Binary option

[3] While binary options may be used in theoretical asset pricing, they are prone to fraud in their applications and hence banned by regulators in many jurisdictions as a form of gambling.

[5] The U.S. FBI is investigating binary option scams throughout the world, and the Israeli police have tied the industry to criminal syndicates.

[13] Articles published in The Times of Israel newspaper explain the fraud in detail, using the experience of former insiders such as a job-seeker recruited by a fake binary options broker, who was told to "leave [his] conscience at the door".

[17][18] On January 30, 2018, Facebook banned advertisements for binary options trading as well as for cryptocurrencies and initial coin offerings (ICOs).

[23] On non-regulated platforms, client money is not necessarily kept in a trust account, as required by government financial regulation, and transactions are not monitored by third parties in order to ensure fair play.

[24] Binary options are often considered a form of gambling rather than investment because of their negative cumulative payout (the brokers have an edge over the investor) and because they are advertised as requiring little or no knowledge of the markets.

Gordon Pape, writing in Forbes.com in 2010, called binary options websites "gambling sites, pure and simple", and said "this sort of thing can quickly become addictive... no one, no matter how knowledgeable, can consistently predict what a stock or commodity will do within a short time frame".

[citation needed] The country's Financial Services Authority has issued a warning to the general public about unlicensed Forex and binary options trading provided by entities registered in Saint Vincent and the Grenadines.

[11] In August 2016, Belgium's Financial Services and Markets Authority banned binary options schemes, based on concerns about widespread fraud.

[35] On May 3, 2012, the Cyprus Securities and Exchange Commission (CySEC) announced a policy change regarding the classification of binary options as financial instruments.

[36] In 2013, CySEC prevailed over the disreputable binary options brokers and communicated intensively with traders in order to prevent the risks of using unregulated financial services.

[38] CySEC also temporarily suspended the license of the Cedar Finance on December 19, 2013, because the potential violations referenced appeared to seriously endanger the interests of the company's customers and the proper functioning of capital markets, as described in the official issued press release.

CySEC also issued a warning against binary option broker PlanetOption at the end of the year and another warning against binary option broker LBinary on January 10, 2014, pointing out that it was not regulated by the Commission and the Commission had not received any notification by any of its counterparts in other European countries to the effect of this firm being a regulated provider.

The AMF stated that it would ban the advertising of certain highly speculative and risky financial contracts to private individuals by electronic means.

[47] They had sponsored a well-known Irish mixed martial artist, Conor McGregor, who in turn promoted the company through social media.

On November 29, 2018, BaFin announced that it is planning to "prohibit the marketing, distribution and sale of binary options to retail clients at a national level".

[49] According to the Commodity Futures Trading Regulatory Agency (CoFTRA) in Indonesia, also known as BAPPEBTI, binary options are considered a form of online gambling and is illegal in the country.

[53] In November 2016 the Israel Securities Authority carried out a raid on the Ramat Gan offices of binary option broker iTrader.

[54] On May 15, 2017, Eliran Saada, the owner of Express Target Marketing, which has operated the binary options companies InsideOption and SecuredOptions, was arrested on suspicion of fraud, false accounting, forgery, extortion, and blackmail.

[8] In September 2017, the FBI arrested Lee Elbaz, CEO of binary options trading company Yukom Communications, upon her arrival in the United States.

[61] In April 2017, New Zealand's Financial Markets Authority (FMA) announced that all brokers that offer short-term investment instruments that settle within three days are required to obtain a license from the agency.

[67] This positions binary options as a form of gambling, and the administrator of the trading as something akin to a casino, as opposed to an exchange or brokerage house.

[63] In December 2018, FCA has proposed new rules which would permanently ban the sale, marketing and distribution of binary options to retail consumers.

To reduce the threat of market manipulation of single stocks, FROs use a "settlement index" defined as a volume-weighted average of trades on the expiration day.

MYSEA and Donato A. Montanaro submitted a patent application for exchange-listed binary options using a volume-weighted settlement index in 2005.

Regulators found the company used a "virtual office" in New York's Trump Tower in pursuit of its scheme, evading a ban on off-exchange binary option contracts.

The investigation is not limited to the binary options brokers, but is comprehensive and could include companies that provide services that allow the industry to operate.

[6] On March 13, 2017, the FBI reiterated its warning, declaring that the "perpetrators behind many of the binary options websites, primarily criminals located overseas, are only interested in one thing—taking your money".

[82][83] In January 2018, Boston federal prosecutors filed a complaint against Leonel Alexis Valerio Santana and Frank Gregory Cedeno, accusing them of such type of fraud.

[84] In August 2018, Santana was sentenced to 63 months in prison, three years of supervised release, and ordered to pay restitution of $105,869 (Cedeno was indicted in March and pleaded not guilty).