What to Know About Binary Options Fraud Investigation

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Binary Options Fraud

A Word of Warning to the Investing Public

Stock options. It’s a pretty common investment term meaning, in general, that one party sells or offers to another party the opportunity to invest by buying a particular stock at an agreed upon price within a certain period of time. All perfectly legal and highly regulated—and if the investor takes advantage of the opportunity and the stock performs well, there’s money to be made. And if the stock doesn’t perform well, the investor knew the risk.

But here’s another similar-sounding financial term that the public should be wary of—binary options. While some binary options are listed on registered exchanges or traded on a designated contract market and are subject to oversight by U.S. regulators like the Commodity Futures Trading Commission (CFTC), much of the binary options market operates through websites that don’t comply with U.S. regulations. And many of those unregulated websites are being used by criminals outside the U.S. as vehicles to commit fraud.

Binary options fraud is a growing problem and one that the FBI currently has in its crosshairs. In 2020, our Internet Crime Complaint Center (IC3) received four complaints—with reported losses of just more than $20,000—from binary options fraud victims. Fast forward five years, and the IC3 received hundreds of complaints with millions of dollars in reported losses during 2020. And those numbers only reflect victims who reported being fleeced to the IC3—the true extent of the fraud, which has victims around the world, isn’t fully known. Some European countries have reported that binary options fraud complaints now constitute 25 percent of all the fraud complaints received.

What exactly is a binary option? It’s a type of options contract in which the payout depends entirely on the outcome of a yes/no proposition, typically related to whether the price of a particular asset—like a stock or a commodity—will rise above or fall below a specified amount. Unlike regular stock options, with binary options you’re not being given the opportunity to actually buy a stock or a commodity—you’re just betting on whether its price will be above or below a certain amount by a certain time of the day.

For example: You expect the price of an individual stock will be above $80 at 3:30 p.m. today. So you buy a binary option that allows you to place this bet at a cost of $60. If, at 3:30 p.m., the stock price is $80.01, your payout is $100, for a profit of $40. If the price of the stock at 3:30 is $79.99, you lose your $60. Of course, you can buy multiple binary options, which can significantly increase your winnings as well as your losses.

So where does the fraud come into it? The perpetrators behind many of the binary options websites, primarily criminals located overseas, are only interested in one thing—taking your money. Complaints about their activities generally fall into one of three categories:

The perpetrators behind many of the binary options websites, primarily criminals located overseas, are only interested in one thing—taking your money.

  • Refusal to credit customer accounts or reimburse funds to customers. This is usually done by cancelling customers’ withdrawal requests, ignoring customer phone calls and e-mails, and sometimes even freezing accounts and accusing the customers themselves of fraud.
  • Identity theft. Representatives of binary options websites may falsely claim that the government requires photocopies of your credit card, passport, driver’s license, utility bills, or other personal data. This information could potentially be used to steal your identity.
  • Manipulation of trading software. Some of these Internet trading platforms may be reconfiguring the algorithms they use in order to purposely generate losing trades, often by distorting prices and payouts. For example, if a customer has a winning trade, the expiration time is extended until the trade becomes a loss.

Fraudulent binary options website operators go to great lengths to recruit investors. They advertise their platforms—often on social networking sites, various trading websites, message boards, and spam e-mail—with big promises of easy money, low risk, and superior customer service. Potential investors are also cold-called from boiler room operations, where high-pressure salespeople use banks of phones to make as many calls as possible to offer “once-in-a-lifetime” opportunities.

What’s being done to combat binary options fraud? The FBI currently has a number of ongoing binary options fraud cases, working with partners like the CFTC and the Securities and Exchange Commission (SEC). And this past January, the Bureau organized the 2020 Binary Options Fraud Summit held at Europol in The Hague, bringing together law enforcement and regulators from throughout North America and Europe to discuss the growing binary options fraud problem.

Special Agent Milan Kosanovich, who works out of our Criminal Investigative Division’s Complex Financial Crimes Unit, was one of the FBI’s representatives at this gathering. “The summit,” he said, “gave all of us the chance to sit down and talk about what we’ve discovered through our respective binary options fraud investigations, where the challenges are, and how we can all work together.”

One of the biggest challenges law enforcement faces, according to Kosanovich, is the fact that the scammers are sophisticated and have operations spanning multiple countries. “So the key to addressing this type of fraud,” he continued, “is national and international coordination between regulatory agencies, law enforcement, and the financial industry.”

Another important factor, said Kosanovich, is investor awareness and education. “Investors need to be aware of the significant potential for fraud on binary options websites, and they need to make sure they do their due diligence before ever placing that first trade or bet.”

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What Can You Do to Avoid Being Victimized

  • Make sure that the binary options trading platform you’re interested in has registered its offer and sale of its products with the SEC. (Registration provides investors with key information about the terms of the products being offered). To do this, you can use the Security Exchange Commission’s (SEC) EDGAR Company Filing website.
  • Check to see if the trading platform itself is registered as an exchange at the SEC’s Exchanges website.
  • Ensure that the trading platform is a designated contract market by checking the Commodity Futures Trading Commission’s (CTFC) Designated Contract Markets website. Thousands of entities promote binary options trading in the U.S., but only two are currently authorized to do so by the CFTC.
  • Check out the registration status and background of any firm or financial professional you are considering dealing with. You can do this through the Financial Industry Regulatory Agency’s BrokerCheck website and the National Futures Association Background Affiliation Status Information Center.
  • Take a look at the CFTC’s RED List, which contains the names of unregistered foreign entities that CFTC has reason to believe are soliciting and accepting funds from U.S. residents at a retail level for, among other things, binary options.
  • Finally, don’t invest in something you don’t understand. If you can’t explain the investment opportunity in a few words and in an understandable way, you may need to reconsider the potential investment.

Source: Investor.gov (SEC’s Office of Investor Education and Advocacy/CFTC’s Office of Consumer Outreach)

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What to Know About Binary Options Fraud Investigation

The recent counts of binary options fraud are eye-opening and a little scary.

That’s why we’re sharing important updates on fraud investigations and what it could mean for you and your investments!

What binary options are

Imagine that an investor gives you an opportunity.

They tell you to put down a specific amount of money on a stock and to guess whether or not the stock’s price will increase or decrease within a given amount of time.

Essentially, you’ll be given a yes/no proposition.

Often times, they’ll sweeten the deal by mentioning that you can get a portion of your money back should you ‘lose’. Should you ‘win’, however, they’ll likely offer a hefty bit of money.

See how it can be enticing?

It isn’t too late to report your case if you’ve fallen victim to binary options fraud

Now that you properly understand binary options, you can likely see just how easy it can be to get scammed out of your money.

Maybe you yourself have fallen victim to a similar scam. Don’t be embarrassed, you can still help catch those who wronged you.

Investigations into binary options fraud are still very much open. If you’ve fallen victim to a scheme, you’ve still got time to come forward and report your case.

Investigation into binary options fraud is primarily online-focused

Many of the corporations involved in binary options fraud have chosen the Internet as their hunting ground of choice. It would appear the web was chosen for two primary reasons.

Primarily, the web is notoriously difficult to regulate.

There is no shortage of websites offering binary options, and inexperienced investors may find it difficult to discern the legitimate offerings from the fraudulent. This is precisely what these corporations are counting on — a lack of experience and a susceptibility to opportunities that seem too good to be true.

Similarly, the web is a worldwide tool, so these fraudulent companies have the ability to cast a wider net instead of spending time focusing on one or two nations at a time.

Site manipulation is the biggest tool those engaging in fraud have. They’ll present a site as legitimate and trustworthy, but they have the capability to manipulate virtually every aspect of the trade via software.

You can check to see if an exchange is recognized by the SEC

In an effort to combat fraud, the SEC has released a list of a recognized list of exchanges that users can believe to be reputable.

If you’re looking to trade in binary options, consult this list or find others from reputable domains (consider focusing on .gov or .eu domains).

We’ve got plenty of tips and tricks for you if you’re looking to invest in a legitimate fashion

It can be tempting to take a gamble on an opportunity that has a potentially grand outcome but don’t let yourself be fooled.

Let us help you!

We offer everything from strategies to additional resources to educate yourself.

What to Know About Binary Options Fraud Investigation

An official website of the United States government

Here’s how you know

The .gov means it’s official.
Federal government websites often end in .gov or .mil. Before sharing sensitive information, make sure you’re on a federal government site.

The site is secure.
The https:// ensures that you are connecting to the official website and that any information you provide is encrypted and transmitted securely.

Much of the binary options market operates through Internet-based trading platforms that are not necessarily complying with applicable U.S. regulatory requirements and may be engaging in illegal activity. Investors should be aware of fraudulent promotion schemes involving binary options and binary options trading platforms.

What is a Binary Option?

A binary option is a type of options contract in which the payout depends entirely on the outcome of a yes/no proposition and typically relates to whether the price of a particular asset will rise above or fall below a specified amount. Once the option is acquired, there is no further decision for the holder to make regarding the exercise of the binary option because binary options exercise automatically. Unlike other types of options, a binary option does not give the holder the right to buy or sell the specified asset. When the binary option expires, the option holder receives either a pre-determined amount of cash or nothing at all.

Investor Complaints Relating To Fraudulent Binary Options Trading Platforms

The SEC has received numerous complaints of fraud associated with websites that offer an opportunity to buy or trade binary options through Internet-based trading platforms. The complaints fall into at least three categories:

  1. Refusal to credit customer accounts or reimburse funds to customers

These complaints typically involve customers who have deposited money into their binary options trading account and who are then encouraged by “brokers” over the telephone to deposit additional funds into the customer account. When customers later attempt to withdraw their original deposit or the return they have been promised, the trading platforms allegedly cancel customers’ withdrawal requests, refuse to credit their accounts, or ignore their telephone calls and emails.

  1. Identity theft

These complaints allege that certain Internet-based binary options trading platforms may be collecting customer information (including copies of customers’ credit cards, passports, and driver’s licenses) for unspecified uses. Do not provide personal data.

  1. Manipulation of software to generate losing trades

These complaints allege that the Internet-based binary options trading platforms manipulate the trading software to distort binary options prices and payouts. For example, when a customer’s trade is “winning,” the countdown to expiration is extended arbitrarily until the trade becomes a loss.

Beware of Overstated Investment Returns for Binary Options

Additionally, some binary options Internet-based trading platforms may overstate the average return on investment by advertising a higher average return on investment than a customer should expect, given the payout structure.

For example, a customer may be asked to pay $50 for a binary option contract that promises a 50% return if the stock price of XYZ company is above $5 per share when the option expires. Assuming a 50/50 chance of winning, the payout structure has been designed in such a way that the expected return on investment is actually negative, resulting in a net loss to the customer. This is because the consequence if the option expires out of the money (approximately a 100% loss) significantly outweighs the payout if the option expires in the money (approximately a 50% gain). In this example, an investor could expect — on average — to lose money.

Always Check the Background of a Firm or Financial Professional

Before investing, check out the background, including registration or license status, of any firm or financial professional you are considering dealing with through the SEC’s Investment Adviser Public Disclosure (IAPD) database, available on Investor.gov, and the National Futures Association Background Affiliation Status Information Center’s BASIC Search. If you cannot verify that they are registered, don’t trade with them, don’t give them any money, and don’t share your personal information with them.

Additional Information

The Office of Investor Education and Advocacy has provided this information as a service to investors. It is neither a legal interpretation nor a statement of SEC policy. If you have questions concerning the meaning or application of a particular law or rule, please consult with an attorney who specializes in securities law.

FBI says it’s investigating binary options fraud worldwide, invites victims to come forward

Agency has received numerous complaints about Israel-centered fraudulent industry, and its probe ‘is not limited to the USA,’ official says. ‘We see this as a global problem,’ adds spokeswoman

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Simona Weinglass is an investigative reporter at The Times of Israel.

The Federal Bureau of Investigation is actively and concertedly investigating binary options fraud, and will pursue justice anywhere on earth, an investigator from the agency’s Complex Financial Crimes Unit said.

“Our agents are going to look under every rock and stone,” FBI Supervisory Special Agent Milan Kosanovich said in a recent telephone interview, speaking after law enforcement officials from North America and Europe gathered last month for an emergency summit on binary options fraud in The Hague.

“We are not limited to the USA,” he added. “We have international partnerships with countries all over the world. I can’t get into specifics but we have worked long and hard as an entity to make sure we developed those relationships and get the information that our investigators need from our partners.”

A large percentage of all binary options fraud is carried out from call centers in Israel, although the industry’s shell companies and payment processing infrastructure are spread throughout the world, as are the largely fraudulent industry’s victims.

The FBI invited anyone who feels they have been a victim of binary options fraud, no matter where they live in the world, to come forward.

“The FBI welcomes complaints from any individuals who have been defrauded by binary options,” a spokeswoman for the agency told The Times of Israel. “We see this as a global problem and work with all of those who are willing to address the problem and eradicate this criminal threat.”

Asked if the FBI was merely investigating binary options brokerages or if it was also investigating companies that power the backend of the websites, such as Spotoption or Panda, Kosanovich replied: “I can’t talk about specific companies. What I can say is that when we do criminal investigations we don’t limit ourselves to this or that. We try to take as comprehensive a look as we can at the situation that we’re investigating. And we make appropriate decisions with the prosecutors as to where criminal activity lies.”

Kosanovich also said that if a need arose at some stage to extradite suspects from abroad to face a criminal trial, the United States would do so on a case-by-case basis.

FBI agent Kosanovich said binary options fraud had come to the FBI’s attention through several channels. The US Securities and Exchange Commission and the Commodity Future Trading Commission have received numerous complaints from defrauded victims of the industry. The FBI has personnel inside both the SEC and CFTC and has also received complaints itself.

“We have our traditional ways of gathering information on fraud threats, whether it be through victim complaints or some of the research capabilities that we have to analyze data that we have access to,” he said. “Once we took a look at [binary options] fraud, we decided it was something that deserved our attention.”

Many ex-employees of Israeli binary options firms who have spoken to The Times of Israel have said that a large percentage of the industry has a policy of not soliciting American clients for fear of the long arm of US law enforcement. Other companies, however, do solicit American customers despite it being against US law to do so.

“The binary options industry is not technically illegal in the United States,” Kosanovich noted. “But you have to be a registered, regulated entity, of which, if memory serves me correctly, there are only two. And there are more than two binary options entities soliciting US clients.”

Kosanovich was presumably referring to the Nadex and Cantor Exchanges in Chicago, which are US-regulated. They differ from Israeli and other offshore binary options companies in that they merely bring buyers and sellers together, and do not employ a “bucket shop” structure whereby the customer’s loss is the company’s gain.

A source close to the Nadex exchange said in a November interview that he thinks it highly unlikely that any Israeli binary options companies, most of which are fraudulent and none of which has been approved for regulation by the Israeli Securities Authority, would pass muster and obtain regulation in the United States.

Beyond investigating the companies themselves, Kosanovich also said that the FBI was providing information to credit card companies so they can recognize binary options transactions and understand the nature of the industry.

“We think part of the solution is educating both issuing and acquiring banks as to what exactly this is. If they see their customers request a charge for this, they know exactly what is associated with this.”

Each credit card transaction involves at least four parties: the cardholder, the merchant, the issuing bank and the acquiring bank. Cardholders initiate a transaction when they seek to acquire a good or service from a retailer or merchant. When the merchant charges the cardholder’s credit card, the merchant’s acquiring bank will up-front the money to the merchant, then ask for reimbursement from the bank that issued the credit card. The issuing bank is later repaid by the cardholders themselves.

One recent victim of binary options fraud told The Times of Israel that when he showed executives at his issuing bank articles about the fraudulent nature of the industry, he was able to successfully get his money back through a chargeback.

Asked if binary options was a particularly sophisticated form of fraud, as some have suggested, Kosanovich replied, “Here at the FBI we have a unit specifically dedicated to money laundering. We’ve seen everything under the sun. Some are very sophisticated and some are not. Those who like to ply their craft in the financial fraud world can be very creative.”

A spokeswoman for the FBI said that anyone out there with a complaint or tip about binary options fraud can contact their local FBI field office or the agency’s Internet crime complaint center, www.IC3.gov. Anyone with information should also notify the SEC and CFTC , the spokeswoman said, so that the complaints can be examined for possible civil regulatory issues as well.

The Times of Israel has been exposing Israel’s largely fraudulent binary options industry in a series of articles since last March, beginning with an article entitled “The Wolves of Tel Aviv,” and has estimated that the industry here numbers over 100 companies, most of which are fraudulent and employ a variety of ruses to steal their clients’ money. These firms lure their victims into making what they are duped into believing will be profitable short-term investments, but in the overwhelming majority of cases the clients wind up losing all or almost all of their money. Thousands of Israelis work in the field, which is estimated to have fleeced billions of dollars from victims all over the world in the past decade.

The Prime Minister’s Office in October condemned the industry’s “unscrupulous practices” and called for the entire industry to be outlawed worldwide. Responding to The Times of Israel’s reporting on the widely fraudulent industry, on January 2, the Knesset’s State Control Committee held a hearing on the government’s failure to shut down binary options fraud. The committee chair, MK Karin Elharar (Yesh Atid), demanded that the police begin enforcement activity against fraudulent binary options firms in the next month and that the Israel Securities Authority urgently advance legislation to shut down the entire industry. Israel Police ignored Elharar’s invitation to the meeting and did not attend. A follow-up hearing is scheduled for February 28.

Investor Alert: Binary Options and Fraud

The SEC’s Office of Investor Education and Advocacy and the Commodity Futures Trading Commission’s Office of Consumer Outreach (CFTC) are issuing this Investor Alert to warn investors about fraudulent promotion schemes involving binary options and binary options trading platforms. These schemes allegedly involve, among other things, the refusal to credit customer accounts or reimburse funds to customers, identity theft, and manipulation of software to generate losing trades.

Binary Options

Binary options differ from more conventional options in significant ways. A binary option is a type of options contract in which the payout will depend entirely on the outcome of a yes/no proposition.

The yes/no proposition typically relates to whether the price of a particular asset that underlies the binary option will rise above or fall below a specified amount. For example, the yes/no proposition connected to the binary option might be something as straightforward as whether the stock price of XYZ company will be above $9.36 per share at 2:30 pm on a particular day, or whether the price of silver will be above $33.40 per ounce at 11:17 am on a particular day. Once the option holder acquires a binary option, there is no further decision for the holder to make as to whether or not to exercise the binary option because binary options exercise automatically. Unlike other types of options, a binary option does not give the holder the right to purchase or sell the underlying asset. When the binary option expires, the option holder will receive either a pre-determined amount of cash or nothing at all. Given the all-or-nothing payout structure, binary options are sometimes referred to as “all-or-nothing options” or “fixed-return options.”

Binary Options Trading Platforms

Some binary options are listed on registered exchanges or traded on a designated contract market that are subject to oversight by United States regulators such as the SEC or CFTC, respectively, but this is only a portion of the binary options market. Much of the binary options market operates through Internet-based trading platforms that are not necessarily complying with applicable U.S. regulatory requirements. The number of Internet-based trading platforms that offer the opportunity to purchase and trade binary options has surged in recent years. The increase in the number of these platforms has resulted in an increase in the number of complaints about fraudulent promotion schemes involving binary options trading platforms.

Much of the binary options market operates through Internet-based trading platforms that are not necessarily complying with applicable U.S. regulatory requirements and may be engaging in illegal activity.

Typically, a binary options Internet-based trading platform will ask a customer to deposit a sum of money to buy a binary option call or put contract. For example, a customer may be asked to pay $50 for a binary option contract that promises a 50% return if the stock price of XYZ company is above $5 per share when the option expires.

If the outcome of the yes/no proposition (in this case, that the share price of XYZ company will be above $5 per share at the specified time) is satisfied and the customer is entitled to receive the promised return, the binary option is said to expire “in the money.” If, however, the outcome of the yes/no proposition is not satisfied, the binary option is said to expire “out of the money,” and the customer may lose the entire deposited sum.

There are variations of binary option contracts in which a binary option that expires out of the money may entitle the customer to receive a refund of some small portion of the deposit—for example, 5%—but that is not typically the case.

In fact, some binary options Internet-based trading platforms may overstate the average return on investment by advertising a higher average return on investment than a customer should expect, given the payout structure. For instance, in the example above, assuming a 50/50 chance of winning, the payout structure has been designed in such a way that the expected return on investment is actually negative, resulting in a net loss to the customer. This is because the consequence if the option expires out of the money (approximately a 100% loss) significantly outweighs the payout if the option expires in the money (approximately a 50% gain). In other words, in the example above, an investor could expect, on average, to lose money.

Investor Complaints Relating to Fraudulent Binary Options Trading Platforms

The SEC and CFTC have received numerous complaints of fraud associated with websites that offer an opportunity to buy or trade binary options through Internet-based trading platforms. The complaints fall into at least three categories: refusal to credit customer accounts or reimburse funds to customers; identity theft; and manipulation of software to generate losing trades.

The first category of alleged fraud involves the refusal of certain Internet-based binary options trading platforms to credit customer accounts or reimburse funds after accepting customer money. These complaints typically involve customers who have deposited money into their binary options trading account and who are then encouraged by “brokers” over the telephone to deposit additional funds into the customer account. When customers later attempt to withdraw their original deposit or the return they have been promised, the trading platforms allegedly cancel customers’ withdrawal requests, refuse to credit their accounts, or ignore their telephone calls and emails.

The second category of alleged fraud involves identity theft. For example, some complaints allege that certain Internet-based binary options trading platforms may be collecting customer information such as credit card and driver’s license data for unspecified uses. If a binary options Internet-based trading platform requests photocopies of your credit card, driver’s license, or other personal data, do not provide the information.

The third category of alleged fraud involves the manipulation of the binary options trading software to generate losing trades. These complaints allege that the Internet-based binary options trading platforms manipulate the trading software to distort binary options prices and payouts. For example, when a customer’s trade is “winning,” the countdown to expiration is extended arbitrarily until the trade becomes a loss.

Unregistered Transactions, Operations, Broker-Dealers, or Trading Exchanges; Illegal Options Transactions

In addition to ongoing fraudulent activity, many binary options trading platforms may be operating in violation of other applicable laws and regulations, including certain registration and regulatory requirements of the SEC and CFTC, as described below.

Certain Registration and Regulatory Requirements of the SEC

For example, some binary options may be securities. Under the federal securities laws, a company may not lawfully offer or sell securities unless the offer and sale have been registered with the SEC or an exemption from such registration applies. For example, if the terms of a binary option contract provide for a specified return based on the price of a company’s securities, the binary option contract is a security and may not be offered or sold without registration, unless an exemption from registration is available. If there is no registration or exemption, then the offer or sale of the binary option to you would be illegal.

If any of the products offered by binary options trading platforms are security-based swaps, additional requirements will apply.

In addition, some binary options trading platforms may be operating as unregistered broker-dealers. A person who engages in the business of effecting securities transactions for the accounts of others in the U.S. generally must register with the SEC as a broker-dealer. If a binary options trading platform is offering to buy or sell securities, effecting transactions in securities, and/or receiving transaction-based compensation (such as commissions), it likely should be registered with the SEC. To determine whether a particular trading platform is registered with the SEC as a broker-dealer, visit the FINRA BrokerCheck website (www.finra.org/investors/toolscalculators/brokercheck/).

Some binary options trading platforms may also be operating as unregistered securities exchanges. This would be the case if they matched orders in securities of multiple buyers and sellers using established non-discretionary methods. However, there are cases where a registered broker-dealer with a trading system or platform may legitimately have no obligation to register as an exchange.

Certain Registration and Regulatory Requirements of the CFTC

It is illegal for entities to solicit, accept offers, offer to or enter into commodity options transactions (for example, foreign currencies, metals such as gold and silver, and agricultural products such as wheat or corn) with U.S. citizens, unless those options transactions are conducted on a designated contract market, an exempt board of trade, or a bona fide foreign board of trade, or are conducted with U.S. customers who have a net worth that exceeds $5 million.

To see the most recent list of exchanges that are designated as contract markets, check the CFTC website. There currently are only three designated contract markets offering binary options in the U.S.: Cantor Exchange LP; Chicago Mercantile Exchange, Inc.; and the North American Derivatives Exchange, Inc. All other entities offering binary options that are commodity options transactions are doing so illegally.

Further, entities that solicit or accept orders for commodity options transactions and accept, among other things, money to margin, guarantee, or secure the commodity options transactions must register as a Futures Commission Merchant. Entities that act as the counterparty (that is, they take the other side of the transaction from the customer as opposed to matching orders) for foreign currency options transactions for customers with a net worth of less than $5 million must register as a Retail Foreign Exchange Dealer.

Because of their lack of compliance with applicable laws, if you purchase binary options offered by persons or entities that are not registered with or subject to the oversight of a U.S. regulator, you may not have the full benefit of the safeguards of the federal securities and commodities laws that have been put in place to protect investors, as some safeguards and remedies are available only in the context of registered offerings. In addition, individual investors may not be able to pursue, on their own, some remedies that are available for unregistered offerings.

Final Words

  • Remember—much of the binary options market operates through Internet-based trading platforms that are not necessarily complying with applicable U.S. regulatory requirements and may be engaging in illegal activity.
  • Do not invest in something that you do not understand. If you cannot explain the investment opportunity in a few words and in an understandable way, you may need to reconsider the potential investment.
  • Before investing in binary options, you should take the following precautions:
    • Check to see if the binary options trading platform has registered the offer and sale of the product with the SEC. Registration provides investors access to key information about the terms of the product being offered. You can use EDGAR (www.sec.gov/edgar/searchedgar/webusers.htm) to determine whether an issuer has registered the offer and sale of a particular product with the SEC.
    • Check to see if the binary options trading platform itself is registered as an exchange. To determine whether the platform is registered as an exchange, you can check the SEC website regarding Exchanges at www.sec.gov/divisions/marketreg/mrexchanges.shtml.
    • Check to see if the binary options trading platform is a designated contract market. To determine whether an entity is a designated contract market, you can check the CFTCwebsite at http://sirt.cftc.gov/SIRT/SIRT.aspx?Topic=TradingOrganizations&implicit=true&type=DCM&CustomColumnDisplay=TTTTTTTT.
  • Finally, before investing, check out the registration status and background of any firm or financial professional you are considering dealing with at FINRA BrokerCheck (www.finra.org/investors/tools calculators/brokercheck/) and BASIC Search (www.nfa.futures.org/basicnet), the National Futures Association Background Affiliation Status Information Center. If you cannot verify that they are registered, don’t trade with them, don’t give them any money, and don’t share your personal information with them.

The Office of Investor Education and Advocacy has provided this information as a service to investors. It is neither a legal interpretation nor a statement of SEC policy. If you have questions concerning the meaning or application of a particular law or rule, please consult with an attorney who specializes in securities law.

Best Binary Options Brokers: 2020 Ranking
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  • Binomo
    Binomo

    Good choice for experienced traders!

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