This past week reminded me of a Russian joke about a seminar titled “How to Become a Millionaire.” The guy who organized the seminar steps on stage and asks how many people are there in the audience. “One thousand,” comes the answer. “And how much did each of you pay for the seminar?” “One thousand dollars,” the audience answers happily. “Thank you. The seminar is finished,” the guy bows and leaves.
A well-designed scam can keep the people behind it well paid and out of jail for a long time. Has the time of reckoning come?
On March 31st, Giambrone, an international law firm, issued a press release from its London office stating that it plans to launch a class action lawsuit against Forex and Binary Options companies NRG Binary, Iron FX, Titan Trade, Ivory Options and LBinary. Currently, it is estimated that the companies have allegedly defrauded over 70 investors from their deposits of in excess of €4.3 million. The majority of claimants are from the Gulf States, with some European clients from Germany and Italy joining the class action.
On the same day, March 31st, the Paris Prosecutor’s office, the French Competition and Consumer Fraud Authority and the French Prudential Supervisory Authority pledged to reign in the “fraudulent practices targeting French consumers of financial services.” The Paris Prosecutor estimated that the financial damages resulting from illegal Forex and Binary Options scams have totaled €4.5 billion only in France in the past six years.
This may just be the tip of the iceberg in a worldwide web of fraud and corruption.
One of the people I spoke to since my last blog post had worked in the binary options industry, in the Cyprus office of an Israeli-run company, in 2013.
“I have to say, you have to be without a heart to work in such company.”
I guess, his own heart was temporarily numbed by all the corporate brainwashing, the promises of getting rich and retiring in the Bahamas or wherever else it may be – pretty much the same promises that drive the unfortunate clients to “invest” in the industry in the first place.
On average, the Cyprus brokers were paid 1,500 euros per month (US$1,709) plus a percentage of sales, usually 3%. Sales targets for junior brokers start at €50,000 per month, seniors’ targets run at €100,000 and over. What this means in plain English is that in order to earn 4,000 euros (US$4,557), which is a rather realistic salary for a broker in this business, you basically need to steal around 100,000 euros a month from naïve clients. With thousands of people working in the industry in Tel Aviv only, I suggest you do your own math.
There is no money back. The client will be ping-ponged between the sales team and be promised anything until he is completely dried out of cash. The broker will tell him to borrow money from the bank – which many did – pay by credit card – borrow from relatives – because this next deal, and this next bonus, will make it all come back to you, and you will be rich, and these trades that we are making now – and tomorrow – and if you put in more I offer you a 125% bonus – and tomorrow… “The ball is in your court now”. And people have lost their retirement funds, emptied out their bank accounts and overdrawn all their credit cards.
But after all, it is the client who gambled his money away. His own fault. “We never forced you to take the trades.”
Binary Options is good business. Perhaps, the best business. No country besides the US has ever taken action against this global scam. No one is stopping the even bigger evil out there – providers like SpotOption – who arm the scammers with rigged platforms and payment systems.
No, I will never understand how it is possible to borrow $45,000 on a credit card in order to win $100,000 that doesn’t exist. I would much rather run into debt traveling the hidden corners of the world, drinking and partying with the natives, sleeping on the beach and swimming in hidden lagoons. But does this put me in some superior moral position to the hapless victims of thieves? I don’t think so. Admittedly, I feel equally sad for those who have worked as brokers in this crooked industry, and I applaud those who have come out and shared their stories with me.
The problem is bigger than either of those. As one of the former traders told me, “I see the problem rather in the ruthless and absolutely criminal way people get promised things over and over again. All this get rich bullshit is going on for many years and people are too lazy to educate themselves before it is too late.”
Will regulation mean anything?
The existence of such absolutely unregulated business with online access to the entire world has horrifying consequences. The regulations governing cross-border financial transactions are still inadequate, and whatever do exist out there are more likely to make life difficult for small business owners rather than target the big sharks. To whom do the clients complain? And if they complain – which is pretty useless – who will give them their money back? How do you get money from a company with so many subsidiaries and offices that even the founders may have lost track of them all by now? Where is the guarantee that even if you do get a court order to freeze the accounts these accounts will actually have any value? In my experience – they most often don’t.
Hundreds of millions have been stolen. Why hasn’t anyone done anything to regulate or ban this fraud? And who else gets the share of the money? I guess we may never find out the answers to some questions… so who cares after all – besides the victims.