Binary options scams are an online scourge. Private investors have lost billions of dollars because of them. But when Facebook and Google announced earlier this year that they would ban binary options ads, the first thing I thought of was cigar.
The crooks who operate binary options sites will just as easily slip through the cracks as well. So are binary options advertisements of no use? No, but they’re no other solution. They must be accompanied by coordinated international action. The (temporary, three-month) prohibition imposed by the European Securities & Markets Authority (ESMA) on the marketing, distribution or sale of binary options to retail investors, which went into effect on August 9, and restrictions on the marketing, distribution or sale of contracts for difference (CFDs) to retail investors, which will come into effect on August 1, are an important beginning. Hopefully, they will be extended permanently.
The only countries to ban binary options entirely are Belgium and France (both of which are EU members), Canada and Israel. In the U.S., binary options brokers must be licensed by the Commodity Futures Trading Commission (CFTC), which so far has licensed only three of them.
Recent research conducted by wealthwatchs.comWealth-Watch.pngWealth-Watch.pngWealth-Watch.png, the Michigan based international fund recovery firm that has retrieved more than $7 million for victims of binary options, forex, CFD, and crypto-currency scams, reveals that most binary options operators like BinTex have already purged the term from their sites. Instead they have re-branded themselves as forex and CFD dealers. Now that the clock is ticking before EU restrictions on forex and CFDs take effect, some former binary options sites now claim they are offering “banking” services, knowing that description will allow them to evade the censors.
So while bans are welcome, they cannot succeed on their own. The one missing element in the strategy is making the scammers pay. If sufficient numbers of online scammers are forced to forfeit the money they stole their business model will collapse. This is why it is critical for victims of binary options and other online scams to file requests for service-related chargebacks. The daunting challenge is that many victims do not even know the possibility for doing so exists, and even if they do it can be a complicated process. Complicating matters is that many banks are unfamiliar with service-related chargebacks as well. Of course, as more and more victims file for chargebacks the more quickly the banks will learn and adapt. And when the scammers’ banks see that they’re having to repay more and more victims, the more anxious they’ll be cut off the scammers’ access to credit cards and drop them as clients.
Binary options have received a bad press for the past several years. Once a legitimate tool used by traders the world over as part of their overall investment strategy, these financial products have fallen from grace. The central cause of this change of fortune for the humble binary option is the green-eyed goddess — greed. Unscrupulous scammers identified a hole in the market and succeeded in packaging the binary option as a straightforward “safe” bet for naïve customers.
Trading is not a science, but short-term binary options trading is more of a game, and the odds favor the option seller. Due to this skewed risk, ESMA declared a three-to-six-month ban on the product across the EU until it was able to establish a set of rules for trading the financial instrument. This move was part of the Markets in Financial Instruments Directive (MiFID) of 2004 aimed at investor protection. Some have called the ESMA ruling timely, while others, perhaps less charitably, have called the move too little, too late. Binary options scams have become widespread, and ESMA should probably have acted years ago.
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