You know the bad guys are getting good when securities commissions across the country form a task force to educate and protect Canadians.
That’s what the Canadian Securities Administrators have done to combat the explosion of binary options scams.
The get-rich-quick, high-risk bets may be a real thing in some jurisdictions, but in Canada they are a complete fraud. The Competition Bureau, in conjunction with the Better Business Bureau, says it is the eighth biggest scam in the country.
But Jason Roy, the Manitoba Securities Commission investigator who is the chairman of the CSA Binary Options Task Force, believes it is the number-one investment fraud in the country.
"We’ve had some reports about binary option fraud in the last couple of years but it has exploded in 2016 to a level I have never seen before," said Roy. "In terms of the amount and the sophistication, it was so significant we decided to create a task force to try to deal with it."
There were 800 reported incidents across the country in 2016, but likely many more that went unreported.
The binary options concept is a very tight, time-sensitive bet on currency or stock trades with payouts or losses booked within minutes.
But any binary option firm contacting Canadians is unregistered and unlicensed, so it is either lying or is in contravention of securities law.
Louis Morisset, chair of the CSA and president and CEO of the Autorité des marchés financiers, said, "In response to this escalating problem, we formed a Binary Options Task Force to raise awareness and protect Canadians from binary options scams and launched a new resource site, www.BinaryOptionsFraud.ca, as part of a campaign to educate Canadians about such scams."
The task force just got back from The Hague, where it presented at a conference with FBI and SEC and other international law enforcement agencies on prevention and investigation of binary options scams.
Roy said the scam is taking place all over the world, with the FBI estimating binary option scams earn about US$10 billion per year. In Europe, binary options account for 25 per cent of all investment fraud reported.
Roy knows first hand how they operate. In addition to the professional work he has done investigating the scams, he was actually the recipient of a telephone pitch.
"They can be incredibly persistent and pushy," he said. "But the firms that are contacting Canadians are boiler rooms designed to steal your money. All they want is your credit card or money wired to them and then you never get it back."
The task force is planning to meet with officials from the credit card companies to help prevent further damage. It is also meeting with officials from social media companies to encourage them to reject the ads for the scam that appear to encourage people to get hooked.
"There are marketing companies and links to YouTube videos on how binary options work to try to entice people, claiming things like ‘this person from Winnipeg made $25,000 yesterday and this is how they did it,’ " said Roy.
There is a whole ecosystem we had to understand and figure out. When we realized what we are dealing with we became very concerned."
The CSA task force advises Canadians to never send money to anyone you don’t know on the Internet or over the phone, never give out sensitive personal information and to research investments before making them.
The Competition Bureau, in conjunction with the Better Business Bureau, Quebec-based consumers group Option consommateurs and other fraud-prevention partners announced Wednesday the top 10 fraud scams targeting Canadians in 2016. In terms of the number of complaints received, the hit list is as follows:
1. Employment scam ($5.3 million lost)
The most reported scam to BBB Scam Tracker.
Chances are you didn’t apply for a job you can do from home, much less get an interview. A cheque-cashing scheme that is simply too good to be true.
Advice: Do research on any company before accepting a position; ignore a company that asks you to deposit a cheque.
2. Romance scams ($17 million lost)
Canadians give away a lot of money as they give away their hearts to Catphishers.
Catphishing is when a fraudster fakes an identity and tricks someone via dating sites into a phony emotional or romantic relationship for financial gain.
Advice: Do not wire money to someone you’ve never met
3. Identity fraud ($11 million lost)
Scammers steal a person’s identity to secure credit cards, bank loans and even rent property in that name.
Advice: Never carry your SIN with you; change online passwords regularly.
4. Advance fee loan ($1.1 million lost)
Paying an up-front fee to get a loan is illegal in Canada and the United States.
These scammers prey on those who don’t qualify for loans through reputable lenders.
Advice: Seek alternative finance options.
5. Online purchase scams ($8.6 million lost)
Scammers have new online avenues to take your money and trust.
Counterfeit merchandise, goods that never show up, fake websites and free trial traps are everywhere.
Advice: Shop on legitimate websites; use third party payment portals such as PayPal.
6. Spearphishing ($13 million lost)
Spearphishing is a big problem for the business community.
Millions are lost when scammers pose as company brass and demand money be wired to a fake company email.
Advice: Create payment redundancies in your organization; be vigilant on any incoming emails.
7. Binary options scam ($7.5 million lost)
Big promises of low-risk, high returns and full refunds entice Canadians to take a chance.
It’s really just an unregulated 50/50 bet and not an investment. They delay any winnings... if you win at all.
Advice: Understand high risk is involved; seek professional investment advice.
8. Fake lottery winnings ($3 million lost)
If you didn’t enter, you didn’t win. Calls come in at all hours telling you you’ve won a big lottery.
You just need to pay a tax or insurance fee before you get your millions. It’s way too good to be true.
Advice: You do not have to pay to receive lottery winnings; contact the corporation directly.
9. Canada Revenue Agency scam ($4.3 million lost)
While the scam is still being reported, a crackdown on a call centre in India in 2016 has seen a dramatic decrease in the number of calls targeting Canadians.
Advice: The Canada Revenue Agency does not make threatening phone calls; the CRA does not request information by phone or by email.
10. Fake online endorsements and sponsored content (amount lost unknown)
Consumers are often enticed to purchase a product or service based on reviews by social media influencers.
Unfortunately, these reviews may not be genuine and the influencer may have been paid by a company to be used as a marketing tool.
Advice: Take everything you read online with a grain of salt
— The Canadian Press