SINGAPORE (Dec 15): Singapore police has issued a warning over a “sharp rise” in scams involving online trading in binary options.
The Commercial Affairs Department (CAD) has received more than 30 reports from investors who have lost more than S$1 million to unregulated binary options trading platforms, authorities said in a press release on Wednesday.
Police said most victims are local Chinese males aged between 31 and 50, and include finance professionals as well as retirees.
“Binary options trading is attractive, because it sounds simple and the option providers or platforms often promise high, quick and safe returns,” police said in its statement. “In reality, binary options are speculative and risky, and many online platforms offering binary options trading are fraudulent.”
All or nothing
With a binary option, investors try to predict whether the price of the underlying asset will be above or below a specified price at a specified point in time.
That specified point in time is usually very near, ranging from a few minutes to a few months in the future.
Meanwhile, the underlying products can range widely, and include shares, currencies and commodities.
Unlike other types of options, holding a binary option does not give the investor the right to buy or sell the underlying asset. Investors receive a fixed payoff, if their prediction is correct, but lose the entire investment if they are wrong.
“That is why binary options are often also called ‘all or nothing’ options,” police said. “The risk of losing your entire investment is high, because correctly predicting short term price movements is difficult.”
Singapore investors lost over S$1 mil to online binary options scams
An investigation by Money Mail and the Bureau of Investigative Journalism found that the vast majority of binary option traders never make any money from it.
Some eight in 10 customers are reported to end up losing all their cash within five months. At some binary firms, the investigations revealed that just three in 100 customers ever make a profit.
Lured by initial profits and promises of financial advice, more bonuses and attractive rewards, most of the investors found it difficult to stop at one small investment and would put in more money.
In Singapore, these investors either lost all their monies or could not withdraw the balances in their accounts, police said.
Some also had unauthorised withdrawals made in their debit or credit cards after they had handed over their card details for payment.
Authorities said most of the binary options trading platforms encountered were usually unregulated entities based outside Singapore.
When things go wrong, the victims faced difficulties contacting these foreign operators, who commonly claim to be operating from the United Kingdom, Cyprus and Hong Kong.
Beware of scams
Police urged Singaporeans to exercise caution and keep in mind the following when dealing with binary options trading:
a) Even when offered by legitimate sellers, binary options trading is a high risk investment where you can easily lose all that you invested.
b) Investments which promise high returns usually come with high risks. Think carefully before making the investment. When in doubt, seek professional advice before engaging in any investment products.
c) Dealing with unregulated entities mean you may have very little recourse if things go wrong.
To find out which entities are regulated in Singapore, check the list of capital markets services licence holders under Monetary Authority of Singapore (MAS) and the list of licensed commodity brokers under International Enterprise (IE) Singapore.
You may also like to check the MAS Investor Alert List, which provides a listing of unregulated entities which may have been wrongly perceived as being licensed or authorised by MAS.
d) Even if you are dealing with an entity regulated in Singapore, some binary options offered by that regulated entity may not be regulated. This means that you may have minimal recourse if things go wrong. When in doubt, you should check with the regulated entity before investing in any binary option it offers.
e) Be wary of third party reviews, endorsements or success stories of binary option providers. These reviews and endorsements may have been paid for by the binary option providers. They may also attempt to gain your trust by warning you against a particular binary option provider while directing you to another binary option provider connected to them.
f) Be cautious of high pressure sales tactics used by representatives of binary option providers. These tactics include promises of quality financial advice or easy profits.
g) Be careful when sending money to overseas bank accounts via fund transfers, debit or credit card payments, and any other modes of payment. Always ensure that the end recipient is reliable before making any transfers or payments.
Likewise, do not give your personal particulars such as your name, identification number, passport details, bank account or credit and debit card details to others without first verifying whether they are legitimate.