The Financial Conduct Authority (FCA) has issued a warning over online investment fraud taking place on a range of popular social media sites, after it was revealed that victims are losing £87,000 a day to these types of scams.
The fraudsters offer get-rich-quick schemes, offering services to trade in contracts for difference (CFDs), forex, cryptocurrencies such as Bitcoin, and binary options.
It’s been found that those under the age of 25 are six times more likely to trust an investment offer made via social media, compared with those over 55, and that they were significantly more likely to fall for a binary options investment scam.
In December 2017, a Which? investigation revealed the secrets of binary options scams, dubbing it the ‘biggest investment con in Britain’.
This format of reeling in unsuspecting consumers is a step on from cold calling and postal scams that have proved problematic in the past, possibly because people are now wiser to such tactics.
What do the investment scams look like?
Typically, pictures are posted up on social media showing expensive cars, piles of money and expensive watches – all suggesting the kind of lavish lifestyle you could lead if you invest your money with the company.
This comes at a time when social media, and those who position themselves as ‘influencers’, have an increasingly powerful sway on young people’s lifestyle and brand choices.
The FCA have released the examples below of how social media has been used to garner interest in binary options investments.
As Which? revealed last year, after promising high returns, investors often find that prices are distorted, they can get tied in with extreme pay-out clauses, have their account closed and be faced with refusals to have their money paid back.
In 2017 alone, Action Fraud reported that investors lost £87,410 a day to these kinds of schemes.
What are binary options?
Binary options allow you to make a bet on the expected value of a stock, commodity, currency, index – or anything else that can be measured in financial terms.
For example, you could bet that a share will increase by a certain percentage by a certain time – the time periods are usually very short; just a couple of minutes.
While returns can be high, so is the risk. Since 3 January 2018, binary options became a regulated investment product, so UK firms offering binary options must be authorised by the FCA.
Authorisation means that the deals will be subject to the regulatory regime for investment products, complaints can be referred to the Financial Ombudsman Service, and eligible consumers will have access to the Financial Services Compensation Scheme.
If you invest with a company that is not FCA-approved, you will have none of this security.
How to check if an offer is real
The FCA’s ScamSmart campaign – fronted by TV presenter Nick Hewer – is aiming to help consumers spot and report investment and pension scams.
The FCA has put together a Warning List of unauthorised binary options firms that it understands to be offering binary options trading to UK consumers.
If you see or are approached by someone offering an investment opportunity, check the list below before further considering to give them your money. You can search for specific names using the search bar.
For further details of companies featured on the list, see the FCA’s full list of unauthorised binary options firms.
The Financial Services Register also holds details of all FCA-approved companies, so you should also check this before you make an investment. Just because a company doesn’t show up in the table above, it doesn’t necessarily mean that it’s approved.
Which? has a guide to spotting social media scams. In addition to this, the FCA advises the following three steps:
- Reject any unsolicited investment offers – whether you’re contacted online, via social media or over the phone.
- Check the FCA Register to see if the firm or individual offering the investment is authorised.
- Get impartial advice before investing. For more, see the Which? guide on how to find a financial adviser.