The regulator is urging the public to be vigilant online as fraudsters often promote through social media channels, such as Facebook, Instagram and Twitter.
Typically, promising high returns, imposters use images of luxury goods to entice people to invest. Upon investing, they distort prices on their website, trap people with extreme pay-out clauses and even close customer accounts, refusing to pay back their money.
The FCA revealed that last year, investors lost £87,410 per day to binary options scams.
Binary options investments allow consumers to place bets on the predictable value or price of a stock, commodity, currency or index. However, on 3 January 2018, this became a regulated investment product and now requires all firms trading in these to be authorised by the FCA.
Since then, the FCA has published a list of 94 firms they believe are trading without FCA authorisation.
Mark Steward, director of enforcement at FCA, said: “As people have become more sceptical of investment-related cold calls and consumer habits have changed, we have seen investment fraud moving online and to social media.
“While their websites and profiles appear to be professional, they are all too often run by fraudsters who fix prices and pay-outs, or in some instances don’t really place trades at all, before disappearing with innocent investors’ money.”
Under 25s most vulnerable
The FCA’s latest study conducted as part of its ScamSmart campaign found those under 25 were six times (13%) more likely to trust an investment offer they received via social media, compared with over 55s (2%).
Action Fraud figures reinforce this trend, showing that under 50s are significantly more likely to fall victim to a binary options scam versus other types of investment fraud (34% versus 21%).
Nick Hewer, who is supporting the campaign, described the amount of money being lost every day as “staggering”.
He said: “It’s vital for all those on social media to be extra cautious about engaging in any conversations or with adverts that relate to quick-wins or guaranteed returns, especially with individuals or companies you do not know.
“Remember, if it sounds too good to be true, then it probably is. If you are offered an attractive investment out of the blue, be suspicious, check the FCA’s Warning List and seek impartial advice. Better still, if you get an email or message about an investment from someone you don’t know, just delete it.”
Tom McPhail, head of policy at Hargreaves Lansdown, agreed and emphasised the importance of dealing only with regulated firms to reduce the risk of being prone to a scam.
He added: “What’s more, if something does go wrong there are complaints procedures and compensation schemes in place to protect you. Always check the firm you’re dealing with is regulated and that the investments they are promoting are also regulated.”
