A rural Manitoba couple who lost $180,000 to an online investment scam has little hope of ever seeing their money again. Now, the Manitoba Securities Commission is warning others in the hopes that no one else will fall for the scam.
Professional-looking social media ads — featuring the unauthorized likeness of a celebrity — were used to lure the couple into investing money in a binary options firm.
Binary options operate like a bet. For example, an investor makes a wager that a particular stock, bond or other security will go up by a certain amount within 10 minutes.
"If it goes up the X dollars in 10 minutes, you get paid what was agreed to in the binary option. If it doesn't you get nothing," said Chris Besko, director of the Manitoba Securities Commission.
At best, the Securities Commission deems binary options a very risky bet.
But often the money isn't even invested, and it's simply a scam, they say.
The couple, who asked to remain anonymous, saw an ad for a company called WM Options about how a prominent Canadian public figure makes money, the Securities Commission said in a release.
Over the course of nine months, the couple sent money to the company via credit card and wire transfer. The company told the couple their investments were profitable and accessible.
"Right off the hop, their only intention is to take your money," one of the victims said in the release. "But I only became aware at the end when it was too late. They keep pushing you, again and again, to invest more and more."
Jason Booth, communications co-ordinator for the Securities Commission, said the companies set up websites that look legitimate where victims can check their "accounts," which consistently show investments making money.
Sometimes, if a victim invests a significant amount of money the company will allow small withdrawals, but if someone tries to make a significant withdrawal, the company will cut off contact, Booth said.
The Manitoba couple became suspicious when an unknown company started making withdrawals from their credit card.
There are currently no binary options firms registered in Canada, and Besko said new rules were posted in April banning them outright. The Securities Commission is going through comments and hopes to bring the new rules into effect shortly, Besko said.
In 2015, there were four complaints from Manitobans about binary options firms. In 2016, that number rose to 58, and the Securities Commission is seeing a similar number in 2017.
Most firms are registered to shell companies in foreign countries. In the case of the Manitoba couple, WM Options — which has changed its name to Prime CFDs — is registered in Bucharest, Romania.
The fact that these firms are registered overseas makes it nearly impossible for authorities in Canada to pursue them.
"To be honest, it's very difficult to pursue somebody who's not in Canada. It's very difficult to charge them criminally, it's very difficult to pursue them civilly. And so the best defence for fraud is to try to prevent it before it happens," said Besko.
The Securities Commission advises people against giving money to anyone you only know through a website or unsolicited calls or email, and to never give out sensitive personal information online or over the phone.
"If I could tell people one thing: be aware of the phone calls, of the ads online and on social media. If they promise big wealth in short order, watch out," said the victim in the release.
Some red flags to look out for include:
- Promises of high returns in a short period
- Pressure to invest quickly and make quick decisions
- Requests to send money to an unregistered offshore firm
- Offers of "free" or "bonus" money to get started
The Canadian Securities Administrators has also set up a website at binaryoptionsfraud.ca.