This is the biggest financial scam you've never heard of

This is the biggest financial scam you've never heard of

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We live in a low-return, high-cost world of deep economic uncertainty, so how would you feel if I suddenly granted you access to a pot of cash – for argument’s sake £20,000 or more – and said that you could do with it whatever you liked?

A prudent proportion might choose to hold it in a bank account, where it can’t be grown but also won’t trickle away. A more ballsy subset of people – perhaps those who think of themselves as savvy, financially aware and a little bit opportunistic – might ponder ways to increase that handy sum.

And I wouldn’t blame them.
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Obviously, savings accounts and ISAs don’t offer returns to speak of these days. Property is basically out of financial reach and prices of everything from groceries to holidays are rising as the pound lingers near multi-year lows. You’d ideally like to create a nest egg to ensure that you’re comfortable for the rest of your life, but your options aren’t obvious, so what about the opportunities available online?

From the comfort of your own armchair, you could venture into the cyber world and have a shot at generating cash in a controlled environment, while knowing that you can always back out if things start to look sticky. It sounds almost too good to be true. And that, unfortunately, is because it is.

Welcome to the world’s biggest online financial scam that few have ever heard of.
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Last week, I published an investigation into the scope and scale of a rapidly growing online trading scam that largely appears to be targeting pensioners with access to cash and little understanding of the risks involved in doing business on the internet.

I detailed the way in which oblivious savers think that they are investing their hard-earned money in online trading sites that offer the promise of potentially huge payouts, purportedly with little risk attached.

The companies involved encourage people to make apparently simple bets on whether a share, a currency, a commodity or even Bitcoin will rise or fall in value. Many such “binary options trading platforms” are legitimate. But a number – one that it’s impossible to ascertain – are not.
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Both types currently fall outside the control of financial regulators in this country, meaning that people have little recourse to get their money back if they feel they’ve been scammed. But just because regulators are powerless to clamp down on these firms from a legal standpoint, it doesn’t mean that they should be totally shrugging off the responsibility of saving people from falling down the nasty, degrading rabbit hole.

The clue here is awareness.

Many of the individuals falling for these types of scams are pensioners, especially tempted to give trading a shot because of changes to regulation in April 2015. Since then, they are no longer required to buy an annuity and are able to take their entire pension as a lump sum.
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Imagine having access to so much cash – more than you’ve likely ever been able to lay hands on in your life – and the unfettered freedom to decide what to do with it.

With such low returns offered by other investments, the prospect of trading binary options, with the help of a friendly “broker” you met online, undoubtedly looks enticing.
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I understand that a company, which is probably based abroad, which can’t be tracked down and which doesn’t even respond to court orders is nigh on impossible to control. I understand that, to a large extent, people have to take responsibility for their own missteps, financial or not, internet-based or not.

But the Government, the police, advisers, banks and the Financial Ombudsman Service should be screaming their warnings from the rooftops when it comes to these types of repulsive swindles.

Richard Howlett, a partner at London-based law firm Selachii LLP, who I spoke to for my investigation, said that he had dealt with countless cases concerning binary options trading fraud. Victims, he said, were being conned out of anywhere from a few hundred pounds to more than £1m.
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I talked to many people, most of whom were too embarrassed to be identified, who said that they had lost in some cases their entire life savings on platforms like this. This is not a tale of isolated duping. This is a system of sophisticated conmen who are ruining people’s lives.

One 70-year-old widow told me she had lost almost £40,000 shortly after her mother died. She’s now struggling to survive. I came across an army veteran suffering from post-traumatic stress disorder who hoped to shore up some savings to support his family. He said he had felt worthless and was trying to compensate.

This is PPI all over again – but it’s even worse because of how few people are aware of it. Every bank, every lender, every building society should be educating their clients. And as David Newman, head of pensions at investment firm Close Brothers Asset Management, told me: “Just putting a leaflet at the back of a financial statement is not enough.
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Figures published recently by the FCA show that 53 per cent of pension pots accessed since the new rules were introduced have been withdrawn fully. It recently raised a number of concerns relating to what people are doing with that money and a full report into the issues around pension freedom is due to be published next year.

But this can’t wait. Lawyers have told me that more fraudulent platforms are springing up daily. It’s our collective responsibility to clamp down by speaking up. In the endlessly lengthening maze of the internet, where policing of every dark corner is by its nature impossible, that – unfortunately – is our only hope. 

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