There are many things binary options traders are worried about: will they make a profit, did they make a proper analysis, is their broker really the best, but many of them are unaware of binary options scams. Binary options scams are, unfortunately, present on the market. They can easily cost traders their hard earned money. Still, there are ways to protect yourself from frauds who are lurking for an opportunity.
Here are top 6 binary options scams and guides on how to recognize these binary options frauds.
1. Hiding Risks of Binary Options Trading
It is normal that every company will accentuate the good sides of a product, but some scam brokers go that far to claim that binary options trading carries no risk or are using manipulative advertisements that are hiding the real risk. For example, scam binary options brokers often claim that 4 out of five traders are winning every trade without giving the possibility to verify such results. Also, they use specific terms that can easily be misinterpreted and have a specific way of advertising.
Some brokers are also using pushy sales representatives who are using psychological techniques to make traders deposit. By making the trader feel uncomfortable, they convince them that this is the once in a lifetime opportunity. Traders should always take their time and do their research in order to find a good binary options broker.
2. Cold Calling and Privacy Breach
An additional technique often used by scam binary options brokers is cold calling. This means that binary traders often receive emails or telephone calls by brokers who they never registered with. The agent who works for scam broker is promising high payouts and great trading opportunities. The only question is how did they get trader’s number or email address.
The answer is simple: scam binary brokers are often using stolen customer data either bought from other scam brokers or stolen from legit brokers. In an industry that is based on trust, such as binary options industry, these privacy breaches are ruining the reputation of all companies, even those that are not keen to such practices.
It is not uncommon that even our own staff receives such emails or phone calls. Such scam binary brokers end on our list of not recommended binary brokers. Find out more about cold calling in binary options.
3. Ambiguous Terms and Conditions
Terms and conditions are something that no one pays attention to. After all, we live in the worlds where we are used to clicking ‘I accept’ without reading what it’s all about. Scam binary brokers know that and take advantage of it.
Scam binary options brokers often hide terms and conditions from traders or make them so unclear it is impossible to understand them properly. For example, scam brokers have a special page on their website dedicated to withdrawals, but only have all withdrawal terms listed in T&C. When the trader wants to know more, they link the page with vague information. But, when the trader wants to withdraw, the broker is relying on terms and conditions that trader is not familiar with, but unfortunately accepted them.
Terms and conditions represent a contract between broker and the trader that defines all obligations of both sides, and scam brokers like to take advantage of it.
4. Managed Accounts for Binary Options Trading
Managed accounts are offered to binary options traders as an easy solution for making a profit. Usually, a person that represents itself as a ‘senior broker’ offers one-on-one session and sooner or later recommends trader to trade instead of him. Of course, the scam account manager that works scam binary broker is promising extremely high returns the trader would never be able to achieve on his own.
This type of trading is extremely risky, as the trader has no control over the funds invested. It is strongly recommended never to accept offers to use managed trading account.
The most famous case that involves managed accounts is that of the broker uTrade. Aviv Talmor, who worked for the broker, scammed 600 traders over the course of 3 years (from 2012 to 2015). Talmor was using some very persuasive techniques in order to convince traders to manage their binary trading accounts, and he didn’t even have a license to do it. Luckily, he was prosecuted by Israeli authorities.
5. Binary Options Bonuses Scams
The bonus is something that sounds amazing, but in fact, many traders find themselves disappointed when they find out all about this type of promotion. It is hard to accentuate enough how the bonus is not a free money, but money provided by the broker that can be traded and withdrawn only under certain conditions.
This type of scam is very similar to scam no. 3, as it also involves terms and conditions. Traders should never mindlessly accept the bonus, but always read all bonus terms. Scam brokers use bonuses to lock in traders’ money and prevent them from withdrawing.
Traders should always request to have all terms and conditions applied to bonuses in written and never accept anything over the phone. Some regulators, such as CySEC, go that far that they don’t consider bonus valid unless it is accepted in written.
6. Denied Withdrawals
Traders are often allured by incredible offers and shiny banners, and as they trade, they pay no attention to withdrawing process. When they make a profit, traders want to enjoy it and request a withdrawal. Unfortunately, what follows is more like a nightmare.
Scam binary options brokers first find more than one reason why the trader shouldn’t ask for a withdrawal and usually try to persuade user to invest even more money. If the trader refuses, they simply stop answering emails and phone calls. Scam binary brokers are always looking for an excuse.
In such situations, there is a little the trader can do. Traders have to be persistent and never give up, even if it means they have to ask regulators or website like Fair Binary Options for help.
It is important to notice, how legit binary brokers have to ask for an account verification via ID and other documents, which may delay withdrawals. This is not a scam behavior but something that protects trader from scams and imposters.