$2.4m lost to binary option scams
Police reveal how victims are enticed to trade on fraudulent overseas sites
More than 40 people in Singapore have lost about US$1.7 million (S$2.4 million) after being lured to take part in an unregulated, sometimes fraudulent and mainly offshore activity known as binary option trading.
One victim lost a staggering US$693,000 after engaging in this highly risky trading, which is banned in some jurisdictions.
Singapore police are investigating a string of complaints and disclosed the eye-popping losses yesterday, in response to queries from The Straits Times.
Binary options trading involves investors predicting if the price of an underlying instrument - shares or currencies, for instance - will be above or below a specified price at a specified point in time. This can range from a few minutes to a few months in the future.
They receive a fixed sum if the prediction is correct, or lose the investment otherwise. It is essentially "yes" or "no" betting, hence the name binary.
The scam is a growing problem worldwide. The authorities in the US, Canada and other jurisdictions have warned of the risks involved in such trading.
Last month, the Monetary Authority of Singapore (MAS) warned of the risks of trading binary options, saying many offshore trading platforms are fraudulent and that such options are risky and speculative.
Yesterday, the police here said that binary option providers use a number of ways to attract victims to trade on their platforms.
One of the more common methods involves the use of advertisements, which victims see when browsing the Internet or social media websites. These ads can take the form of paid surveys or articles with catchy headlines, such as "The secret to making fast money".
A police spokesman said: "We have also seen some advertisements which featured 'interviews' with supposed millionaires who made fortunes from trading in binary options.
"After responding to such advertisements, victims would be asked to leave their personal details or be directed to binary option websites.
"Some... also advertise their services via spam e-mail promoting automated trading software or congratulating the e-mail recipients for being selected to join as a member or sign up for accounts."
Another tactic involves offering bonus trading credits to entice victims to transfer more money.
For example, victims may be promised an additional $250 in trading credit for every $1,000 they transfer to their trading account.
Asked about the progress of investigations, the police said they are working with foreign law enforcers, as almost all the binary option providers in investors' complaints are based overseas. The bank accounts used to receive money from investors are also offshore.
"While these pose challenges, the Commercial Affairs Department is working closely with overseas law enforcement agencies," said a spokesman.
"We would like to remind the public to be alert to the risks of transacting with foreign operators without any physical presence in Singapore. Do not transact with any parties, share personal particulars or send them money if you are unsure."
On Dec 14 last year, the police advised investors to check lists compiled by the MAS to find out which investment service providers are regulated.
Back then, the police received more than 30 reports from investors who lost more than US$1 million to unregulated binary option trading platforms.
Since then, more than 10 investors have made similar complaints, with the total losses reported to be about US$700,000. The amounts invested ranged from US$250 to about US$693,000.