The Metamorphosis of Forex Trading Scams

Forex scams are a multimillion-dollar industry and give a bad name to legitimate online forex platforms

The foreign exchange market, also known as Forex, FX or the currency market, is the international exchange for trading currencies. Included in this market are the purchase, sale and exchange of currencies at current or determined prices. 

It is undoubtedly the largest trading exchange in the world, followed by the credit market. Recent estimates indicate that approximately $6.6 trillion moves through foreign exchange markets each trading day.

Retail trading first caught on in 1999 and, since then, countless fake trading platforms have materialized online, leaving thousands of vulnerable people destitute.

For all intents and purposes, these trading platforms look 100% legitimate, but a closer look reveals the criminal world of forex trading scams.

Goodbye Binary Options Scams, Hello Forex Scams

While hundreds of online, government-regulated forex brokers exist, there are many more unregulated criminal operations with business models whose business models are based on the misappropriation of millions of dollars from inexperienced and unsuspecting investors.

Online Forex trading scams sprung up as a direct result of the collapse of the binary options trading industry. In the beginning of the 21st century, the internet became a hotspot for binary options scams and binary options fraud. A quick and profitable return on investment, bonuses for signing up and an easy to understand platform were a few of the supposed benefits that drew professional investors and beginners in. 

Fast forward to 2020 and the scam still exists. But it was renamed, remodeled and disguised as legitimate forex trading.

It’s All a Simulation

One would assume that a brokerage, with a visually professional and state-of-the-art platform, would be the best place to start a journey to financial success. The reality, however, is that it’s all a video game ‒ a simulation to create the illusion that the user is trading on the forex markets. 

Fake forex trading platforms do not follow prescribed trading procedures and regulations. In addition, these websites are not plugged into the forex trading exchange. The wins and losses, the ups and downs and the excitement and disappointment are all a sophisticated feature of this cleverly designed system. Unfortunately for the victims, it’s all smoke and mirrors. An advanced system designed to convince the investor that it’s real.

What About My Investment?

Unregulated brokers claim that all deposits go into a secure, segregated account. After all, there cannot be any real trading without one. They further try to prove their integrity by providing users guarantees of full access to their accounts with immediate withdrawal capabilities when required. In truth, no such segregated accounts exist. All deposits go directly into the scammer’s own bank account.

Of course, they will promise that users can withdraw their money at any time. The reality however is that when one chooses to withdraw his funds, subtle hints of the deception slowly start to emerge. Certain platforms will flat out ignore requests for a withdrawal and cut off communication. Others will send you from one department to the other until you’re forced to give up on any chances of having your funds returned. And then there are firms that will direct you to the fine print on the terms and conditions page you signed. Or even on the terms and conditions page that you didn’t sign. Grab a microscope and you’ll notice that the release of your funds is allowed only once you’ve reached an impossible and unreachable target, or once you’ve repaid the massive bonus they gave you when you first signed up.

To further complicate matters, unregulated brokerages are mostly based in “safe havens” offshore. Eastern European countries and small, isolated island states are the most favorite due to weak or nonexistent accredited financial regulators.

Critical Points to Consider When Choosing a Forex Broker

Identifying a legitimate and licensed broker can be difficult owing to the professional techniques certain brokers use to deceive people. The following steps will help identify the fake from the friendly.

Check Independent Review Sites

There are many trusted online review sites that have a wealth of information, including reviews and ratings for forex trading brokers. The great thing about these sites is that the collected information based on many customer reviews, gives a good overview of the company you’re investigating.

Personal Recommendations

Many beginners who are new to forex trading will invariably have been told about it by someone they know. Whether it’s a family member, someone in your circle of friends or a work colleague, it’s safe to say that they can be trusted if they understand forex trading. Investment advisers are another option as they have their names and reputations to back up their claims.

Check with Professional Regulatory Bodies

Legitimate brokers should have the necessary regulatory information available on their websites. Another option is to go directly to the official site of the regulatory body as brokers are legally required to register to hold a license. These sites should display records on broker registration, their current status and any complaints lodged against them.

Check the Website and Social Media

It’s recommended to spend some time on the broker’s website. Start with the company’s background information, where they claim they are situated and the regulatory body they fall under. 

Confirm whether the broker has a listed contact number and street address and cross-check this information with a Google search and Google Maps. Legitimate companies should have no problem displaying their contact details and location.

Try and determine the year the company was established as fake brokers will generally trade for short periods, close their doors, rebrand and trade under a different name. Keep in mind that building a good quality website that looks professional is easy, building a good, trustworthy brand takes time.

Fund Recovery Following a Forex Scam

For the average user who just realized he got scammed, there is very little recourse since the companies are based offshore and have done everything in their power to protect their business model.

Users are urged to always confirm that their financial or investment firm is a legitimate trading entity, licensed by a strong financial regulator. It is also advised to ensure that the firm has not had a scam warning issued by a regulator, professional association or consumer protection agency.

Every year, MyChargeBack, a leading international fund recovery firm focusing on complex dispute resolution involving card-not-present service-related transactions, receives thousands of inquiries from novice investors who fear they have lost their funds on online Forex brokerages.

With years of banking and financial experience, our strategically crafted arguments are presented to your bank to give them the information and evidence required to show that you were scammed in order to start your fund recovery process.

Founded in 2016, MyChargeBack has become the leader in credit card chargebacks, fund recovery and consumer advocacy. We have assisted our clients by navigating their complex transaction disputes according to Visa and Mastercard guidelines at over 800 banks worldwide.