Find out how binary options work, how to avoid scams and what to do if you are scammed.
Update: The sale of binary options to retail consumers is now banned. If you are offered binary options, it is probably a scam.
Binary options are a form of fixed-odds betting. Typically, a trade involves whether an event will happen or not (for example, will the price of a particular share or asset go up) and the outcome is either yes or no.
If the investor is correct, they ‘win’ and should see a return on their investment; if they’re wrong, they lose their full investment.
From 2 July 2018, the European Securities and Markets Authority (ESMA) has banned firms from selling binary options to retail consumers across the EU, including the UK. The ban is for an initial three-month period however, ESMA will renew this ban, with limited exceptions, from 2 October 2018 for a further three months.
How binary options scams work
Binary options fraudsters often advertise on social media – the ads link to websites that are well-designed and professional looking.
The firms operating the scams tend to be based outside the UK but often claim to have a UK presence, often a prestigious City of London address.
Scam firms may manipulate software to distort prices and payouts – they then suddenly close consumers’ trading accounts, refusing to pay back their money.
How to protect yourself
Be wary of adverts online and on social media promising high returns from binary options trading.
You should only deal with financial services firms that are authorised by us. As the sale of binary options to retail consumers is now banned any firm offering binary options services is probably unauthorised or a scam.
You should check the firm isn’t a clone firm by asking for their firm reference number (FRN) and contact details and then calling them back on the switchboard number on our Register – never use a link in an email or website from the firm offering you an investment.
Always be wary if you’re contacted out of the blue, pressured to invest quickly or promised returns that sound too good to be true.
If you have been scammed
If you have already invested in a scam, fraudsters are likely to target you again or sell your details to other criminals.
The follow-up scam may be completely separate or related to the previous fraud, such as an offer to get your money back or to buy back the investment after you pay a fee.
If you have any concerns at all about a potential scam, contact us immediately.