Binary options are often referred to as scams. This is not true and very unfair. It is true that they are high risk instruments that are used to speculate in the markets. It is also true that you can lose a lot of money and that most traders lose money while trading.

With this in mind is easy to understand why some people feel that binary options are scams. The fact that some people start trading with binary options without really understanding how they work does  not make them scams. That some people lose a lot of money does not make them a scam either because there are people making a lot of money from their trade. It is just like it is in sports, the music industry and many other areas. The best earn a large part of the money.

If you think of binary options in the same way as stocks and regular options where each trade have two parties and the broker only facilitate the trade then it is easy to see binary options as scams. This is however not a fair comparison. Binary options are not like other financial instruments. You do not trade with other people. You trade directly against the broker. They lose money every time you earn money. They earn money every time you lose money. With this in mind it is not strange that they make sure that they keep a small edge. This is their source of income and can be compared with the brokerage fee you pay when you trade with stocks.

Binary options are very honest with what they are and how they work. This make them into potential risky speculative investments that can be very profitable or cause you to lose a lot of money. But they are not scams.

Potentially fraudulent aggressive marketing

Binary options in themselves are not a scam. Some marketing for binary options can however be very aggressive and potentially fraudulent. Marketing sometimes paint binary options as a guaranteed way to earn money. As easy money. The marketing do this without adequately informing the target audience about the risks involved in the trade. That you cant sell an option once you bought it and that you risk the entire purchase price every time you buy a binary options. A person who falls for ads like these might feel scammed.

The most aggressive and misleading ads are usually not published by the brokers themselves but by third parties that are trying to earn money as affiliates. We do not support this type of aggressive advertising and we do not recommend that you register at a broker using a link provided in aggressive marketing. By doing that you are promoting this behavior. We recommend that you use a honest review site such as binaryoptions.net to find a good binary options broker. Avoid ads and websites that promise too much. Remember the universal rule of investing. If it seems to good to be true it likely is.

Price Manipulation and Rigged Platforms

One of the most common forms of binary options fraud involves price manipulation. Unscrupulous platforms alter or delay price feeds to ensure that certain trades close against the client’s position. For instance, a trader may predict that a currency pair will end higher within sixty seconds, only for the platform to adjust the displayed price by a fraction of a point at expiry, just enough to register a loss. Because the broker controls both the trading software and the data feed, clients often have no way to verify the legitimacy of results.

For dishonest brokers/platforms, manipulating the price feed works especially well for binary options, since they are so sensitive compared to linear financial instruments. For an over/under binary option, one tick wrong exactly at the expiration moment can make the difference between getting paid in full and losing it all. For a no-touch option, a simple touch at the defined price point for a minuscule amount of time is enough to immediately render the option worthless.

Lax or Misrepresented Regulation

Another major problem within the retail binary options industry is lax regulation and false or misrepresented claims of dependable regulation. Many of the strict financial authorities, the ones that carry out strong enforcement of trader protection rules, have banned brokers from selling binary options to retail clients (non-professional traders). This has left the retail traders in a situation where it is difficult to find a properly regulated binary options platform. Best case scenario is to pick a platform regulated by a second-tier financial authority, i.e. a platform based in a country where retail binary options are still legal and platforms are licensed and supervised, even if the framework for trader protection is not as strong as in places such as the United Kingdom and Australia.

Many retail binary options platforms are not based in any of these countries, however. They are deliberately based in offshore paradise locations known for either not having much in the way of trader protection rules or simply not enforcing the existing rules. One of the main reasons for a platform to pick a jurisdiction of this type as their formal home is to be able to continue to reach out to and sell binary options to consumers in countries where there is a ban in place. A platform targeting retail clients in the UK, Australia, the European Union, and so on, can not be based in a country where breaking British law (etc) would violate the terms and conditions of their license. Therefore, many retail binary options platforms are based in laissez-faire jurisdictions where they feel safe. When you, a retail client, pick a platform based in one of these jurisdictions, you are placing yourself in a situation where you do not have much legal protection at all.

• Some platforms are honest about the fact that they are based in and licensed by well-known offshore havens such as Vanuatu, Mauritius, or the Bahamas. Traders can make a concious decision.
• Other platforms are deliberately dishonest, and will for instance claim to be licensed by the UK FCA since that financial authority enjoys a high degree of trust among traders. Always confirm any claims directly with the applicable financial authority. Any scammer can claim to be licensed by a reputable authority.
• There are also platforms who exist in a gray area. They proudly display a license from an entity that sounds very serious, such as the International Financial Market Relations Regulation Center (IFMRRC) or the Global Financial Services Authority (GLOFSA). A little bit of digging will reveal that this is actually not a governmental regulator, it is simply a private company or organization that anyone can obtain a license from, and the trader protection they provide is weak.

When platforms operate from laissez-faire jurisdictions or through a complex mesh of shell corporations, it can be anywhere from difficult to impossible to recover your funds once you have deposited them.

Withdrawal Obstruction

Some binary options platforms will deliberately prevent clients from making withdrawals. Some are simply after your first deposit and problems will arise immediately. Others play a longer game, and will behave well at first, to convince you to make bigger deposits.

Withdrawal obstruction can take many forms, and you might for instance face endless verification requests, hidden withdrawal processing fees, opaque bonus requirements, or simply unexplained delays. If you have accepted any type of bonus, you can be told that you must meet unrealistic trading volume requirements before withdrawals can be processed, and this can entice you to make additional deposits in your efforts to fulfill the requirements.

Customer service can be seemingly helpful at first, e.g. while asking your for a never ending stream of identity verification documents, claiming it is a legal requirement. Eventually, they will start responding more and more infrequently, and eventually you get dropped, especially if they have realized that you wont make any new deposits or send them any more private information.

Account Managers and High-Pressure Sales Tactices

A common scam tactic involves assigning clients a so-called account manager who claims to trade on their behalf or offer professional guidance. These individuals often pressure clients into depositing more money and making bigger or more frequent trades, promising higher profits and special account privileges.

Bonuses With Opaque or Exorbitant Terms and Conditions

Bonuses are frequently used as bait, both to lure in new customers and to entice existing ones to make additional deposits. Once accepted, the bonus terms and conditions prevent clients from withdrawing funds until impossible turnover targets are met. The result is that the account becomes locked, and the client effectively loses control over their own balance.

Identity Theft and Data Exploitation

Beyond financial losses, some binary options scams exploit clients’ personal information. Scammers collect identification documents during the account verification process and later sell or misuse this data for other fraudulent purposes. In such cases, the harm extends beyond trading losses to potential identity theft and long-term financial damage. You can even find your name and photo embroiled in police investigations, because scammers have been hiding behind your identity when defrauding others or setting up companies. All the documentation you used to prove your identity and address to the sketchy binary options platform can be used by a scammer pretending to be you.

Many people think “This platform might be sketchy, but I will make a $100 deposit, and if it doesn´t work out, I only lost $100”. They do not realize that getting involved with scammers can have much more serious consequences.

Clone Websites

Fraudsters frequently create clone websites that mimic websites belonging to legitimate brokerage companies. These sites copy the branding, layout, and even registration numbers of regulated firms to appear authentic. Unsuspecting investors deposit money believing they are dealing with a licensed provider, only to realize later that their funds were sent to an unrelated, fraudulent entity.

Cloned web sites frequently differ from the real website in small but significant ways, e.g. displaying different information for deposits (the scammers want you money), and sometimes also different contact information to the customer support since they do not want you to contact the real company.

When you are looking up a broker, always go to the stated financial authority and find them there. Do not follow any links from the purported broker site (authority sites can be cloned too). At the official site of the financial authority, you should be able to find the correct website address to the true license holder. Only use this address.

This article was last updated on: October 30, 2025