The State Corporation Commission cautions Virginians to be wary of online binary options schemes which, at best, are a big gamble and, at worst, can be outright scams.
Much like bets, binary options are short-term, all-or-nothing investment contracts in which the investor predicts the value of an underlying asset (currency, stock, etc.) at a predetermined time or date in the future. If the investor correctly predicts the asset price at the end of the contract, the investor is supposed to receive the payout agreed upon in the contract. If the investor is incorrect, there is no payout and the investor loses the amount invested in the binary option.
As binary option platforms proliferate, securities regulators are seeing an uptick in complaints. In many cases, the internet-based platforms upon which binary options rely are unregistered or otherwise not in compliance with regulatory requirements.
“Like the flip of a coin, it’s heads you win, tails you lose with binary options,” said Ron Thomas, director of the SCC’s Division of Securities and Retail Franchising. “Educate yourself and understand the risks of binary options and other investment opportunities before you invest and know where to turn for help,” Thomas said.
In some cases, even when virtual investors see gains, they cannot collect their profits since the profits aren’t real or the firms offering these investments refuse to pay. Other complaints involve unauthorized charges found on credit cards used to invest through a binary options website or representatives demanding excessive fees when withdrawal requests are made.
In binary options schemes, it is common for scammers to target an investor a second time by claiming to be affiliated with a government agency that can, for a fee, help the investor recover money lost in the initial scam. This is called a “reload.”
Warning signs of binary options include unsolicited investment offers, high-pressure sales tactics, requests for personal information and a lack of information provided about the investment or the offering firm.
Offering investment services or products, whether online or in person is subject to state and/or federal regulatory oversight. Thomas urges Virginians to hang up on aggressive cold callers and not allow themselves to be pressured to make rushed decisions about investments they don’t understand.
“Contact the SCC’s Division of Securities and Retail Franchising to check that both the seller and investment are registered. If they are not, don’t invest. If you suspect you are the victim of fraud, report it to your state securities regulator immediately,” Thomas said.
For more information, call the SCC’s Division of Securities and Retail Franchising in Richmond at (804) 371-9051 or toll-free (in Virginia) at 1-800-552-7945. You may also visit the division’s website at www.scc.virginia.gov/srf/ or visit the North American Securities Administrators Association’s website at www.nasaa.org/43192/informed-investor-advisory-binary-options/.
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