Binary options have become a very powerful player in the financial sector. The reason for this is that they are a highly unregulated instrument and investors can make, at times, substantial gains. In fact, binary options are one of the financial transactions that is the closest to gambling in the financial marketplace today. When trying to understand binary options and what their corresponding risks are, it is wise to look at the conversation below:
A Basic Break Down
A binary option is an options contract where the profit paid out depends completely on the outcome of a yes/no question that is connected to the projected price of a specific asset and whether it will increase or decrease below a certain amount. What makes these particular options tricky to deal with is that the investor makes a profit or losses 100% of. When the binary option expires, the current holder has no right to buy or sell. That said, when the binary option expires, the option holder gets the previously determined amount of cash or nothing.
When You Should Suspect Fraud
One important thing to remember is that there is very little regulation on binary option websites as many of them are located in foreign jurisdictions. For this reason, they do not comply with many of the regulations that the United States poses, yet they can still be accessed by American consumers. For those American consumers that are unware of what binary options are, it is essential to research them carefully before providing your information and know when to suspect fraud.
Some indicators of fraud that one should look for are:
- Software Manipulation: While this is difficult to spot at first, there are several foreign and domestic companies that greatly modify the software to make it impossible for the prospective investor to win. Be careful of sites that receive negative consumer and governmental reviews so that you do not fall prey to one of these unfortunate schemes.
- Refusal to Credit Customer Accounts or Reimburse Customer Funds: There may be companies that just will outright not pay the earnings that are owed or credit the consumer’s account. Be wary of stories of these companies not paying to avoid not receiving payments or credits yourself.
- Identify Theft: Identity theft is one of the more substantial issues that occurs when individuals decide to use binary options providers. The reason for this is that these sites require the most up-to-date information from the customer such as: driver’s license and privileged banking information. Be very careful before you decide to provide your private information to a binary options company’s website.
- Lack of Credibility in the Industry: Before engaging with a binary options site, make sure that the provider has a reputation in the industry and is not a newer business that has appeared out of nowhere. For example, sites that are well established in the United States and registered with a recognized government agency such as the Commodities Futures Trading Commission (“CFTC”) better places to start; however, it is still important to be careful with any binary options trading site that you decide to do business with.
What If You Are a Victim of Binary Options Fraud?
If you are a victim of binary options fraud, it is important to contact attorneys experienced in recovering investor losses to see whether you have a case against the binary options provider that you completed your transaction with. Attorneys may also have a list of suspected companies that are already under scrutiny by the SEC. Meeting with attorneys will be a strong starting point to getting your case resolved and potentially, your assets recovered.