It is quite normal to have an extra cushion in life in the form of financial freedom. When you have enough money, your life becomes more comfortable. You have the freedom to buy the things that you desire most. And it is not a crime to dream big.
Many seek an alternative source of income to supplement their income. There are several ways one can achieve this, and the stock market is one such place. Many have invested in the stock market and have made substantial profits.
Considering the current economic situation, the need for this extra cushion is ever greater. The rising food prices, the Fed’s increasing interest rates, and declining job prospects have raised concerns among many Westerners.
As more and more people explore the possibilities of making a quick buck, scammers are just around the corner, waiting for them to make a mistake and get scammed in the process.
Several scammers will impersonate stock brokers or brokerage firms; there are also some firms whose license to practice trading has expired or been revoked due to some legal issues. Thus, you, as an investor, need to be careful not to fall for such scams.
The binary options trading scam is one such financial fraud that has engulfed many victims in its path.
Binary Option Trading
Before we understand the nature of the scam, let us first understand what binary options trading is.
It is a type of contract between the broker and the client where the payouts entirely depend on the outcome, such as “yes” or “no.” The price trend of a financial asset like a stock is considered, and a wager exists between the broker and the client that in the next five minutes, the price trend of that particular stock will either increase or decline. The one who loses the wager pays the winning amount to the winner.
For example, a $100 wager between the client and broker is that the price of X stock, which is trending at $45 per share, will rise or fall. The one who loses the wager pays off the winner.
Such wagers are instantaneous, and unlike other types of options available in the financial market, there is no way the client can avoid paying the losing bet. The contract ends when the stimulated time ends, and the loser pays the winner.
Binary Option Scams
Well, if binary options trading is so simple, you have a 50% chance of winning the bet, and you might think, “What could go wrong?”
Well, for one, the trading platform that scammers offer their clients to download is rigged. The rigging is achieved in two ways: either the entire platform is rigged or there is a delay in the data that is streamed.
Generally, the trading platforms offered by brokers or brokerage firms relay real-time data on price fluctuations in the stock market.
The trading platform provided by Binary options scammers could cause a delay in the data streamed by the stock market. Thus, scammers know in advance about the price moment and can thus ensure that every bet that is placed is in favor of the scammer.
In the second way of scamming the victims, scammers provide their victims with a completely rigged trading platform. In this case, the real-time data is not streamed from the stock market; rather, it is completely controlled by scammers.
How do scammers keep their victims enticed?
Scammers are smart; they know that if they keep on winning every time, their victims will lose interest and stop playing their “rigged game.” Scammers will ensure that their victims initially win, thus promising a false sense of security that they have the “ability to win big.”
Thus, once these scammers start investing more, they start to lose. They invest more because they are afraid of losing money. The false sense that “this is the last bet, the one bet that will recover all the lost money,” makes them invest more while increasing the amount on successive bets.
A few genuine brokers and brokerage firms allow binary trading; they are regulated and certified by the regulatory authority, which ensures clients’ interests are protected.
How to spot bogus brokers or brokerage firms offering binary options services?
Among all the complaints that are being received by the SEC, or Securities Exchange Commission, there are three common categories where victims were ripped off.
1. Denying reimbursement or paying off clients
Once clients have opened trading accounts with scammers, they will deposit their money into their trading accounts. As and when the clients are falsely encouraged by the scammers to invest more to win more. Once these clients have had enough of the losses or wish to withdraw their winnings from their accounts, these scammers will not allow their clients to withdraw.
Since these Binary options scammers are based in another country, there is little that these clients can do apart from calling their customer service center, which will eventually block their contact numbers.
2. Identity Theft
Under the guise of providing binary options services, scammers will collect all the sensitive data from their victims. These scammers will collect their social security numbers, bank account numbers, credit card details, passports, driver’s licenses, and so forth.
3. Rigged trading platform
Many clients who fall victim to bogus brokers or brokerage firms finally admit that they have fallen for a scam where they suspect that the trading platform was rigged. They also stated that the time left until the expiration of the winnings may be extended arbitrarily until the trade ends in a loss.
Final thoughts
The United States has legalized binary options trading, and as mentioned earlier, there are a few genuine brokers and brokerage firms regulated by regulatory authorities that are either private or government-owned.
Since almost all brokers and brokerage firms advertise and can be contacted online, researching these firms is a must to avoid falling for binary options scams. Use caution if any broker or brokerage firm is offering binary options services at competitive prices. It’s possible that they are scammers.
Regulatory authorities offer protection against scams and fraud; they protect the interests of clients of a broker or a brokerage firm. So when a broker or brokerage firm goes rogue, these regulatory authorities ensure that the client’s interests are protected.
Always check that the online broker or brokerage firm is authorized and protected by a renowned private regulatory body or a government-owned entity.
The binary option scam has also engulfed the cryptocurrency market; thus, be cautious if a binary option is offered in the crypto market.
Read Also:
- 6 Ways To Make Sure Your Finances Are Seamless
- The Future Of Digital Currencies: 7 Things We Can Expect In 2022
- Crypto Staking: Locking Up Crypto Holdings To Earn Interest
