“Diana” lost $7000 by trying to trade the markets through an organisation she found online.
The money was her $5000 “deposit” and her $2000 “gains” from trading binary options, though she couldn’t say for sure whether any trading ever took place.
The numbers on the screen could all have been part of an elaborate ruse to gull her into a false sense of security while her money was stolen.
The Bay of Plenty nurse, who was too ashamed to use her real name, was encouraged to share her story by the Financial Markets Authority (FMA), the government’s financial services watchdog, for the start of World Investor Week.
The watchdog urged investors not to “invest” with off-shore, un-licensed providers of financial services, though it also warns against ordinary investors dabbling in high-risk binary options trading.
When Diana started trading binary options, she hadn’t heard of the FMA, and didn’t know there could be regulated, and unregulated financial service providers.
“That’s the message that’s got to get out,” she said.
It all started when she clicked on an advert promising to help her make extra money from home.
She registered at the website of what appeared to be a Scottish company, which prompted a call from a “nice Scottish lady”. Where that woman actually was, Diana remains uncertain.
She was passed onto a more assertive character, a male trading consultant, who inducted her into “trading” binary options, which are contractual bets on whether an asset will go up or down in value.
The bets were extremely short-term, for example, betting the pound would strengthen against the US dollar during the next two minutes.
Binary options are sometimes called “all or nothing” options because if a bet fails, the trader loses their money.
“It was like rolling a dice,” said Diana, who said had never so much as bought a lottery ticket before.
She’d never made a transaction more complex than opening a KiwiSaver account, or putting money in a term deposit.
She was supposed to place bets based on market patterns, for example betting something would go up in value, if it had been on an upward track for specific period immediately before the bet.
Initially she was asked to put in a small amount of money until she had been walked through some successful trading, and then she was asked to invest more, and more.
To this day she doesn’t know if those successful trades were anything more than fiction. The binary options trader provided all the charts, all the data.
Diana wasn’t seeking to become fantastically rich.
“I was saving for a holiday. I thought I wouldn’t mind a bit more spending money,” she said.
She was far too trusting, she said, but the situation gradually became more and more ludicrous, and even the trader on the other end of the line struggled to maintain the fiction that all he wanted to do was help her become rich.
He even encouraged her to trade by telling her another client was a Saudi Arabian Sheik who wanted to get even richer.
“When he said he had the sheik on the other line, I thought ‘This is a farce’,” Diana said.
Now she realises that if these people had trading formulas that allowed them to routinely beat the market, they wouldn’t be on the phone with her. They’d be fantastically rich, and in all probability would be at home relaxing on their private Carribean islands.
So she asked for her money back, but the company refused, saying she had agreed to make at least 27 more trades.
“I told him I didn’t know what I was doing, and that I was sure I would lose the money.”
What happened next has proved to her that she was conned. Her name and number got on an International suckers lists, and other crooks have her details now.
“They keep on calling. I actually got two calls this morning. I might have to change my number now.”
Paul Gregory from the FMA said: “The FMA regularly receives complaints from consumers who have been caught out by slick websites and promises of high returns from off-shore. These complaints centre on products like binary options and foreign exchange trading. Where an unlicensed, unregulated company based off-shore withholds money from an investor, it is very hard for the FMA to help.”
“Don’t think a company is legitimate because their advertisement appears on what seems like a credible website.”
Before investing, he said people should Check FMA lists of individuals and businesses to be wary of, though it is easy for crooks to change the names of their fake companies, and also its lists of providers, markets and individuals that are licensed or authorised to operate in New Zealand.
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