Binary Trading Fraud: Criminal Fraud, or Just Merchant Error?


What Do Consumers & Banks Need to Know About Binary Trading Fraud?

Binary trading is a form of betting. It’s an exotic option allowing consumers to gamble on whether the price of a trade option will go up or down. If they guess right, they win…but guess wrong, and they lose everything.

These options are incredibly risky even under the best conditions. Unfortunately, bad actors can use binary trading as a tool to commit fraud. The real question: how do you tell legitimate trading platforms from fraudulent ones? And can you distinguish fraud from unintentional error?

How Fraudsters Play Their Part

Fraudsters will do anything to get money out of people, and binary trading is an easy way to do this.  Action Fraud, the UK’s National Fraud and Cyber Crime Reporting Centre, reports that £87,410 was lost to binary fraud every day as of January 2018.

Here are some examples of how binary trading fraudsters lure their victims:


Fraudsters create fake websites and social media profiles portraying themselves as expert traders. They make promises of a quick win, leading victims to invest more and more money.

Action Fraud have recorded that people under the age of 25 were six times more likely to trust a trader via a social media profile, compared with over 55’s.


Another way to scam consumers is to use celebrities as a selling point in advertisements. Their photos or testimonials will be used to boast how good the company is and how they helped them get a good return on investment. However, the celebrities allegedly endorsing the platform have no knowledge or involvement.

In 2017, Sir Richard Branson was a target for this fake celebrity endorsement scheme. As he expressed to Action Fraud: “These scams can be terrifyingly deceptive, and I would urge everyone to look out for these stories and report them as soon as you see them.”


Fraudulent binary traders can manipulate software provided to investors by adjusting the settings. The fraudster effectively “rigs” the tool. Investigations into fraudulent trading software platforms have discovered prices and winnings changed to ensure victims lose money.


When the fraudsters have found an investor—or shall we say “victim”—they will make it very hard for them to withdraw any winnings. The investors will not get replies or their accounts will be closed without any warning.

Who’s Authorised & Who Isn’t?

Depending on which country the investment company is trading in, it’s good practice for traders to register their personal details with the relevant authorities before trading.

The number of resources out there claiming to hold this information can be quite overwhelming. The following sites should help, depending on your location:

  • United Kingdom: The best way to find out if a merchant in the UK is legitimate is to check if the Financial Conduct Authority (FCA) has regulated and authorised them to trade. A list of these merchants is on the FCA Register.
  • Another handy tool to check out is the FCA Warning List. In August 2018 alone, the FCA added 51 suspected companies. These entities claim to be in the UK, but if after investigation, they are found to be trading overseas without proper permission, the FCA will take action through the courts to make them stop.
  • Europe: If a merchant is in Europe, they could be on either the FCA Register or the Financial Services Register. It’s recommended to check both, as an authorised, UK-based merchant could have been granted permission to establish their presence in the European Economic Area (EEA). If they’re not listed, be careful and do some research.
  • United States of America: Binary traders in the U.S. must register themselves as being a broker-dealer with the Securities & Exchange Commission’s Office (SEC). The Commodity Futures Trading Commission (CFTC) recommend checking the lists on the Brokercheck website, as this offers merchant information to know if the merchant has registered.

What Issuers Need to Know

As you may already know, there are two primary scenarios to consider when a cardholder asks for their money back:

  1. When they’ve been a victim to criminal fraud; in this case, the binary scam.
  2. When the merchant has made an error.

Criminal Fraud

This is when consumers have fallen for a scam. Sadly, issuers report losses to criminal fraud are ranging from £100.00 - £500,000 per victim.

If a consumer in the UK has been a victim of criminal fraud, their first point of call should be to Action Fraud. If they’re overseas, make sure the police are aware so investigations can be carried out by the relevant authorities. These scams need to be stopped!

Prevention is key to mitigating criminal fraud. You need to help your cardholders know what it is they should be looking out for when signing up to these investments. Send leaflets, emails or have information available on your websites. Once they’ve signed up to a scam, it may be too late to recover the money.

Merchant Error

Of course, not all binary traders are fraudsters. There are some legitimate traders out there that make mistakes. This could be because they lack the knowledge on how to describe their services properly, or they’re not aware of the refund policies the card schemes put in place.

Your cardholder may be entitled to a chargeback—a forced payment reversal—under certain situations. Here are some examples when a chargeback could be available:

  1. If the merchant files for bankruptcy before trading services, consider this as a service not being provided
  2. Does the cardholder have written proof from the merchant guaranteeing an amount of profit/return? If yes, consider not as described
  3. Has the merchant refused to allow the customer to withdraw available balances? If so, ask if the cardholder has a copy of the investment account statement showing the date, withdrawal amount, and available balance at the time of the withdrawal request was made. Consider a chargeback for misrepresentation
  4. If the cancellation/refund policy was not disclosed properly to the cardholder, then consider a chargeback for cancellation of services

Just remember: each chargeback code has many rules and requirements, so these chargebacks may not always be possible.

Chargeback Rebuttal Letters

Learn how to create a winning debit or credit card chargeback rebuttal letter. Download our rebuttal letter template and writing checklist today.


What Acquirers Need to Know

An acquirer’s focus should be finding and retaining customers…not dealing with chargebacks. To prevent unnecessary chargebacks, make sure your binary traders are educated on how to follow the card scheme rules when accepting payments cards.

In the situations where chargebacks have been requested, the acquirers first step toward chargeback recovery is to respond with the correct information.

There’s no perfect formula to gather evidence for a case. The documentation needed will depend on the customer’s claim, and the case needs to be built to reflect that.

Remember that speed matters. Ensuring the operation responds as quickly as possible with enough evidence will ensure a better recovery.

Need Help Understanding the Complex Rules?

Chargeback rules are complex and inconsistent. Without the right management techniques, you could actually increase risks, costs, and liability.

Don’t let binary trading disputes put you out of pocket! If you’d like more information about our solutions and how they can help your business, contact us today.

Prevent Chargebacks.

Fight Fraud.

Recover Revenue.