Convicted Ponzi schemer Bernie Madoff who stole 50 billion dollars from unsuspecting victims may be the last person from whom you would accept investing advice, but in fact, his advice, as contained in a 2014 jailhouse interview Madoff gave to the Wall Street Journal is helpful to people hoping to avoid the fate of Madoff’s many victims. With great “chutzpah,” Madoff blamed his victims for their losses. He said that his investors were “sophisticated people” who should have known better. “People asked me all the time, how did I do it. And I refused to tell them, and they still invested. Things have to make sense to you. You should ask good questions.” About this he is correct. No one should ever invest in anything that they do not totally understand. And this leads us to binary options. Binary options are a legitimate form of investment, but while they offer the potential for great rewards, they also carry the risk of losing your entire investment.
Binary options are, at their essence, a bet on whether the price of a particular index or asset will rise or fall above or below a specific price. The Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) regulate binary options platforms and trading. In the past both of these agencies issued an alert in which they warned people that some online trading platforms for binary options trading fail to comply with federal regulations https://www.sec.gov/files/ia_binary.pdf In many instances the sales of binary options have been done without complying with registration requirements and with fraudulent promotional advertising and improper disclosures.
Recently, Israeli law enforcement arrested three people accused of operating a sophisticated binary option scam that stole millions of dollars from their victims.
People who have been the victims of binary options scams have also been targeted by scammers who promise to help you regain your lost money if you pay them an upfront fee. Legitimate government agencies such as the SEC never charge for getting money from scammers to refund to victims.
The bottom line is that Bernie Madoff was right about one thing. No one should ever invest in anything without totally understanding the investment and the inherent risks. If you understand binary options and still wish to invest (I would say gamble) in them, that is fine, but all investment decisions should be made only after being properly informed. You may want to check out the SEC’s investor education website at www.investor.gov.
Before investing with anyone, you should also investigate the person offering to sell you the investment with FINRA’s Central Registration Depository. http://www.finra.org/industry/crd This will tell you if the broker is licensed and if there have been disciplinary procedures against him or her. You can also check with your own state’s securities regulation office for similar information. Many investment advisers will not be required to register with the SEC, but are required to register with your individual state securities regulators. You can find your state’s agency by going to the website of the North American Securities Administrators Association.http://www.nasaa.org/2709/how-to-check-out-your-broker-or-investment-adviser/
Specifically in regard to binary options, if you are considering purchasing them you should check with the CFTC to see if the trading platform is a designated market which you can do through this section of the CFTC’s website https://sirt.cftc.gov/SIRT/SIRT.aspx?Topic=TradingOrganizations&implicit=true&type=DC%20M&CustomColumnDisplay=TTTTTTTT
You also should check with the SEC’s EDGAR system to confirm that the binary options offering is properly registered with the SEC which you can do at this website https://www.sec.gov/edgar/searchedgar/webusers.htm