Police warn of rise in online scams involving binary options; over $1 million lost to unregulated trading platforms

A diagram illustrating binary options trading.
A diagram illustrating binary options trading. GRAPHIC: POLICE

SINGAPORE - There has been a "sharp rise" in complaints involving online trading in binary options, the police said in a news release on Wednesday (Dec 14).

To date, the Commercial Affairs Department has received more than 30 reports from investors who have lost more than $1 million to unregulated binary options trading platforms.

According to the police, most of the investors were local Chinese men aged between 31 and 50, and included finance professionals and retirees.

"Encouraged by initial profits and promises made by the platform staff about financial advice, more bonuses and attractive rewards, most of the investors found it difficult to stop at one small investment and will put in more money," the news release said.

"In these cases, the investors either lost all their monies or could not withdraw the balances in their accounts. Some also had unauthorised withdrawals made in their debit/credit cards after they had handed over their card details for payment."

While binary options trading is attractive as it sounds simple and there are often promises of high, quick and safe returns, the police warned that binary options are in fact speculative and risky.

Many online platforms offering such trading are also fraudulent.

How binary options work: the trader tries to predict whether the price of an underlying asset (such as shares, currencies and commodities) will be above or below a specified price at a specified point in time, which can range from a few minutes to a few months in the future.

A diagram illustrating binary options trading. GRAPHIC: POLICE 

Should the trader get it right, he or she receives a fixed payoff; but the entire investment will be lost if it is wrong.

"That is why binary options are often also called 'all or nothing' options. The risk of losing your entire investment is high, because correctly predicting short term price movements is difficult," said the police.

Should one consider trying binary options trading, one should take note of the following pointers:

- Even when offered by legitimate sellers, binary options' trading is a high risk investment where you can easily lose all that you invested;

- 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;

- Dealing with unregulated entities mean you may have very little recourse if things go wrong. To find out which entities are regulated in Singapore, you may want to check the list of capital markets services licence holders under Monetary Authority of Singapore (https://masnetsvc.mas.gov.sg/FID.html) and the list of licensed commodity brokers under International Enterprise Singapore (http://www.iesingapore.gov.sg/E-Services/Commodity-Trading-Act/CTA-List-...). You may also like to check MAS Investor Alert List (http://www.mas.gov.sg/IAL.aspx) which provides a listing of unregulated entities which may have been wrongly perceived as being licensed or authorised by MAS;

- 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;

- 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;

- 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;

- Be careful when sending money to overseas bank accounts via fund transfers, debit/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/debit card details to others without first verifying whether they are legitimate.