promises a 50% return if the stock price of XYZ company is above $5 per share when the binary option expires.

Representatives of binary options websites may use fictitious names and tout fake credentials, qualifications, and experience.  They may misrepresent where they are calling from (for example, pretending that they are in the U.S.).  Supposedly “unbiased” sources reviewing or ranking binary options websites may have been paid to promote or criticize particular websites.  Fraudsters may pretend to warn you that the binary options website you are using is a scam in order to gain your trust and get you to deposit even more money in another website that they also run.

If you are considering investing money with a binary options website, look out for these red flags:

• Unsolicited Offers. Unsolicited offers (you didn’t ask for it and don’t know the sender) to earn investment returns that seem too good to be true may be part of a fraudulent investment scheme.
• High Pressure Sales Tactics or Threats. Representatives of binary options websites may use high pressure sales tactics or even threats (for example, threatening to file a lien against your property) to swindle you.
• Identity Theft. Representatives of binary options websites may falsely claim that the government requires photocopies of your credit card, passport, driver’s license, utility bills, or other personal data.  Protect yourself and safeguard your personal information.
• Constant Turnover of Representatives. Be skeptical if the names of the persons you are dealing with at a binary options website seem to change frequently or if you are told your former “broker” has been fired.
• Issues with Withdrawals.  Representatives of binary options websites may use delay tactics to hold up your withdrawal request until it is too late for you to dispute the charge(s) with your credit card company.  The Fair Credit Billing Act (FCBA) provides consumer protectionsif you are charged for goods and services you didn’t accept or that weren’t delivered as agreed, but you must send a letter disputing the charges that reaches the creditor within 60 days after the first bill with the error was mailed to you.  Also, be skeptical if someone tries to convince you to pay more money for a “premium” account with fewer restrictions on withdrawals.
• Credit Card Abuse.If you used a credit card to fund your account, keep an eye out for unauthorized charges on your credit card statements.  Even if you signed a form purportedly waiving your right to dispute any credit card charges, report all unauthorized charges to your credit card company immediately.
• Government Impersonators.  If someone claiming to be affiliated with the SEC contacts you and asks you to pay money to help you recover binary options investment-related losses, submit a Complaint Form to the SEC’s Office of Inspector General (OIG) or call the OIG’s toll-free hotline at (877) 442-0854.  It’s important for all investors to know that the SEC never makes people pay to get their money back.

This information is provided by The White Law Group, a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm with offices in Chicago, Illinois and Vero Beach, Florida. If you are concerned that you have been victim of securities fraud please call The White Law Group for a free consultation at 888-637-5510.

For more information on the firm, visit www.whitesecuritieslaw.com.