April 18, 2018

New CFTC Videos Give Inside Look at Binary Options Fraud

Victims’ Stories Illustrate Why Investors Should Beware of Unregistered Exchanges

Washington, DC —The Commodity Futures Trading Commission (CFTC) today released The Truth Behind Binary Options Fraud>, new videos that give viewers a first-hand look at the tactics shrewd fraudsters use to con investors out of hundreds or even thousands of dollars.

Click here to view The Truth Behind Binary Options Fraud Video Series

“Binary options can be helpful hedging tools for some traders, but there are only a few entities that can legitimately do business with individual investors in the U.S.,” said Erica Elliott Richardson, CFTC Director of Public Affairs. “These videos serve as a wake-up call to investors to check the registration of the company they are trusting with their money.”

In this two-part episode, experienced investors Nick Morrison and Lowell Enlow tell their stories of how they were swindled in a binary options scheme that ultimately stole more than $1 million from victims in the United States. Their ordeal illustrates how even seasoned investors can be fooled when fraudsters build legitimacy by promoting supposedly infallible trading platform software with convincing online advertisements and fake testimonials and reviews.

The Truth Behind Binary Options Fraud is the second installment of True Fraud Stories, a video series about real people losing their hard earned money to fraudulent financial schemes. 

To watch the binary options fraud videos, visit SmartCheck.gov/Videos.

The CFTC created these videos about binary options fraud because it has a global reach – most of the fraudulent operations are based in other countries with no physical location or people in the United States. These fraudsters use the Web, social media, mobile apps, and telephone pitches from so called “brokers” to lure victims into the scams and then drain the investors’ credit card accounts.  

It is common for these fraudsters to create professional looking websites that resemble legitimate trading platforms. On these fraudulent sites, investors can quickly and easily open accounts, fund the accounts with their credit cards, place trades, and manage gains and losses. However, not all binary options trading is fraudulent. Binary options can be legally traded on regulated exchanges in the United States. Registered exchanges and brokers must agree to uphold requirements put in place by the CFTC and other regulators. Although registration is no guarantee against fraud or mismanagement, it does bring a higher level of security and accountability to the public.

The CFTC launched SmartCheck.gov in 2014 to make it easy for investors to conduct background checks of financial professionals and firms to ensure they are registered. CFTC also publishes the Registration Deficient List (RED List) that identifies unregistered foreign entities that the CFTC has reason to believe are soliciting and accepting funds from U.S. residents at a retail level for, among other things, trading in binary options or foreign currency and are required to register with the CFTC, but are not registered.

“We strongly encourage investors to take the simple first step of checking the registration status of their broker on SmartCheck.gov or the RED List before trading,” said Dan Rutherford, Deputy Director of CFTC’s Office of Customer Education and Outreach. “In addition to the videos, the SmartCheck website offers resources and tools to help traders and investors spot other warning signs of fraud and a direct way to report suspicious activity.” 

About CFTC SmartCheck

CFTC SmartCheck is an educational initiative of the CFTC’s Office of Customer Education and Outreach. SmartCheck.gov provides the public with tools that help them research the credentials of financial professionals, uncover past disciplinary histories, and stay ahead of scam artists with news and alerts. The campaign is central to CFTC’s commitment to help protect the public through robust fraud prevention and investor education. Learn more about CFTC SmartCheck on Facebook at facebook.com/CFTCSmartCheck or Twitter at twitter.com/CFTCSmartCheck.