The Financial Conduct Authority (FCA) has warned of an increased risk of online investment fraud as it revealed that investors lose on average £87,000 a day to binary options scams.
Conducted as part of its ScamSmart campaign, the FCA’s latest study found those aged under 25 were six times (13%) more likely to trust an investment offer they received via social media, compared with over 55s (2%).
The trend is backed up by Action Fraud figures, which show under 50s are significantly more likely to fall victim to a binary options scam versus other types of investment fraud (34% v 21%).
Fraudsters offering investments in binary options, contracts for difference (CFDs), forex and cryptocurrencies such as bitcoin often promote themselves online and via social media channels, such as Facebook, Instagram and Twitter, the regulator said.
It comes after the FCA said there are almost 100 binary options traders illegally operating in the UK.
While according to Action Fraud, the amount of money investors have lost through ‘binary options’ – which target investors through social media – has shot up by 400% in the last six years from £6,200 to £27 million.
The FCA’s director of enforcement, Mark Steward, said the changing habits of consumers’ means investment fraud is shifting online and to social media.
He said: ‘While their websites and profiles appear to be professional, they are all too often run by fraudsters who fix prices and pay-outs, or in some instances don’t really place trades at all, before disappearing with innocent investors’ money.’
Hargreaves Lansdown head of policy Tom McPhail said the warning illustrated the ‘challenge’ of introducing a telephone cold-calling ban.
McPhail said: ‘In principle this is a good idea but fraudsters are already evolving tactics to circumvent any ban on unsolicited phone calls.
‘In the meantime, the whole investment community including legitimate firms, the regulator and investors themselves must remain alert to the risk of fraudsters trying to separate ordinary people from their hard-earned savings.’