Don’t want to be pounced on by the feds at night? Don’t sell binary options

During 2018, 25 boiler room and binary options crooks were given a short, sharp shock by police officers early in the morning

The Financial Conduct Authority (FCA) may be regarded as a gentleman’s establishment, notable by its enviable status among modern regulatory environments and its gray suited approach to corporate sensibility, however it has a sting in its tail.

Quite alike British culture itself, the polite and restrained nature of the FCA goes hand in hand with its sensible set of rules which non bank financial services providers often happily adhere to, however if pushed too far, its teeth become very clearly visible.

Britain has a very well respected and vast, diverse financial markets ecosystem, and prides itself on being one of the only nations in the world that has complete market dominance in every sector, with quality and service being key tenets.

This has to be protected, and the FCA has quietly but fiercely done its bit during the past year to actually physically remove bandits.

In other well organized and well respected major financial centers such as Sydney, Chicago or New York, regulators take the strict approach by conducting surveillance via electronic means on all firms operating, and then publicly censure them by winding up their business and restituting customers, with all of the actions available for public reading.

The perpetrators then often are faced with lifetime bans and very heavy fines, however the British approach is simply to barge into the home of the owner of a nefarious firm and rudely awaken them from their slumber.

Today, official figures were released by the FCA showing that the regulator had conducted twice the number of dawn raids last year up from 13 in 2017 to 25 in 2018.

The data, produced by British financial services consultancy FSCOM, detailed that the method by which the FCA conducts raids is via searches of business and individuals’ premises by the regulator under warrant and in the presence of police officers.

They are often carried out in the early hours of the morning and are designed to capture as much potential evidence as possible, and the police officers present have law enforcement powers and can conduct arrests.

Most of the targets of these dawn raids have been, as is to be expected, unregulated and illegal business such as boiler room pressure sales schemes, HYIPs, and surprise surprise, binary options.

The 25 raids undertaken by the FCA in 2018 is the highest annual total since 2010 when there were several people and businesses taken to task following irresponsible lending and credit related carelessness that played a part in the 2008 and 2009 financial crisis.

The number of raids fell to single digits between 2014 and 2016 as investigations of credit crunch-era misconduct, such as rigging of Libor and FX rates reached their conclusion via traditional litigation.

Binary options, usually offered by non-British, unregulated offshore entities run by Israeli mafia and facilitated by fraudulent rigged platforms provided by the compatriots of said mafia, have been a bete noire of the British authorities for some years, and in 2017 the City of London Police stated that it was the “biggest internet scam ever” as it unearthed over 30 shell companies in Scotland which had been incorporated to disguise the trail that leads back to the Eastern Mediterranean.

Some of the firms involved in attempting to dupe members of the British public had resorted to very clever marketing, including sponsoring premier league football teams, which in the UK often bears a bastion of trust because the large football teams have high profile corporate deals and are trusted not to display anything that would lead their loyal fans to believe that an association with their favorite team equals bona fide business.

FinanceFeeds began lobbying premier league British football club Southampton FC on September 7, 2016 by way of email and telephone calls to senior members of staff within their sponsorship divisions, pointing out that by accepting sponsorship from fraudulent binary options firms, there are two toxic consequences.

The first being that a major football team is earning revenue from the proceeds of fraud, therefore associating itself with the lowbrow, bottom rung nature of binary options, and the second being that loyal fans who are unsuspecting and perhaps have never heard of binary options are exactly the market that binary options brands seek to target, therefore by allowing binary options firms to sponsor them, football teams are creating an environment in which their own loyal fans who adore and trust their beloved teams could be ripped off.

Indeed, Banc de Binary, which no longer accepts customers but whose management are still scheming from the same office under a different guise, managed to gain an unpleasan reputation for stealing from customers, and has been the subject of an $11 million lawsuit from US officials at the Securities and Exchange Commission for illegally soliciting US customers for off exchange binary options – a serious felony in America.

The second possibility is probably the most dangerous, as it would cause individuals who had no previous exposure to electronic trading to associate bona fide firms of London, New York and Chicago with back street binary options businesses with no presence in any financial center, thus making life harder for the real firms in the industry whose executives dedicate their professional careers to providing the highest quality trading environment and live market access to customers.

We were successful in our attempts and Southampton FC dropped the deal with Banc de Binary, one of the largest and most arrogant binary options brand that has been responsible for huge damage globally.

FinanceFeeds contacted several companies in London that specialize in arranging sponsorship deals for football teams, all of which explained that it would be perfectly acceptable for them to accept binary options firms as sponsors, until we explained the true magnitude and potential consequences of promoting such firms and their activities toward the loyal fans of football teams.

One such firm was Synergy, which nestles deep in the heart of London’s trendy media heartlands in Great Portland Street. When asked whether they would take a binary options brand and broker a deal with a football club, and whether they consider this unethical, the representative explained “No, we work with any firm that looks to improve their branding.”

“We work exclusively brand side” she continued to explain. “One of our services is consultancy, in which we have a look at the portfolio of the brand, and then we look at the sponsors that may suit. We work for big blue chip clients often on this basis.”

“We don’t think it is unethical to broker deals between football teams and binary brands” she said. “If it is right for the brand or rights holder, then we go ahead. We look at he brand, value, ROI, it’s not an easy yes or no.”

FinanceFeeds understood from this investigation that the agencies see the dollar signs and do the deal, not realizing the true business models that these firms employ, therefore some degree of providing information to marketing and PR agencies is also needed in order to stem this level of high profile sponsorship.

An additional caveat to bear in mind is that football shirts, and what is written on them, are massively influential to children and teenagers in parts of the world in which football is a very popular and almost religiously followed sport.

Football clubs often sell merchandise versions of the shirts of the stars that children and teenagers who love football admire, therefore by having binary options names on football shirts, minors by default could be inadvertently standing themselves up as ‘ambassadors’ to this fraud, or even worse getting taken in by it themselves.

We also approached an industry lawyer close to the matter, who did reply but explained that it is very unlikely that any binary brand or anyone connected with that particular industry would comment as it is a ‘sensitive matter’ and that he would not like to see anybody involved in such business ‘get hurt’.

Some of the owners of binary options companies concerned that the jaws of the regulators and governments are finally about to put an end internationally to this nefarious business have established a back-street organization called European Brokers Association (EUBOA) recently, however it is quite unlikely that such an organization, which is unrecognized by any national regulator or government authority and is run by the very people who orchestrate binary options fraud will ever make a case in favor of allowing OTC binary options to continue unabated.

Our efforts were noticed at high level in London, and the City of London Police subsequently made a public statement on the matter, at which point major British news source The Times got involved and also began to lobby Southampton FC, following our lead.

City of London police at the time said fraud complaints against binary companies had spiked “dramatically” in recent months. The average loss: £20,000. “It is the latest and perhaps fastest-growing iteration of investment fraud,” said Andy Fyfe, the force’s financial crimes specialist. “These companies are luring a much younger audience of would-be investors because they are advertised on social media, like Instagram. We’ve never seen that before.”

Thus, the FCA’s collar-feeling method is to be applauded.

Read this next

Executive Moves

Lirunex Limited recruits Waleed Salah as head of MENA sales

Maldives-based brokerage firm Lirunex Limited has secured the services of Waleed Salah, who joined the company in the role of its head of sales for the MENA region.

Executive Moves

Trading 212 parts ways with co-founder Borislav Nedialkov

Trading 212 has a void to fill at its FCA-regulated business in London, following the departure of two key players, Raj Somal and Borislav Nedialkov.

Digital Assets

Binance acquires troubled crypto exchange GOPAX

Binance, the world’s largest digital asset trading platform, has reportedly acquired a majority stake in the troubled South Korea-based cryptocurrency exchange GOPAX.

Digital Assets

Kraken exits Middle East, closes UAE office

Digital currency exchange Kraken will close down its operations in Abu Dhabi, UAE and lay off the majority of its team focused on the Middle East and North Africa.

Industry News

CFTC comments on ION Cleared Derivatives issues after Russian-linked hack

“The ongoing issue is impacting some clearing members’ ability to provide the CFTC with timely and accurate data. As this incident unfolded, it became clear that the submission of data that is required by registrants will be delayed until the trading issues are resolved.”

Industry News

FCA took down 14 times more misleading ads in 2022 thanks to technology

The FCA has made significant improvements to the digital tools it uses to find problem firms and misleading adverts. These improvements have enabled it to work through a much larger number of cases compared with 2021.

Executive Moves

HKEX appoints ex-Goldman Sachs Matthew Cheong to lead platform’s focus on derivatives

“He has worked for a number of the world’s leading investment banks and his experience will be invaluable to HKEX as we continue to enhance our derivatives product offerings and build on our innovative and robust platform business, connecting capital with opportunities.”

Digital Assets

Zodia Custody and SBI Digital Asset Holdings launch JV for crypto asset custodian in Japan

“Zodia Custody is both proud and excited to be working with SBI DAH to help set up SBI Zodia Custody; the first tier 1 crypto asset custodian for institutions in Japan.”

Digital Assets

Paxos opens R&D center in Israel to focus on transaction signing and crypto custody security

“Paxos is looking to expand its team in Israel in 2023 and beyond, giving engineers the opportunity to work on cutting-edge financial products and shape the future of the global economy.”