International fraudsters jailed for fake binary options
First strike 2021 reveals method and part of criminal network
The authorities of Bulgaria, Cyprus, Germany, the Netherlands and Ukraine conducted several house searches in Bulgaria against a white-collar crime group in October 2021. The operation was coordinated by Eurojust and Europol's experts against organised economic crime. Eurojust was established by the EU in 2004 to coordinate investigations and prosecutions between national EU judicial authorities and tackles serious cross-border and organised crime. On the day of action, a task force made up of Europol and national law enforcement officers from the member states, but also from third countries (in this case from Israel, Ukraine and Georgia) orchestrated operations with task forces in several places at the same time.
As the investigations showed, the people behind the crime had set up several call centres in Sofia, Bulgaria, under the cover of a Ukrainian financial company, which called victims and persuaded them to make bogus investments. This part of the criminal network, which was the first to be uncovered, had defrauded German investors of more than 15 million euros in about two years. Victims were lured with professional-looking online advertisements for financial services and social media activity. The network employed about 100 people in its call centres and operated over 250 domain names. When these sales agents called, they advised the purchase of non-existent binary options. Guides with key messages and planned call flows were used. It turned out that the majority of these employees were not even aware of the scams they were marketing. In the company's customer portal, victims were enticed to make further "investments" by initially being shown fictitious profits. The clients were not able to receive any payouts, the investments were not real and the money had already been misappropriated. This led to 246 criminal proceedings in 15 German states and then to the international investigations.
Binary options - what is it?
Due to low interest rates in the period just before and since the pandemic, investors feel tempted to invest in high-risk financial instruments such as binary options. With such options, fixed amounts of money are used as a guarantee for risky financial transactions. A binary option is thus an extremely fast, simple and very risky financial instrument that is used to speculate on whether the price of an asset will rise or fall in the near future, e.g. the price of gold, the share price of Google, the price of Bitcoin, the dollar - euro exchange rate, etc. The time span of speculation is only up to 60 seconds, so you can speculate hundreds of times per day. Within seconds, however, you also lose everything if you have speculated on the wrong outcome. The Austrian Financial Market Authority (FMA) has prohibited the trading of binary options with small investors since 2019 due to the high risk. In addition, binary financial constructs are particularly susceptible to fraud and this is often abused by white-collar criminals. This circumstance has also been demonstrated in this example.
Second strike 2023 shows dimension of fraud
From the arrests and seized evidence of the first action, it became clear that parts of the network from elsewhere continued to use the same methods and had found many more victims. Therefore, another coordinated action took place this year in March. 10 house searches and further checks of five call centres in Bulgaria and Romania as well as other locations in Georgia and Israel led to arrests. The fake online investment platform had stolen about 89 million euros from more than 33,000 victims. This time, too, the fraudsters asked their victims to initially invest small amounts between 200 and 250 euros. With fake graphics and misleading software, high profits were feigned. Afterwards, so-called closers (sales agents who initiate a business deal) called, pretended to be personal financial advisors and promised higher profits. Instead of paying out investments or credit balances on the platform, however, the amounts paid in were simply embezzled into the criminals' accounts.
We strongly warn retail investors not to circumvent the FMA's ban on trading binary options through international trading platforms or crypto exchanges. Europol lists its latest police actions against alleged investment firms that claim to trade in binary options.