A red-hot stock market gives the impression that anyone can make big money these days. But if you’re convinced that you just spotted a sure-fire way to trade complicated options online, get ready to lose big cash.
Earlier this year, a resident of Troy, Mich., came across an outfit online called Tenoption.com.
The man invested $2,000 with a broker who advised him that “they were going to make a lot of money and that he could take out his money at any time,” according to a Troy Police report.
Five weeks later, the man called to withdraw some cash and was told he would receive the money in five days. He’s still waiting. The Tenoption phone is off the hook. And the website is useless.
The site notes: “This site is no longer available. Any questions or concerns should be directed to email@example.com.”
Good luck getting a response.
Maybe it starts online or with a phone call out of the blue about a quirky way to make an all-or-nothing bet on whether gold or oil prices will go up or down by a set date. Maybe an old friend from a fraternity suddenly has a trading scheme to help you rebuild your retirement nest egg.
Maybe you’re about to lose anywhere from $2,000 to $2 million.
Doug Shadel, lead researcher for AARP’s Fraud Watch Network, said many times consumers think they cannot become a target for an investment scam because they don’t have much money to start.
“Really?” he asks. “Do you have a 401(k)? Because they go after that 401(k).”
Too often, common sense advice goes unheeded. Tips for avoiding a scam include staying away from unregistered securities, unregistered sales people and online outfits that have strange names.
Regulators say investors are being lured into complex trading schemes by plenty of outfits that operate overseas and aren’t regulated in the U.S.
The Commodity Futures Trading Commission added 71 names in late April to an online list that warns about foreign entities illegally soliciting U.S. residents to trade foreign currency and binary options. The list now has more than 110 names – including names like 10Markets, WinOptions and Planet Option.
The Securities and Exchange Commission has received complaints of fraud associated with websites that offer binary options.
What’s a binary option? It’s essentially a strange way to gamble on whether a price of something will go up or down by a certain time. Sometimes it’s dubbed “all-or-none options.” Sometimes, you’re betting on the future of oil prices or gold or silver.
Options are risky enough. But bad actors often refuse to credit customer accounts or give customers money when they request a withdrawal. The trading platforms also may be involved with identity theft schemes and request photocopies of your credit card, driver’s license or other personal data.
The Internet Crime Complaint Center received calls from hundreds of consumers who reportedly lost millions of dollars last year relating to complaints about binary options.
No doubt, we’re able to do plenty of research online before we invest our money.
BrokerCheck at www.finra.org allows you to research the background and experience of financial brokers, advisers and firms. The Financial Industry Regulatory Authority also has a help line for seniors at 844-574-3577.
Another option: State regulators can offer insight, too.
But here’s an odd revelation: Many times, victims are tempted to go with off-the-radar investments.
In an AARP survey that included fraud victims, as well as the general population, about 48 percent of victims agreed with this statement: “The most profitable financial returns are often found in investments that are not regulated by the government.”
By contrast, about 30 percent of general investors agreed with the statement.
Fraudsters play up the notion that government regulations only create more fees – fees that cut into how much money you might be able to make on an investment.
Another interesting point: About 58 percent of fraud victims reported receiving at least one investment sales telephone call each month compared to 32 percent of the general investors.
Con artists may advertise on social networking sites or various message boards. Or potential investors can be called by high-pressure sales people who promise “once-in-a-lifetime” opportunities, according to an alert by the FBI in March.
Take that Tenoption.com. Research on the IP address for Ten Option shows that the site is registered in London and housed on several servers in California. Googling the company online indicates that plenty of other consumers lost money with that outfit, too.
Last week, I emailed the support network for Ten Option listed online and received no response.
Bob Webster, director of communications for the North American Securities Administrators Association, said regulators in various states, including Ohio and Missouri, have had similar cases involving different firms in recent years.
In Ohio, a 68-year-old teacher invested $50,000 using her credit card with Vault Options, an outfit based in Israel, and when she wanted to withdraw money, she was told she’d need to send an additional $10,000 even though her account reportedly had $100,000. The securities were not registered in Ohio, and the broker was not licensed in Ohio.
A legitimate outfit isn’t going to ask you to send thousands of dollars – and charge it on a credit card – just so that you can withdraw money that exists in your account. But that’s often a mark of many of the scam artists.
In 2016, the U.S. Commodity Futures Trading Commission took legal action against Vault Options and Global Trader 365. Regulators charged that the firms defrauded consumers, frequently avoided repaying customers and falsely promised customers that their money would be returned if they paid more money for taxes and fees.
Customers also were falsely told that their trading deposits were insured against losses.
The complaint alleged that the two firms unlawfully solicited and accepted more than $1 million from at least 50 U.S. customers to trade off-exchange binary options contracts. The complaint outlined stories of customers in Tennessee, Texas, Massachusetts and Michigan.
Many defendants have “lost nearly all of their funds, sometimes within days or a few weeks,” according to a filing in U.S. District Court in Illinois.
In July 2016, the court ordered that the firms pay a $3-million civil penalty and $1,587,731 in restitution to their defrauded customers.
An Okemos, Mich., woman got a call out of the blue from Global Trader 365 in the fall of 2012, according to the complaint filed in federal court.
She ended up trying to make money by predicting future price movements for oil, silver and gold, based on recommendations from that broker.
After experiencing trading losses from those recommendations, the customer asked for her money back.
The broker told her that the company would return her money but only after she sent them another $5,000.
The customer sent the $5,000, but did not get money back.
Later, she was told that a company insurance policy would pay back her losses – if she sent another $14,200 to pay taxes and fees. When the customer said she did not have the cash, she was told to max out her credit cards to send in that money. The woman sent the $14,200 but had not received any of her money back by early 2016, according to the court filing.
She was out more than $30,000.