Thursday, 19 October 2017 11:40

Police take action as binary options fraud grows to £59m

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City of London police City of London police

City of London Police have joined forces with the FCA, Trading Standards officers and HMRC to carry out a ‘day of action’ to highlight the growing problem of ‘binary options’ investment scams which have seen investors lose over £59m in five years.

Police, with support from other government agencies, visited over 20 company offices this week - many in the City - to highlight the growing number of victims of ‘binary options’ investment scams and to gather intelligence.

So far 2,065 people have reported being a victim of Binary Options fraud to Action Fraud since 2012 and victims have lost more than £59m in total. Victims have lost £18m in the first half of 2017 alone and the average person loses £22,811.

Fraudsters, often using boiler room tactics, are known to use slick social media postings and other promotions to scam investors out of their money. They offer investors the chance to invest in ‘binary options’, which promise to pay out on an investment ‘bet’ for an asset to rise or fall but usually fail to deliver. The FCA has warned that binary options are not regulated and scams are multiplying.

The day of action on Tuesday used Operation Broadway tactics, mostly visiting businesses occupying serviced offices and reviewing their compliance documents. 

The day brought some interesting results, says City of London Police, with one team discovering a business that had paid over three month’s rent upfront to the serviced office provider and then had disappeared. Work will now take place to establish information about this company and investigate whether it was possibly a boiler room.

Operation Broadway teams have conducted inspections and disruption raids at over 100 offices in the City and Canary Wharf since launch. Over the next six months an intelligence picture will be developed, says police, using the information gathered from the day of action to ensure that investment fraudsters are prevented from operating in the City of London.  

Over the next week, City of London Police and its partners will be raising awareness of investment fraud through its social media channels using the hashtag#BeatTheBoilerRooms.

City of London Police’s chief superintendent Glenn Maleary, head of the economic crime directorate, said: “This multi-agency operation, allowed us to speak with multiple businesses and gather significant intelligence around various investments currently being traded in the City. 

“With our partners we want to ensure the City is a hostile environment for fraudsters to operate in and we will continue to do everything we can to ensure that this is the case.”

The FCA says that UK consumers are increasingly targeted by binary options investment scams which it describes as a form of fixed-odds betting. Typically a trade involves whether an event will happen or not (for example, will the price of a particular share or asset go up) and the outcome is either yes or no. If the investor is correct, they ‘win’ and should see a return on their investment; if they’re wrong, they lose their full investment.

The firms operating the scams tend to be based outside the UK but often claim to have a UK presence, often a prestigious City of London address.

Scam firms may manipulate software to distort prices and payouts – they then suddenly close consumers’ trading accounts, refusing to pay back their money, says the FCA.

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