Canadian securities regulators have formed a task force to raise awareness and protect Canadians from a scam called binary options that can cost investors everything they have.
Traditional stock options enable investors to buy a stock or other investment for a certain price, on or before a certain date. As such, gains and losses are limited to the gap between the option price and the market price.
But binary options are a much more short-term bet on the direction of an asset. Unlike regular options, they are all-in: bet right and you make all the money from the person on the other end of the trade; betting wrong means losing it all.
Securities regulators across the country received complaints in the hundreds about such scams last year, but the true number of victims is likely far more.
Binary options dealers advertise on websites geared towards investors, as well as on social media, in order to promote their fake investing mobile apps. Regulators are now cracking down on those ads.
Most binary options sites lure in victims with small early returns, according to the Canadian Securities Association A "free" $100 in credits will likely be enough to get a victim hooked. But in many instances, no actual trading occurs with any money the scammers receive, and the entire interaction takes place for the purpose of stealing money.
Once the victim has seen some early "wins" on options trades they've supposedly made, the fraudsters will ask for credit card information — and that's when the losses and withdrawals start. Investors could lose what they'd set aside, and in one extreme case, a victim took his own life.
