Investors have been warned to be vigilant to the threat of online investment fraud, after the regulator has revealed that £87,000 a day was lost to binary options scams in 2017.
Binary options allow consumers to make bets on the expected value or price of a stock, commodity, currency or index. These became regulated by the Financial Conduct Authority (FCA) on 3 January 2018. But since then, the FCA has published a list of 94 firms trading without FCA authorisation.
It adds that fraudsters offering investments in binary options, contracts for difference (CFDs), forex (foreign exchange) and cryptocurrencies, such as Bitcoin, often promote themselves online and via social media channels, such as Facebook, Instagram and Twitter.
These adverts typically promise high returns and use images of luxury items, such as expensive watches and cars, to entice people to invest in their scams.
However, after someone has invested, companies distort prices on their website, tie people in with extreme pay-out clauses and even close customer accounts, refusing to pay back their money.
Historically, people aged over 55 have been most at risk to investment fraud. But the FCA’s latest study found those aged under 25 were six times (13%) more likely to trust an investment offer they received via social media, compared with over 55s (2%).
The research comes as part of the FCA’s ‘ScamSmart’ campaign (Fca.org.uk/scamsmart), which aims to help consumers avoid investment and pensions scams, and enables them to report a scam or unauthorised firm.
Countdown presenter and former adviser to Lord Alan Sugar, Nick Hewer, who is supporting the campaign, says: “The amount being lost every day to online investment fraud, such as binary options scams, is staggering.
“It’s vital for all those on social media to be extra cautious about engaging in any conversations or with adverts that relate to quick-wins or guaranteed returns, especially with individuals or companies you do not know. Remember, if it sounds too good to be true, then it probably is.”
How to avoid investment scams
To reduce the chance of falling victim to investment fraud, the FCA advises consumers to:
- Reject unsolicited investment offers, whether made online, on social media or over the phone.
- Check the FCA Register before investing to see if the firm or individual is authorised, and check the FCA Warning List of firms to avoid.
- Get impartial advice before investing.
Suspected investment scams can be reported to the FCA at www.fca.org.uk/scamsmart or via its contact centre on 0800 111 6768.
Visit Moneywise’s How to be Cyber Aware hub for advice on protecting your money online.