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Binary options trading: How to spot the scammer.

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Scammers are on the prowl …

As more individuals explore the idea of trading for themselves, the high fail rate for retail traders is compounded by the number of scam artists seeking to take advantage of novice and savvy traders alike. The following is an excerpt from an article published by the Commodity Futures Trading Commission (CFTC). It provides a checklist that should assist you in sizing up an individual or entity pitching itself as a binary options broker.

Here’s what to look for …

“Fraudsters commonly use the accessibility and highly anonymized nature of the Internet to their advantage, creating the perception of legitimacy.

Here’s how they often do it:

  • They pretend to be based in the U.S., knowing this could make American investors feel safer working with them.
  • They build sophisticated websites and sell the idea of smart “bot” trading that makes them seem like they are technologically advanced experts.
  • They provide easy access to online accounts that makes the customer feel in control of their own money and trades.
  • They develop fake social media posts touting the platforms and their performance.
  • They post fake reviews and testimonials on other websites and investor forums to get people to believe other investors have endorsed the fraudulent platform.
  • They make up company materials, such as brochures and video tutorials that add to the appearance of credibility.
  • They use fast talking “brokers” to offer advice, but they are often just glorified salespeople attempting to overwhelm customers and get them to agree to the next offer.” — CFTC

The CFTC provides some additional red flags, based on consumer complaints, for identifying fraudulent actors:

  1. Claims made by broker/online platform that they deposited money in an investor’s account but did not.
  2. Denying requests to return funds or even require hidden fees to return assets.
  3. Trading platform/broker overstates the average return on investment or even manipulates past charts to make investing appear more promising than it really is.
  4. Trading platform/broker offers a bonus for opening or adding to an account. The bonus is a monetary amount added to the deposit under the condition that the investor subsequently makes a specific minimum amount of trades before withdrawing any funds.

Avoiding scammers takes work …

Avoiding scammers requires upfront work from you. This includes vetting the individual or firms that approach and offer you trading accounts and services. Start by using the search tools made available to you by the National Futures Association (NFA). If the individual and their firm is not registered with the NFA, this should be a glaring red flag.

You’ve worked hard for your money. Don’t be the prey.

Alton Drew

7 May 2025

Disclaimer: The above post is not investment or trading advice. Contact a trade advisor before making your first trade. If you need advice on filing a complaint or reviewing the legal relationship between you and your brokerage, reach out to me at altondrew@altondrew.com.