6 Ways Binary Options Scam Can Cost You Money and How to Avoid It.
Binary options scams are in essence one of the reasons Fair Binary Options came to existence. We saw a niche that has potential but is full with fraud and unethical activities. As the binary options phenomenon has grown, so have various ways fraudulent binary options brokers found to trick their customers. While regulation from the side of CySEC and other bodies such as the FSA, ASIC and others did help to bring a minimum set of standards binary options brokers must adhere to, we are still seeing widespread use of shady practices that can cost traders money. Read more about regulators in binary options.
AMF Study Reveals Many Brokers Are Not Disclosing Risks Properly.
In this respect it is also fair to say that not always binary brokers are those who cause losses. Many customers are not aware of risks that binary options trading carries. As with any other form of financial speculation, short-term trading can be very risky and this is one of the reasons customers who did not attain desired results sometimes make internet noise. However, this is not only their fault, as the recent research by the French stock market regulator – AMF revealed. Sometimes these risk disclaimers get lost under loads of advertising, pushy phone calls and false promises.
Yes, Binary Options Trading is Risky.
We will show some of their results in this article, along with some binary options scam tactics we encountered while reading numerous e-mails on our support mail. In short, AMF found that some binary options brokers do not follow all standards and regulatory guidelines, and that they use advertising tactics that can trick customers into believing that binary options trading is not risky or in some cases that profits are even guaranteed. As we try to improve the transparency of binary options industry, this report, along with our own experiences can be used as an excellent guide for beginners who understand the risks to binary options trading and like the fact that there is an easy way to take part in financial markets.
AMF Blacklist.
As the number of traders grows, so does the number of brokers in this very competitive industry. Many of them are regulated now and are bound to provide good service most of the time. It is rarely that Fair Binary Options experienced complaints about regulated binary options brokers, however there were instances when they have managed to steal from customers. Also there are many examples of binary options brokers that we never got any complaints about.
See FBO Blacklisted Brokers.
AMF reports a year to year increase in blacklisted binary options brokers that already passed the number of Forex brokers (Picture 1). However we can imagine in the relation to sheer volume traded, forex brokers are much larger entities. We also want to say that many of brokers that are on AMF blacklist actually do not exist anymore and the real number is smaller.
Binary Options Scams in Mainstream Media.
It is only natural that once something becomes popular as binary options did, that scams will show up and try to take their piece of the cake. Also, considering how only few years ago regulators didn’t pay much attention to scams (but enforced more and more measures towards regulated brokers), many traders had only one solution – to contact local media and tell their story about trading with binary scams.
Of course, scam brokers are ruining the reputation of the entire industry, but at the same time, unfair and unbalanced reporting caused maybe even more harm. Media outlets were flooded by stories about binary scams and warnings not to trade binary options, without any understanding of what binary options really are and how markets work.
Such stories grew bigger and bigger, even though they didn’t apply the basic rules of journalism, but were a mere witch hunt focused on the entire industry. Unfortunately, even the big and important websites and magazines, such as Times of Israel, frequently published stories where the other side wasn’t represented at all, or where the basic journalistic principle of "5W’s +H" (answering questions like who, what, when, where, why and how) remained unfulfilled. It was common to read a story published without a single fact and without additional research on what other side has to say. Even though it is completely understandable that media is in service of people, this is a great proof how good intentions don’t have to result in fairness for everyone. By focusing on victims, journalists often seemed to forget how they are reinforcing stereotypes about an entire industry. Undoubtedly, Times of Israel helped a handful of readers to warn others about scams and raise awareness about binary options scams.
Balance is the Key in Binary Options Industry.
Instead of responsible reporting, media created an atmosphere of fear, and Times of Israel even urged to support the policy of banning all binary related industries from Israel. These stories took their toll, and many brokers decided to leave Israeli territory in every way and take their business elsewhere. Considering how the new law was planning to ban customer support companies and IT companies involved in the development of binary platforms and software, this decision is not surprising.
However, after initial enthusiasm, the Israeli Knesset decided to take a summer break and now it seems that the new law will be much less repressive. However, the damage is already done, and more than a few brokers went offshore.
That scams create an unfriendly environment for a specific type of business or industry is no news. The same thing happened not only with forex industry, just a couple of years ago, but also every time some novelty occurs in our lives. It can be concluded that despite the unfriendly treatment by the media, binary options are now entering a new, more serious era, as we all witnessed many brokers being closed down due to new market regulations and rising competition.
It would also be fair to remember our readers how we witnessed regulator’s ignorance for quite a long time. Instead of focusing on the safety of traders, they were acting in typically bureaucratic manner – always passing new bills, policies, rules, and fines focused on regulated brokers while leaving unregulated entities to operate as they like. Now even regulators are becoming more proactive and even stricter when it comes to ensuring a safe trading environment for the trader.
Examples of Retail Trading Forex Scams.
There are many examples that these scams have hit the media, especially when it comes to Forex brokers. There was a case of Joel Ward which at the time rose to become a prominent speaker on trading on Forex and even spoke on topics of ethics in trading shortly before he was arrested for taking more than $15 million of his customers, of which he lost more than $1.8 million and spent much of the rest on a huge salary, "trading retreats" and other perks. Other prominent case is that of Russell Cline, whose brokerage firm promised huge returns only to notify customers they lost all the funds. Bloomberg reported on forex scam with a firm that targeted "safety" as marketing pitch, only to destroy their Indian customers’ investment. In binary options, which is a smaller industry, scams are usually smaller, but it does not mean they hurt people who got scammed less because of that. However, AMF shows, the number of complaints is growing.
So, take a look at our 6 ways binary options can cost you money to avoid them in the future!
1. Downplaying Risk of Binary Options
Auto Trading.
We have already mentioned that one of the ways binary options brokers trick customers into depositing is to downplay risks to trading. This is outright fraud since in most cases they rely on uninformed customer.
