How Brits are losing millions to ‘get rich quick’ binary options trading gambling scams

  • ‘Binary options trading’ fraud collected £27m in 2017
  • Investors being cheated by trading requirements after investing

Brits gambling on a quick quid through so-called binary options trading are frequently being scammed by fraudulent operators, says independent watchdog Action Fraud.

Binary options trading is ripe for scammers, and many Brits have fallen foul.
Binary options trading is ripe for scammers, and many Brits have fallen foul.

Cases of binary trading fraud have escalated tremendously in recent years as offenders turn to social media and online ads in a bid to target victims.

Estimates suggest £61 million has been lost in the past six years due to bogus binary odds trading: a rise of 400,000% since 2012.

Consumer watchdog Which? and the National Fraud Intelligence Bureau have spoken out about the risks, warning investors to read the small print of the fixed odds betting schemes before they make any deposit.

What is binary odds trading?

In essence, binary odds trading is similar to fixed odds betting.

Operators offer the chance to bet against a trading outcome (such as a corporate share price or the price of a commodity) going up or down.

If an ‘investor’ wins, they get a return based on the odds the bet was purchased at; if they lose, they get nothing.

When operated in accordance with regulations, this is a legitimate and popular form of gambling, which, for savvy investors, may see them able to study the market and weigh up the relative value of the bet, much in the same way as a skilled sports bettor might.

So in that sense, there is more to it than a spin on the slots, or the roulette wheel.

However, Action Fraud reports a large number of cases where consumers are misled into believing they are making an investment, and where the risks are unclear.

This has become more prevalent through social media and web advertising, where unscrupulous and unregulated operators can strike with ease.

Often, the data is rigged so that the operator wins most of the time. ‘Investors’ or gamblers will put up cash and will receive a small return from their first investment, but they will likely lose on every investment after that. Binary options brokers may also add ‘trading requirements’ to investments, which require the investor to wager up to 40x of their deposit before anything can be withdrawn.

This works in a similar way to online casino wagering requirements – but online casinos must make these clear in order to comply with their gambling license conditions.

Huge rise in binary options fraud

In 2012, losses related to binary options trading were £6,200, with just a handful of reported cases. By 2018, that figure has risen to £61 million. £27 million of that happened during 2017 alone, prompting a number of gambler and consumer watchdogs to speak out.

Which? describes the fixed odds investment scam as “Britain’s biggest investment con”.

One UK victim reports losing his life savings to the scam, after being asked to make 150,000 trades over and above his initial deposit. “I retired and I was looking for a way of making money so I tried binary because it looked good,” the victim told reporters. “And basically it was a big con, it didn’t work out and I lost a lot of money.”

Taking action against investment gambling

Historically, the Gambling Commission has overseen binary options trading. However, the Financial Conduct Authority will take over from January 2018. This implies that binary options trading is now being classed as an economic activity rather than a gambling game.

It also opens up some new regulatory options. The FCA is known to be tough on fraud and it demands financial services stick to its tight rules at all times. Under the FCA, the authorities will have additional powers to tackle dishonest and illegal trading.

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