Nefarious binary options brands becoming cocksure: FinanceFeeds investigation

Research by FinanceFeeds shows that there has been an increase in binary options brands taking large deposits of up to $500,000 from clients and tying them into restrictive contracts that stop them withdrawing their initial capital and in some cases schemes that zero their accounts.


During the last few years, binary options brands that operate on an OTC basis, and were often founded by those who cut their teeth in the gambling, affiliate marketing and adult entertainment sectors rather than those whose background lies in technology or financial markets have become the subject of media and regulatory scrutiny.

A great number of brands offering similar products exist nowadays, with FinanceFeeds having researched this in detail and deduced that there are 282 active brands that provide OTC binary options trading to retail clients, operating effectively as white label partners of just six platform providers.

Regulators from the US through to New Zealand are putting a lot of effort into labeling  OTC binary options as a scam or ponzi scheme with regular notices about brokerages that are scamming unsuspecting retail customers to creative infographics that outline “How not to fall victim to Binary Options scams”.

Nowadays, mainstream news sources are beginning to report extensively on how the binary options industry has become an example of an industry sector which pressure sells a product which is either not suited to the customers which are targeted, or in which customers have very little chance of ever making a profit or withdrawing their funds.

Some firms reuse lead lists that have been purchased for other industry sectors such as online gambling, and then use sophisticated cold calling technology to contact people at random with a prerecorded message asking if the person on the other line wants to hear about an amazing investment opportunity, thus elevating the gambler, in his mind, to investments rather than the zero sum game of online casinos.

Whilst this tactic (cold calling technology) is well known outside of financial services – for example it was pioneered in the early 1990s in the telecommunications industry, we can see how this can be used in the OTC binary options space considering the lack of leads and price to attract customers to signing up, added to the bad press out there.

Research by FinanceFeeds recently concluded that the cost of acquisition for a new binary options customer is approximately $700, which includes the cost of sales staff, real estate in the form of an office large enough to accommodate enough human resources, the buying and regenerating of leads, and the bugbear of the true legacy model of a human resource-heavy business – the high cost of staff turnover.

This $700 is a particularly important metric when assessing the monthly profitability of operating a binary options brand, especially when considering that in 2013, the average revenue from a new binary options customer was approximately equal to what is now the cost of bringing a single client on board, but also the average revenue has now dropped to between $500 and $600 per client for many brands, constituting a $200 first deposit, followed by a customer retention call that often results in a further $200 the same or following day, and then a small amount more until the client goes west.

Today, however, things are starting to become somewhat different.

With the pressure of media interest in the method by which binary options brands conduct their business and whether many operate with the clients best interests in mind, some binary options brands are upping their game, and indeed instead of the $200 to $500 deposits that were commonplace just three years ago, some are taking up to $500,000 from single retail customers, subsequent to which it has become apparent to FinanceFeeds, the money is sometimes never returned, clients are locked into bonus terms that they allegedly did not agree to in order to ensure that they turn the account over several times before not only being able to withdraw any profit, but the original deposit too.

Not only is this appearing to be the case, but some firms are continuing to attempt to onboard clients in the United States, despite OTC binary options being illegal in the entire federal United States.

Banc de Binary, one particular firm that solicited clients in the US and was the subject of a complaint by the Commodity Futures Trading Commission (CFTC) and Securities and Exchange Commission (SEC) in June 2013 recently settled with US officials at $11 million for breaching exchange rules and offering OTC binary options when all binary options are by law required to be traded on dedicated futures exchanges in the US, and this was without actually engaging in any practices which were against client interests – just purely selling such a service in the US is regarded as highly unlawful.

FinanceFeeds has been made aware of several cases recently in which very large deposits have been taken by OTC binary options firms and have been the subject of inability to withdraw original funds or profits.

In one particular case, remarkably in the US despite OTC binary options being unlawful, in August 2015, a retail client opened a binary options account with a binary brand that claims to be registered in St Vincent and the Grenadines (!!) and deposited 200,000 euros with the company.

This then led to another trend that is beginning to emerge, of which traders should be very vigilant.

Following the deposit, the client was then provided with a ‘portfolio management service’ which was to be operated by a different company which purports to offer signals and a full money management service for binary options, the agreement which was covered by a limited power of attorney (LPOA), with the money manager having access to the account from August 2015 until April 2016.

During December 2015, the client went into a managed account service with the same portfolio manager firm, which was then operated by another company which was registered in Germany.

Based upon back office reports made available by the binary options brand to the client, the account equity, under the management of the portfolio manager, had increased from €200,000 to over €3,400,000 by April 2016.

This was the last business day before the managed account agreement terminated on its own terms. By April this year, the client had requested a withdrawal of €500,000 from his account (an arbitrary weekly maximum set by the brand) and was told that it was queued for processing and b) access to the trading account that the money manager had been managing is pursuant to the money management agreement.

Once this withdrawal request had been made, and the money management agreement had lapsed, the money manager continued to trade the account

In April 2015, the client advised both the binary broker and the money manager in numerous emails and voicemails that the managed account agreement expired in April 2015 and that all trading activity on his account was to cease immediately.

The client continued to send emails to both the binary brand and the money manager regarding his request that all trading in his account cease.

Additionally, he requested that the binary brand turns over to him full access to the account which was being traded by the money manager. According to our research, the client received no response from either the brand or the portfolio manager and he was not provided with access to his own trading account.

Later that month, the client attempted to contact the binary options brand’s live chat operators to regain access to his trading account without any substantive response. At this time, the unauthorized trading activity which occurred in the client’s account had reduced his balance to $0.

The client then received a letter from the binary options brand, stating:

“Criminals forced their way into the company’s systems; causing some of the managed accounts to make lots of losing trades with position sizes which led to a full devastation of the account.”

FinanceFeeds is aware of other cases which are very similar, one particular example being that of a very large binary options brand which acquired a customer with a deposit of $500,000 and upon an attempt to withdraw the funds, the brand stated that the customer was subject to terms and conditions of having received a bonus, which require a certain level of trading activity to take place before not only any profits could be withdrawn, but also the original deposit.

There is no financial markets regulatory authority in the world which allows customer assets to be tied up on condition of trading a number of lots.

Indeed, in a very positive move yesterday, CySec made it clear that remunerating sales teams on profit and loss, as well as trading volume is not lawful, however locking in client assets (trading capital) rather than profit has never been lawful in any regulated jurisdiction.

FinanceFeeds spoke to this particular client, who had reason to suspect that this method was being invoked in order to encourage trading so that the required number of lots were covered before a withdrawal could be made, during which time the firm, knowing that the customer wishes to withdraw, would create a market in order to zero the account.

Whilst this cannot be proven, that is the view of the customer, who has now commenced litigation against the firm.

In circumstances such as these, FinanceFeeds can only reiterate that when choosing a firm with which to trade, always read the small print in the contracts, as it will be very difficult to issue a lawsuit against a company for carrying out what is written and has been agreed to in the terms, and most certainly it is always advisable to trade with firms that are regulated by financial markets regulators that are experienced in electronic trading, such as ASIC, CySec, the National Futures Association (if an American citizen), the Financial Conduct Authority, and the New Zealand FMA as examples, as recourse may be somewhat difficult otherwise.

In regulated jurisdictions, it is possible to approach the ombudsman or enter into civil litigation, however if a firm is unregulated and has specified terms and conditions concerning withdrawal restrictions that have been agreed to, it may prove difficult.

FinanceFeeds is committed to investigating and highlighting such matters in order to continue to work toward the greater good of this industry, those who operate their businesses in accordance with the law, and of course for the welfare of retail customers.

Mind how you go…..

Read this next


Investors transfers $424 million out of bitcoin funds in six weeks

Despite bitcoin’s decent surge last week, which took the primary cryptocurrency up 70% from the year’s low, digital asset investment products saw outflows for the 6th consecutive week.

Digital Assets

OKX has $9 billion in ‘clean assets’, shows latest proof of reserves

OKX, formerly known as OKEx, has released its fifth proof-of-reserves report amid increasing demand of crypto investors asking for transparency from exchanges they trade with.

Digital Assets

Circle seeks France license to launch Euro stablecoin

Circle, the issuer of the second-largest stablecoin by market capitalization, is seeking to get a dual registration in France as it aims to on-shore its flagship product for the European market – EUROC – a reserve-backed stablecoin.

Digital Assets Among Minority of Successful Companies to Renew Coveted Estonian License has successfully renewed its virtual currency service license from Estonia’s FIU for the third year in a row, despite regulatory changes that have made it harder for virtual asset providers to meet the required standards.

Inside View, Institutional FX

Time for brokers to add options trading as volumes explode on high volatility

“Usually, adding options to the typical CFDs and equities offering leads to fragmentation of the platform technology as many brokers will need additional back-end and front-end components, and that could be an important barrier for them. Apart from that, legal hassle and costs associated with proper licensing of market data could be a barrier at first. We are seeing this trend among market data vendors and exchanges to make it easier and more affordable.”

Metaverse Gaming NFT

GCEX’s DeFi education and prime brokerage offering available in DubaiVerse

“We are excited to be part of the developments of The Sandbox and to join other top players in the region, including our regulator, Dubai’s Virtual Asset Regulatory Authority (VARA), as part of the DubaiVerse. This is a great opportunity to bridge the gap between Web3 early adopters and GCEX clients, building a community around Web3 and digital assets.”

Digital Assets

Circle wants Fed to back USDC stablecoin after “very serious stress test” with collapse of SVB

The collapse of Silicon Valley Bank allegedly proves Circle’s point that there is a need for its USDC stablecoin to be backed by the U.S. Federal Reserve with its U.S. dollars held at the Fed.

Digital Assets

Google searches for and exploded by 300% amid FTX collapse

“The findings emphasize the importance of staying on top of market trends and being able to pivot strategies quickly and also offer valuable insights into the current state of the market and the behavior of traders, providing investors with valuable information to make informed decisions about their investments.”

Institutional FX

iS Prime reports £35m turnover, £16.2 million pre-tax profits, £37 cash balances

“We have plans in place to evolve the business over the next year, driving further growth for both iS Prime and for our clients.”