The forex market is the world’s largest financial market, which includes active and dynamic forex traders and institutions globally that trade billions of dollars daily. Unsurprisingly, shady individuals and con men find their way through the market, eager to reap profits off novice traders because of the vast amounts exchanged. In this write-up, we will be addressing the most common scams by forex brokers and how to spot forex scams.
It must be borne in mind that the perpetrators of these scams include criminal enterprises and some online forex brokers who supposedly are out to create a haven for traders to be successful. Forex has created a platform for many giving this habitat for fraudster individuals to hatch schemes and plans to prey on desperate investors.
In most cases, online brokers tend to be the primary offenders. The modern landscape is sufficiently forgiving: setting up an online brokerage with a base in some far-off jurisdiction out of reach of major regulators isn’t hard in any respect. Eager beginner forex traders, in some cases, do not carry out adequate research and are unable to identify a forex scam. This leads them to the tricks of these fraudulent operators.
The organized crime groups have not been dispersed from the action of mounting forex scams, although there has been a clampdown on such activities. Most of the dumb scams have vanished, thanks to stringent regulations; although rank-and-file, clever schemes of defrauding victims still do crop up. These fraudsters have preyed on the emotional weaknesses of traders for as long as trading has been known.
This article will help you in finding some common forex scams and discuss how to spot a forex scam.
Common Forex Scams to Avoid
Forex is often called a scam or some gambling time in a casino. But this is far from the truth; forex acts like an international market where brokers, banks, and market-maker dealers trade with traders and investors, or between speculators. This is done by brokers, banks, and standard liquidity providers. Sometimes tricksters find their way into this scene.
A forex scam is directed towards misled traders to pocket their money or steal their personal information. Some fraudsters use direct deception and others resort to psychological and emotional manipulation tactics.
The given below are some of the most common forex scams:
- Unlicensed forex brokers vanish after getting the money from you with the help of a website that is a payment gateway, which also disappears later.
- The sale of personalized software, resources, and trading indicators by claiming guaranteed income.
- Manipulation of prices, quotes, spreads, and transaction execution to create unfavorable conditions for clients and boost personal profits. There might be intentional promotion of high leverage, which can result in losses by miscalculating point value.
- Financial pyramids: They are appealing to novice investors to attract income from seasoned investors. They promise a fast and simple method to earn money, but eventually, the payments stop.
- Emotional pressure targets a person’s emotions to persuade them to invest additional money and discourages them from withdrawing and complaining about problems.
How the Forex Scams Work?
Forex scams include unrealistic promises like returns with minimal or no risks. Scammers apply high-pressure strategies to persuade investors to believe in depositing their funds in large amounts into a trading account, claiming they will use these funds to generate guaranteed profits.
However, when the money gets deposited, scammers vanish, leaving the investor with nothing.
Ways to Spot Forex Scams
Detecting a forex scam early helps save money, time, and mental well-being. Spending one or two hours thoroughly checking the product and supplier is much better than chasing down ways to recoup the money once it has been sent to the con. There are warning signs that can be uncovered in the first 5-10 minutes of investigation.
1. Guaranteed Profitability
It doesn’t exist that a single affluent asset guarantees any form of income stability. Every trader has some losing trades and losing streaks. To put it straightforwardly, whenever you hear of a promise of guaranteed income to be received in a week or a month on the website of a broker or platform, that is nothing but sheer pyramid scheme work.
2. Unsolicited Contacts & Offers
Aggressive Marketing consists of:
- Emails or calls promoting investment offers in unfamiliar companies;
- Being added to a messaging group without your permission. Forex scammers gather contacts from trading communities and send specific offers with assurances of riches.
The latter model has grown popular in recent times, whereby scammers take advantage of messengers that enable people to follow unfamiliar links or are automatically added to groups, thereafter bombarding them with financial spam.
Another complex scheme allows the scammer access to the user’s contacts after they follow a specific link. Thereafter, the scammer creates a fake account using the avatar of someone the user knows and persuades them to make investments on behalf of that person.
3. Suspicious Behaviors
The possible forex scams include:
- Invitations to strange groups you have not joined. Not being able to comment on posts in the group is yet another reason to be suspicious of a scam.
- Invitations to follow an unknown link with suspicious characters in it.
- Payments with a third party being the recipient.
- The slightly annoying insistence to convince you to invest in the project.
- Active advertising of affiliate programs. The more sellers promote referral links instead of the product itself, the more likely that it is a pyramid scheme.
4. Website & Document Warning Signs
Some more signs to detect a forex scam are:
- There are always some spelling and grammar mistakes on the fake website. Responsible companies ensure that their website is maintained.
- The company’s name doesn’t appear in the top 10 search results on search engines for the query.
- Their offer lacks clarity. It also contains insufficient details and ambiguous wording regarding dispute resolution.
- There are visible differences in the stated name of the legal entity in the offer.
- There will be broken links and errors in the website layout.
If you notice any of the indicators mentioned, it suggests there may be a chance of a forex scam.
What Steps should be taken after you have been Scammed?
If you ever get scammed, the initial thing you should do is reach out to the relevant authorities, like the Securities and Exchange Commission (SEC) or the Commodity Futures Trading Commission (CFTC). Your bank should also be notified by or credit card issuer to report the fraudulent activity and seek a chargeback.
It is important to submit a complaint to the Federal Trade Commission (FTC) and Internet Crime Complaint Center (IC3). Moreover, you may want to consider obtaining legal advice to better understand your rights and options for retrieving your money.
It is crucial to understand that retrieving your funds can be challenging, demanding a lot of your time and effort. Forex scammers usually employ methods to conceal their identities, making it hard to find them. Nevertheless, by informing legal authorities about the fraud, you can assist them in revealing the scam and possibly stop others from becoming victims.
Conclusion
In conclusion, forex scams continue to evolve with time, and despite many efforts by regulators to remove them, they are still prevalent. It is required that you should stay aware and not become prey to scammers.
It is important to take every step carefully while engaging with brokers, particularly those who operate in unregulated environments and those presenting offers that seem unreal. By adhering to the guidance we have given you throughout the article, you won’t become a victim of a forex scam.