Binary Options scams unfortunately prey upon the inexperience and trust of new traders. Binary Options scams are very common and come down to several basic factors, mainly including poor due diligence and poor manipulation by the brokers. This is an unfortunately common occurrence as it damages the image of Binary Options on it binary options scam. That’s why we want to identify the most common Binary Options scams and show you how to avoid them.
The first one is related to the pricing mechanism of the binary options contract itself. In this scenario, two parties enter into the contract with one side offering a vanilla or traditional asset and the other party seeking to hedge. The client does not exercise his right to exit the contract and therefore incurs a penalty fee. This is because when the client bets using the vanilla asset and the broker sells the asset at a higher price than the original amount (the skew), he will be charged for the underbought price and oversold price.
Another Binary Options scam involves the use of managed account providers to facilitate trading. A managed account provider typically allows clients to place orders via the internet without ever seeing the asset face-to-face. These brokers are then used by investors who place fake orders. As such, these brokers can commit a number of crimes such as fraud, money laundering and securities fraud. However, managed account providers are required by law to screen their clients to prevent this type of fraud.
Fraudulent traders will often come across red flags. Red flags generally mean that a trader may be placing false trades. Traders will often have fake quotes, advice and reports that they send to their customers. You can check whether a broker is using a managed account to facilitate the execution of fraudulent transactions through a red flag check. The easiest way to do this is to use your search engine.
Binary options fraud also includes the use of “tricks” by brokers. Some brokers will make use of “bait” products to get potential customers to join their team. There are many binary options scams where brokers lure people into signing up for accounts with them only to rob them later. In fact, this is one of the most popular reasons why brokers are investigated.
There are two binary options scams that we know about today. One is an advertising campaign in South Africa for a binary options broker called Fap Turbo. The campaign promoted a special offer whereby clients could receive $1.6m if they would promote Fap Turbo to five hundred friends. As you can imagine, this was pretty much a clear attempt to get customers using Fap Turbo. A few weeks later, however, it became clear that this ad was a scam and that none of the people who had joined would actually receive such a huge sum of money. Fap Turbo quickly disappeared from the internet as well.
Another binary options scam is the so-called “vanilla” binary call option. This con refers to the fact that the same exact binary call option – the one that brokers usually offer – has been marked as a “vanilla” option. This means that anyone who purchases it will be allowed to trade it without worrying about making a trade based on their knowledge of its accuracy. In other words, anyone can buy this option and place a bet without having to do anything more than carefully check a few numbers on their phone. This makes it very appealing to buyers, but it does not actually provide any kind of advantage.
This type of binary options scam is very common in countries where corruption is widespread. For instance, in Nigeria and Pakistan the government controls all assets – including those of banks and financial institutions. Therefore, sellers of binary options contracts can sometimes put forward assets that aren’t actually there. They may state in the contract that their asset will be transferred to their account once a certain amount of money has been collected. While this sounds like a great way to profit from a binary options deal, it is completely bogus, and the buyer’s account will be closed once the broker receives his share of the cash.