The Binary Option Boom
Binary options have been a hyped phenomenon over the last couple of years. Like “Bitcoin” or “Crypto” is these days, “Binary Options” were magic words for investors (or gamblers). Disguised as investment opportunities, binary options represented a “get-rich-quickly” scheme as do most crypto-schemes today.
It took regulators and investors a few years to learn that binary options are prone to fraud in their applications and their genes. Once recognized, payments services providers and regulators banned them in most jurisdictions as a form of illegal gambling. Additionally, many binary option outlets have been exposed as fraudulent.
- The U.S. FBI currently is investigating binary options scams throughout the world,
- the Israeli police have tied the industry to criminal syndicates,
- The European Union is publishing regulations that will prohibit binary options trading.
The FBI estimates that the binary option scammers steal US$10 billion annually worldwide and passionately chases the binary option scammers:
“Our agents are going to look under every rock and stone, We are not limited to the USA. We have international partnerships with countries all over the world. I can’t get into specifics but we have worked long and hard as an entity to make sure we developed those relationships and get the information that our investigators need from our partners”, FBI Supervisory Special Agent Milan Kosanovich said in an interview with the Times of Israel.
Articles published in the Times of Israel newspaper explain the fraud in detail, using the experience of former insiders such as a job-seeker recruited by a fake binary options broker, who was told to “leave [his] conscience at the door”. Following an investigation by the Times of Israel, Israel’s cabinet approved a ban on the sale of binary options in June 2017, and a law banning the products were approved by the Knesset in October 2017.
The Business Model
The binary options universe was dominated by only a few large scheme operators who focused on
- application development
- call center operation and
- public relation and marketing (with “friendly” relationships to industry publications and their own marketing ventures)
The schemes acted as a sort of wholesalers and distributed their solutions via “White Label” partners and license agreements to the individual investors. Typically, such scheme operators entertained hundreds of different “white label” brands across all jurisdictions. White label operators signed license agreements and served as front-end partners for the respective scheme – and paid their commissions and marketing fees. In case of legal troubles, the brand was closed down, a new domain was registered, and thus a new brand created. One could say that these many different brands came like a swarm over potential investors. Evidently, individual investors were not even aware that the very same schemes were always behind the different brands.
Many of these providers are located in Eastern Europe and in the countries of the emerging markets protected by off-shore laws an/or underdeveloped investors protection laws. In 2017, this global binary option scheme universe came to a (regulatory) end.
The Crypto-Transition and our Investigations
With the dawn of cryptocurrencies and increasing regulatory restrictions, binary options providers have moved into the crypto area. On the websites of the former binary options providers you now preferably see “cryptocurrencies”. In a real migration of peoples, the operators of the binary option schemes moved into the cryptocurrencies and now operate their cryptocurrency schemes there, which often also receive the FOREX label. They deploy their old applications, resources, and customer databasis. Hundreds of binary options labels, billions of dollars of revenues, and their handful of scheme operators are moving into the new holy land called “crypto”.
The Financial Times of Israel conducted extensive investigations on the binary options back in 2016 when bitcoin was far from mainstream. The situation changed meanwhile as we all know. In the heritage of those 2016-investigations, FinTelegram has conducted intensive investigations over the last few months and will present the findings in a multi-part report. We will show in detail how the now-illegal binary options scene and their actors transcend into crypto-space. It’s by far our most ambitious project which is justified by the sheer volume of the potential scam that enters the crypto-space. FinTelegram’s mission is to protect investors and by reporting about the binary options transition into crypto, we serve our mission. Stay tuned.
In case you do have questions or hints, we would be glad to receive them via our whistleblower system.