Major investment fraud derailed, but fraudsters changing tracks

Winnipeg – Dec. 12, 2017 marks the official ban on Binary Options trading in Canada—a type of online investment fraud which has bilked Canadians out of millions in reported losses. But even while celebrating this victory, regulatory authorities are warning the fight against investment fraud is far from over.

Binary options take the form of a wager in which investors bet on the performance of an underlying asset, often a currency, commodity, stock index, or share. The timeframe on this bet is typically very short, sometimes hours or even minutes. When the time is up, the investor either receives a predetermined payout or loses the entire amount. In many instances, however, no actual trading occurs and the transaction takes place for the sole purpose of stealing money.  In addition, those who have provided credit or personal information to binary options sites frequently fall victim to identity theft.

The Canadian Securities Administrators (CSA) announced Multilateral Instrument 91-102 Prohibition of Binary Options on Sept. 28, making it “illegal to advertise, offer, sell or otherwise trade binary options shorter than 30 days with any individual.” The ban officially comes into effect today.

“This ban certainly supports our efforts to combat Binary Options trading and advertising in Canada,” says Jason Roy, chair of the CSA’s Binary Options Task Force and senior investigator with the Manitoba Securities Commission. “But the threat of Binary Options fraud still exists and victims are still coming forward. As well, with our attempts to stop binary options scams in Canada, fraudsters are adapting their approach to separate investors from their money. We’re already seeing the people and companies behind Binary Options fraud changing tactics in some cases, diversifying into products like Forex and Contracts for Difference (CFDs). The new trend is focussed on rising public interest in trading cryptocurrencies like Bitcoin, and initial coin offerings (ICOs).”

“Scammers may be moving on to the next big thing,” says Roy, “Luckily, there are a number of red flags to look for with any kind of investment fraud.”

Common warning signs of investment fraud:

• Unregistered firms: Before making a decision to invest in any product, the CSA encourages all investors to visit aretheyregistered.ca to check the registration of a person or company offering the investment. Any firm or individual selling investments or offering advice must be registered in the province where they do business. Registration helps protect investors because regulators will only register firms and individuals that are properly qualified. For example, there are no registered individuals or firms permitted to trade Binary Options products in Canada.
  
• Investing offshore: a common red flag of fraud, as it may be impossible for investors to get their money back if something goes wrong. 
  
• Big promises: A guarantee of a high return and low-risk is warning sign. One of the first rules of investing is, higher returns equal higher risk.
  
• Pressure to act: Never feel pressured into buying into an investment on the spot. If you have to ‘act fast’ or ‘buy now’ it’s likely there is more than meets the eye.