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Investors lose £87k a day to stock price bet scams

Paloma Kubiak
Written By:
Paloma Kubiak

The financial regulator has issued a warning for investors to be on guard against online investment fraud as £87,000 is lost every day to binary options scams.

Binary options investments allow people to make bets on the expected value or price of a stock, commodity, currency or index.

Since 3 January 2018, they have become a regulated investment product, meaning they need to be authorised by the Financial Conduct Authority (FCA). But 94 firms are trading without authorisation, according to the FCA.

It is now warning investors to be vigilant to the threat of online investment fraud as scammers offering investments in binary options, contracts for difference (CFDs), forex and cryptocurrencies, such as Bitcoin. These groups often promote themselves on Facebook, Instagram and Twitter. In fact, online scams have overtaken phone scams as the most common contact method for investment fraudsters.

They typically promise high returns and use images of luxury items to entice people to invest in the scams. Scammers are also known to include fake customer reviews, logos and statements to lure in prospective investors.

Once someone has invested, prices are distorted on the website, investors are tied in under extreme pay-out clauses and some people even have their accounts closed with the money not paid back.

Changing trend of victim profiles

Historically concern lay with the over 55s who were more susceptible to scams but given that many of the scams promote themselves online and via social media, the FCA said the profile of victims is changing.

As part of its ScamSmart campaign, the FCA has revealed those aged under 25 were six times more likely to trust an investment offer received via social media, compared to 2% of over 55s.

Further, Action Fraud figures also reveal that under 50s are more likely to fall victim to binary options scam than any other type of investment fraud (34% vs 21%).

The FCA found that one in ten wouldn’t conduct any of the recommended checks before investing, such as checking whether a firm is regulated or registered with Companies House, before parting with their cash.

As such, investors are reminded to check the FCA ScamSmart website to view a list of firms which are regulated and acting in according with its rule.

Mark Steward, director of enforcement at the FCA, said:As people have become more sceptical of investment-related cold calls and consumer habits have changed, we have seen investment fraud moving online and to social media.

“While websites and profiles appear to be professional, they are all too often run by fraudsters who fix prices and pay-outs, or in some instances don’t really place trades at all, before disappearing with innocent investors’ money.

“Before investing online, check you know who you are really dealing with. If in any doubt – don’t invest.”