Binary options are a form of gambling that is sold as a regular investment via Multilevel Marketing (MLM) structures to credulous investors. Since more and more jurisdictions have banned binary options, operators are turning cryptocurrencies for their fraudulent endeavors. Fintelegram investigates.
A binary option is a simple game. You take a stock or a currency. This is traded in real time on markets. But they are not bought here. Players see in every second how the price of the value develops. No matter over which period of time you look at these values, they can only change binary in two directions: rise or fall. Hence the name. In Binary Options, the player places a bet on whether an asset rises or falls within a certain period of time – 10 seconds or 1 hour. A game of chance.
Binary Options – The bank always wins
But that game is rigged. If the player wins the bet, he receives – depending on the provider – between 30 and 70% of the stake. If the bet does not stand, he loses the entire stake. In binary gambling, there is a statistical probability of 50% for each of the two cases. Once the win pays less than what the loss costs, the player has no chance in the long run. Roule, for example, shows that the bank always wins. You can bet on 36 numbers and have a balanced chance of winning. But there are 37 numbers. If the ball falls to 0, the house wins. Roulette has a guaranteed statistical winning probability of 37:36. 100 Euro wagers give the Roulette operator an average of €102.78 in return, the player a maximum of €97.22. In the long run, all players lose their money.
In binary options, the probability of winning is 100:70 in the best case for players. 100 euros wagered means that the option operator wins over €142. Well, whoever plays roulette is to blame and that should also apply to binary options, shouldn’t it?.
The last investment of your life
Binary options are based on a simple but effective psychological manipulation and the operators are masters in this game. The options pages do not look like gambling but like stock exchange trading. This is intentional because the operators sell their games as an investment with an extremely high return. They are aimed at people who have an affinity for gambling addiction. Gambling addicts work with repression mechanisms and this is particularly easy when a game of chance looks like an investment. Binary options are based on a criminal deception of vulnerable customers.
Among them are the proverbial grandmother and inexperienced gamblers, who are sold the game in an aggressive form on the phone. In an award-winning Times of Israel series, a former telephone salesman comes clean. He had been instructed to sell the options as an investment and to call himself a broker, although he knew that the client would lose everything: “The client isn’t actually buying anything. What he’s buying is a promise from our company that we will pay him. It’s gambling and we’re a bookie.”
The operators work in the shadows. Managers have no last name, sellers have to invent false biographies, telephone numbers are disguised. “When someone says ‘I’m in hospital and I have cancer,’ we’re supposed to still sell them,” says the former seller. As a trick, customers are told to study market movements in order to be able to predict prices. It is clear that even a financial genius cannot calculate what a price will do in the next 10 seconds.
But the operators rig the odds further. They sometimes manipulate the software to change market values if customers win too much. In this case, the fine print points out that the providers use “algorithms” other than the real market.
Of course, many players realize after a while that they are a fat goose on the way to the slaughterhouse. But then it is often too late because the operators do a lot to avoid having to return deposited money. Players are given a 100% deposit bonus, subject to the condition that all money cannot be withdrawn until 30-40 games have been played. But then, according to the probability, every player has lost everything.
Crypto becomes the new binary options
There is no reliable statistic showing the global scale of fraud with binary options. However, the estimates are in the Billions of Euros range. However, it is slowly becoming uncomfortable for the fraudulent providers of binary options. More and more countries are banning this type of gambling disguised as an investment and are forcing semi-legal companies completely underground. This is where it comes in handy that cryptocurrencies are opening up a market that is perfect for fraudulent gambling.
The cryptocurrency market is still at the very beginning of state regulation and gambling providers will probably be able to work in this legal vacuum for a few more years. In addition, cryptocurrencies are much better at concealing cash flows and ownership than with Fiat money.
In March 2018 Fintelegram started an investigative series about fraudulent binary options providers. Read here: