The Federal Government is being urged to ban a highly speculative investment scheme that has been hijacked by international fraudsters to steal millions of dollars from Australians.
- Government is being urged to ban risky “binary options trading” schemes
- The schemes allow investors to speculate on whether a stock or commodity price will go up or down.
- International fraud networks have used these investments to steal more than $7 million from Australians.
So-called “binary options trading” allows investors to speculate on whether a stock or commodity price will go up or down.
A form of fixed-odds betting, such trading sees investors cash in — or lose everything.
Many established traders consider the investments too risky but naive amateurs are being aggressively sold the products by scammers promising huge returns.
Delia Rickard says Australians who have lost a significant amount of money are unlikely to get it back. (ABC News)
Fraudsters in countries with few financial regulations are using gambling industry tactics and cold calls to pressure Australians into sending them money, which they falsely claim to invest on their behalf.
Some Australians have lost more than $1 million to these scams, alleging the money was never invested or dividends were not returned and they were persuaded to continue sending funds despite huge losses.
Binary options trading is legal in Australia, but the scale of fraud overseas has prompted Israel and Belgium to introduce bans.
Canada is pursuing an nationwide ban and the UK and European regulators are considering similar measures.
These scams are relatively new to Australia and the consumer watchdog is warning $7.5 million has already been lost, saying that’s just “the tip of the iceberg”.
“If you’ve lost a significant amount of money, the sad news is you’re very unlikely to get it back,” ACCC deputy Delia Rickard told the ABC.
The predatory tactics are worrying the Australian Security and Investment Commission (ASIC), which has forced Google and Facebook to stop promoting smart-phone apps run by unregistered traders.
Legitimate traders registered with ASIC are also concerned, with one chief executive telling the ABC he would support a “a complete prohibition” of simple binary options trading.
“We support any steps ASIC decides to make in addressing this unsatisfactory situation,” he said.
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‘I still owe my brother-in-law’
Patrick Venaille, 62, lost $600,000 to an overseas scammer and is urging others to steer clear of binary options.
“I’ve got no more house, I live in a two-bedroom unit, and I still owe money to my brother-in-law,” he told the ABC.
“I think I lost credibility a little bit with my kids, because I always preached them to not put their money in the same basket, and here I am doing exactly what I told them not to do.”
The electrical engineer was made redundant in 2013 and turned to binary options. He spoke almost daily with a broker over Skype, who encouraged his betting.
“Over one day, we made $200,000 so I thought ‘wow, this is incredible. Sounds like the guy knows what he’s doing’,” Mr Venaille said.
“I put more money into it, and slowly he asked me for more money still, and we slowly build up the account whereby I think we deposited a total of nearly half a million dollars.”
The trader kept pressuring him for money and when he tried to pull out, asking for his money back, he was denied.
‘He robbed me of my savings’
Adelaide man Peter Green has not told his family and friends about being strong-armed into the investment scam, which left him with a $50,000 debt.
The 63-year-old was rung every day by a broker who eventually convinced him to bet against the gold price, which is something he thought would be safe.
“My family doesn’t know, apart from my mother and some close friends, so it is rather embarrassing and yeah, it hurt,” he said.
“It means staying living with my mother for a bit longer now, that’s for sure. We’re having a tough year business-wise, so it’s been a pretty hard year actually.”
Mr Green said his money was left sitting into an account in Dubai but was never invested by the broker, it was simply stolen.
“He robbed me all my savings I was trying to put aside to build a house, so it’s been pretty hard,” he said.