Binary Options Scams Spread Into Crypto, Time for US Lawmakers to Act

Navigating binary cryptocurrency options has proven easier said than done for many inexperienced investors.

While binary options are an inherently risky trading method, some are listed on registered exchanges that are policed by U.S. regulators, namely the CFTC or SEC. According to the FBI, most binary options are available via a plethora of online platforms, many of which are not compliant with stringent U.S. regulatory requirements.

"Many binary options products are listed on exchanges and have regulatory oversight. But like Forex and Cryptocurrency trading, many internet-based platforms have surged into the market, and with that surge, the opportunity for fraudulent promotional schemes, overstatement of returns, and the failure to pay out for the wins have increased."

The prospect of being wrong on the value of an underlying asset alone is not the only way for investors to lose their money with binary options.

As per the FBI's warning, fraudulent binary options websites advertise undeliverable promises on social media, trading websites and message boards to lure in unsuspecting customers.

"Many binary options platforms have popped up recently. Just a quick glance at some of these can tell you that they have been put together in a hurry. Most of such platforms don't specify their price sources. Trading on such venues is risky as their product can be manipulated easily."

Although binary options trading is relatively new to the crypto sector, scammers are quickly finding themselves in the dock, facing heavy fines.

According to the CFTC, defendants misappropriated customer funds obtained through binary options by converting Blue Bit Banc investments into ATM coin, telling investors they were worth a substantial amount of money.

"Growth in crypto vanilla options is a good sign and it will help is increasing institutional participation and reducing long term volatility of crypto markets. Binary options is an exception here, a lot of binary options platforms attract customers by selling them a dream of making astronomical returns in short duration. Binary options are high risk products and One should understand the mechanics of binary options completely before trading these products."

Saffron allegedly lured in unsuspecting investors by promising astronomic returns of up to 300%. Instead of using investor funds to trade in binary options as agreed, Saffron transferred the funds to his own wallet to pay out previous participants, a textbook example of a Ponzi scheme.