Binary Options Trading Trap — TRAP10
Binary Trading (commonly also known as Binary Options Trading or Binary Options) is a type of option where the trader takes a yes or no position on the price of a stock or other assets, with the resulting payoff being all or nothing. Assets that can be traded as Binary Options are indices, forex, commodities and stocks.
Binary Trading in the GCC.
All binary options trades are conducted through Internet-based trading platforms which give the impression that they are based in the GCC and do not comply with applicable GCC regulatory requirements and may be engaging in illegal activities. GCC mainly Saudi Arabia stands eighth in the top ten list of binary options trading market.
Top 10 Binary Options Markets
Types of scams running in the GCC.
The scammers are using various techniques to lure GCC residents to engage in TRAP10. Implying affiliation with GCC based financial institutions is the most concerning part. Following is a list of fraud techniques that we were able to identify:
· Brand Abuse: The scammers are abusing brand names of GCC organizations to lure the residents in engaging with them. One of the easiest way to do so is by hosting binary trade business on lookalike domain names of recognized GCC organizations. Another is by creating lookalike social media profiles of recognized GCC brands, to connect and invite the target individuals, implying to them like they are a legitimate GCC organization. While investigating one such lookalike name of a GCC stock exchange, our analysts discovered multiple variations of the same name registered by an entity OptionRally, which is one of the most popular, yet completely unregulated brokers in the GCC. (Option Rally is registered in Cyprus, presumably under CySec)
· Unregistered Establishments: Upon analysis of other websites, like BancoFX, Stock Pair, RehaOren, Top Option and Option Rally, it seems that these private enterprises are operating in GCC countries like Bahrain, Saudi Arabia and UAE without officially incorporating in-country. These entities have vague physical locations listed on their websites and do not appear to be regulated under any official authority; furthermore, phone numbers also remain unanswered during work-hours. As a result, we believe there is a · high likelihood that they are fraudulent and not registered as local or branch businesses.
· Identity Theft: With brokers not being regulated or monitored, we believe there is a very high risk to customers who give their personal and credit card details as this information can be used for a fraudulent purpose. One such example is No1Options.com which requires personal information of the user to sign up.
· Misrepresentation: Most binary trading websites are using get-rich marketing schemes like “Want to make $1,000 or more per day?” to attract GCC-based customers and offering bonuses of multiples of the deposit amount; however, there is considerable fine-print that makes it highly unlikely that large profits can be realized. An example of this is on Banc De Binary, RehaOren and others where a consumer is attracted towards claims of 200% returns on the deposit; yet, in real terms such scenarios are only possible when a trade is 20x the deposit and bonus amounts.
· Manipulation of software: Manipulation of the TRAP10 software to generate losing trades is possible in an unregulated environment. Brokers can manipulate the trading software to distort prices and payouts. For example, when a customer’s trade is winning, the countdown to expiration is extended arbitrarily until the trade becomes a loss. We did identify a case where a trader fell victim to this scam. The background of this is that each broker has a system where a trade is placed and a countdown to the expiration begins. When the clock ticks to zero the victim/trader is awarded a win or suffers a loss. This is a standard binary · options trade; however, what happens after the clock ticks to zero, the status changes to Expiring for at least another 30 to 60 seconds. During that time, if trading was closed, the stock may move enough for the trader/victim to lose their money. OptionBit is one example of mass complaints.
· Unauthorized articles: During the course of our research, we have found articles written by unauthorized people supporting TRAP10 in the GCC which are misguiding the public. arabicbinaryoption.com is one such website which is misleading the users that the reputable stock exchanges in the GCC trade in binary options.
Is Binary Trading legal in the GCC?
There is no legal framework specifically in place for binary trading in the GCC. If we look at binary trading from the perspective of gambling, then according to the current framework gambling remains banned across all GCC states and in general the Arab region. Unlike other financial derivative products, binary trading is not regulated by a central authority in any GCC country.
Is Binary Trading Legal Internationally?
Binary trading is most common in the US, where a high volume of trading takes place on the Northern American Derivatives Exchange (Nadex). Upon our analysis of Nadex, we have found that it is a private entity founded in 2004. It is one of the three exchanges that are officially endorsed by the Commodity Futures Trading Commission (CFTC). While NADEX is legal, it is not closely monitored on a regular basis [2]. Typical trades are capped between $1 and $15,000, with cost of purchase per trade on the high side (90 cents on both sides of the trade). It is apparent that Nadex remains a small-profit / high-volume platform for investors on a small budget. Nadex has not been embraced by Wall Street.
Binary Trading platforms:
Some binary options in the US are listed on registered exchanges like Nadex, Cantor Exchange LP and Chicago Mercantile Exchange that are subject to oversight by the regulatory authorities but this is only a small portion of the binary options market. Much of the binary options market operates through unregulated, unregistered and illegal Internet-based trading platforms. The number of these platforms that offer the opportunity to purchase and trade binary trading has surged in recent years. Offshore destinations such as Cyprus and Gibraltar remain attractive home-bases for brokers.
Risk to GCC entities and community
· GCC residents being scammed out of money, falling prey to the socially engineered fraudulent techniques.
· Negative reputation of GCC financial institutions and regulators.
· Direct impact to brands being abused to conduct the scam, where GCC residents may also show up at the head-office or respective authorities to report that they have been scammed by the abused brand’s organization.
Few Binary Trading sites in the GCC
1. https://www.24option.com/ar/
2. https://bancdebinary.com/ar/
4. https://www.optionbit.com/ar/
5. https://www.optiontrade.com/eu/ar/
Conclusion & Recommendation
Binary trading is not widely accepted by renowned institutions and market experts in the US where it originated; the practice may lead to fraudulent activities. We were also not able to identify permissible regulations for such a business to be conducted in the GCC. Also we could not identify any GCC based business engaged in binary trading or even endorsing it.
Our recommendations are:
1. GCC regulatory authorities should review this business practice and take a position on the legality and regulations on binary options trading.
2. GCC telecom authorities should, at the minimum, block the websites that imply bogus affiliation with GCC countries or organizations.
3. GCC financial institutions should conduct awareness on TRAP10 and related scams internally as well as to customers.
4. GCC organization names that are being abused in such scams should take persistent action of taking down the websites that reflect affiliation with their names.
References:
1. http://www.cftc.gov/PressRoom/PressReleases/fraudadv_binaryoptions
