Or the end of the binary industry?
One of the largest binary brokerages, Banc de Binary, just recently winded down its business and left the industry shaking. The 500 million dollar company decided to stop providing binary options due to regulatory constraints.
Since its appearance in 2009, Banc de Binary was always making headlines but not positive ones. Following years of investigation, in 2013, the CFTC hit the company with a number of charges. In 2016, an $11 million settlement with the US authorities was reached.
The firm was fined several times by CySEC for soliciting US clients without the proper license.
The final straw was from the law firm Giambrone, which is preparing litigation against Banc de Binary. The London-headquartered firm is representing clients searching for a way to recover their funds.
Last year, actions from Giambrone led to the closing of LBinary and NRGbinary; many other brokers also shut down in 2016 and 2017.
Are we going to see a domino effect and the binary industry sink in the swamp of scams?
Icon of the industry or the black sheep
Certainly, Banc de Binary was the most popular binary broker, and leaving will lead to some changes. Someone may see it as the death of an industry icon, but in fact, most of the traders reacted positively to the news: “Finally, the biggest scam is gone” is prominent in the comments.
Back in 2011, Banc de Binary openly accepted US clients, circumventing the prohibition on OTC binary options contracts in the US. The company claimed on its website to have an office in New York City at Trump Tower, but this was in fact a virtual office.
After the broker was kicked out of Trump Tower, the main focus became Europe and obtaining a CySEC license. Once fully regulated, BDB continued its journey with an EU license, but somehow complains from traders didn’t stop.
The new scheme was called “binary robot”: The machine would make your $1,000 into $1,000,000. Can you believe it? Apparently, many people were fooled and trusted the robots, which actually blew their accounts.
How the scheme works
Have you read in The Daily Mail about Mr. Mfune, a 16-year-old from Southampton, UK, who used his McDonald’s salary to trade binary and became so rich he got himself a Bentley and painted it gold?
Turning a McDonald’s salary into a million sounds like the greatest story and makes Mr. Mfune look like the Wolf of binary world. However, the UK tabloids repeated the story but didn’t back it with any facts.
When you search for Robert Mfune, you will find his website for binary signals. You have to make a deposit at a broker and connect your account with Mr. Mfune’s signals software. Then the magic starts to work, and in a few days, you are a millionaire and buying a gold Bentley.
Guess what was the recommended broker?
Later investigation from FinanceMagnates proved Mr. Mfune’s story was fabricated, and the UK tabloids were duped.
A similar article was published some weeks later about a guy who owned a yacht, named "The Golden Bull". The story told of a "mysterious" millionaire who hosted fabulous parties with champagne showers on the deck and half-naked supermodels. The rumors are that he made his fortune trading binary options. The article directly links to Banc de Binary.
How to remove the scam image
If the binary industry wants to continue living the dream, the brokers will have to find a way to remove the scam image. It will be a difficult task, after so much damage was done. Some brokerages, like IG, even renamed their binary products Digital 100s to prevent bad publicity.
When you search for a name of a random binary broker in Google, the first suggestion is always “scam” or “withdrawal”. Withdrawal problems and blown accounts are what many people have faced during the last five years.
The regulation from CySEC obviously did little to nothing to prevent fraud against EU citizens. Some analysts say that the Cypriot regulator will drop binary, and only unregulated firms will continue working.
Opting for a gambling licence is always an option. Some binary brokers have operated with gaming licenses for years. On the other hand, FCA and ASIC already regulate forex brokers offering binary products. Will that be the future of binary?
It seems like some guys were driving those golden Bentleys too fast and threatening the whole operation. The bosses decided to kick out the trouble-makers before the whole business caught fire.