Some scammers are targeting binary options customers with follow-up frauds, such as recovery scams and IRS impersonation scams, according to FINRA.
FINRA issued an alert to warn anyone involved in binary options trading — specifically through unregistered non-U.S. companies offering binary options trading platforms or services — to be on guard for potential follow-up frauds.
In November, FINRA issued an investor alert after it received a number of calls through the FINRA Securities Helpline for Seniors that suggested that scams involving binary options and their trading platforms abound.
The newest alert focuses on follow-up scams that tend to target investors who may be unwittingly involved in “shady” binary options businesses.
A binary option is an “all-or-nothing” proposition in which the payout will depend entirely on the outcome of a yes/no proposition. Whereas, a conventional option is an agreement that gives you the right to buy or sell a security for a fixed price during a set period of time, at which point the option expires.
“When a binary option expires, it makes either a pre-specified amount of money or nothing at all — and if the latter happens, you lose your entire investment,” FINRA explains.
Some binary options are listed on registered exchanges (regulated by the Securities and Exchange Commission) or traded on a designated contract market (overseen by the Commodity Futures Trading Commission).
The problem is that an increasing number of binary options are sold through online platforms that do not comply with U.S. regulations and can be fraudulent, as FINRA, the SEC and the CFTC have warned.
Investors with binary options accounts on these suspect platforms may be targets for follow-up frauds, like advance fees or IRS impersonators.