Got Scammed Through a Forex Fraud? Get Consultation On The Recovery Process Now!
Excerpt: Participating in online trading markets provides people with the opportunity to earn money while sitting in the comfort of their own living rooms. Notable among the advantages of this particular activity is the fact that, if you are skilled in trading, you can make a lot of money relatively quickly. On a side note, it’s important to remember that you won’t have to put up a large sum of money before you start seeing a profit on your investment.
When it comes to foreign exchange fraud, any trading technique that is utilised to defraud traders by convincing them that they can expect to make a huge profit by trading in the foreign currency market falls under this category. Foreign currency fraud can manifest itself in a number of different ways. The Commodity Futures Trading Commission’s Michael Dunn claims that currency trading became a frequent form of fraud in the early part of 2008.
Dunn is a former FBI agent. The foreign exchange market is, after all is said and done, a zero-sum game, which means that for every gain achieved by one trader, another trader suffers a loss. In this perspective, foreign exchange is regarded as a negative-sum game due to the fact that brokerage commissions and other transaction costs are deducted from the profits of all participants.
As of April 2019, the spot FX market, which includes currency options and futures contracts, was worth an average of more than $6.6 trillion every day, according to data from the Bank of International Settlements. Because of the massive amount of money that is moving about in an unregulated spot market that trades instantly, over the counter, and with little accountability, unscrupulous operators are attracted to forex scams.
Forex scams provide investors with the possibility to generate large sums of money in a short period of time. Some old frauds have persisted, while new ones are continually appearing as a result of vigorous enforcement actions taken by the Commodity Futures Trading Commission (CFTC) and the founding of the self-regulatory National Futures Association (NFA) in 1982.
Forex brokers who use wide bid-ask spreads on specific currency pairings are participating in unethical business practises, making it more difficult to earn from trading transactions in those currencies pairs. Any broker based in an uncontrolled offshore country should be avoided at all costs. In the case of signal sellers and robot traders, it is likely that individuals and firms who market systems, such as signal sellers and robot traders, may sell products that have not been tested and will not yield successful outcomes.
A forex broker’s habit of combining money or restricting customer withdrawals could be indicators that something is amiss with the company’s business procedures. As an example, certain forex brokers do not offer the normal two- to three-point spread on the EUR/USD pair, but rather spreads of seven pip or larger, which is significantly higher.
Pips are the smallest possible price fluctuation that a specific currency’s exchange rate can experience based on current market conditions. The last decimal point in the price of most major currency pairs represents the smallest change, which is due to the fact that most major currency pairs are priced down to four decimal places. Be aware that every trade will cost you four or more additional pips, and any possible earnings from a good trade will be wiped out by commissions, depending on how the forex broker arranges their trading fees for their customers.
To be on the safe side, avoid using any offshore retail brokers who are not authorised by the Commodity Futures Trading Commission, the National Futures Association, or the regulatory authority in their particular country of origin. As a result of the actions of others, these inclinations are still there, and it is quite easy for firms to dissolve and disappear with the money they have earned. Many others considered that the perpetrators of these computer manipulations deserved to be imprisoned in prison. However, traditionally, firms domiciled in the United States have been the majority of those that have violated the law, rather than companies established in other nations.
If you’re someone who wants to protect your financial data, then you’re definitely at the right place. We can give you the best practices in identifying red flags as well as help you in recovering your stolen money from scammers!
Table of Contents
CHAPTER 1: What is the Foreign Exchange Market?
Currency trading takes place in the foreign exchange market, which is a global decentralized (also known as over-the-counter (OTC) market) where currencies are traded between traders. This market is responsible for determining the foreign exchange rates for all currencies. Buying, selling, and exchanging currencies at current or predetermined values are all included in this definition of currency trading. According to trade volume, it is the largest market on the planet, with only the credit market coming close behind it.
The major players in this industry are the larger multinational financial institutions. Without exception, financial centers around the world serve as trade hubs for a diverse spectrum of buyers and sellers, operating around the clock (with the exception of weekends) to facilitate transactions between them. Because currencies are usually traded in pairs, the foreign exchange market does not determine a currency’s absolute worth; rather, it determines a currency’s relative value by setting the market price of one currency if it is purchased with another currency. For example, 1 USD is worth X CAD, CHF, or JPY, among other currencies.
The foreign currency market is mediated by financial institutions and operates in a number of different degrees of sophistication. Banks rely on a small number of financial organizations known as “dealers,” which are involved in high volumes of foreign currency trading, to handle their foreign exchange transactions behind the scenes. Because the vast majority of foreign exchange dealers are financial institutions, this behind-the-scenes industry is frequently referred to as the “interbank market” (although a few insurance companies and other kinds of financial firms are involved).
Currency trades between foreign exchange dealers can be quite big, including hundreds of millions of dollars in value. Because of the issue of sovereignty that arises when two currencies are involved, there is minimal (if any) oversight over the conduct of the Forex market.
The foreign exchange market facilitates worldwide trade and investment by providing the ability to convert between different currencies. For example, it allows a business in the United States to buy items from European Union member states, particularly Eurozone members, and pay in Euros, even though the majority of the company’s revenue is in United States dollars.
It also encourages direct speculation and evaluation in relation to the value of currencies, as well as carry trade speculation, which is based on the difference between the interest rates of two currencies, among other things. An example of a typical foreign exchange transaction is when one party purchases a certain amount of one currency by paying with a certain amount of another currency.
During the 1970s, the beginnings of the modern foreign exchange market were laid out. This came after three decades of government restrictions on foreign exchange transactions under the Bretton Woods system of monetary management, which established the rules for commercial and financial relations among the world’s major industrialized nations following World War II and was established in 1944. Countries steadily transitioned away from the former exchange rate regime, which remained set in accordance with the Bretton Woods system, and toward floating exchange rates.
The following qualities distinguish the foreign exchange market from other financial markets: Because of its large trading volume, which represents the largest asset class in the world, the forex market has high liquidity. Other characteristics of the forex market include its continuous operation, which is 24 hours a day except on weekends, trading from 22:00 GMT on Sunday (Sydney) until 22:00 GMT on Friday (New York); the wide range of factors that influence exchange rates; the low margins of relative profit when compared to other fixed income markets; and the use of leverage to increase profit and loss margins.
Due to this, despite the fact that central banks intervene in the market, it has been referred to as the market that comes the closest to the ideal of perfect competition. Worldwide trade in foreign exchange markets averaged $6.6 trillion per day in April 2019, according to preliminary global figures from the 2019 Triennial Central Bank Survey of Foreign Exchange and OTC Derivatives Markets Activity published by the Bank for International Settlements.
This represents an increase from $5.1 trillion in April 2016. Foreign exchange swaps were traded more than any other instrument in April 2019, with $3.2 trillion in value exchanged each day, followed by spot trading with $2 trillion in value transacted per day.
The foreign currency market is the most liquid financial market in the world, with daily trading volumes exceeding $1 trillion. Governments and central banks, commercial banks, other institutional investors and financial institutions, currency speculators, other commercial enterprises, and individuals are among the traders who operate in the financial markets.
According to the 2019 Triennial Central Bank Survey, which was organised by the Bank for International Settlements, the average daily turnover in April 2019 was $6.6 trillion (compared to $1.9 trillion in 2004), according to the Bank for International Settlements. Out of this total of $6.6 trillion, $2 trillion represented spot transactions, while $4.6 trillion represented trades in outright futures, swaps, and other derivative instruments.
As a result, there is no central exchange or clearing house, and foreign exchange is handled in an over-the-counter market where brokers/dealers negotiate directly with one another. The United Kingdom, and specifically London, is the world’s largest geographic commerce centre. Foreign exchange trade in the United Kingdom accounted for 43.1 percent of overall trading volume in April 2019, making it by far the most important centre for foreign exchange trading in the globe, according to Bloomberg.
Because of London’s dominance in the market, the quoted price of a given currency is almost always the same as the London market price. Example: Every day at noon, the International Monetary Fund determines the value of its special drawing rights using the London stock exchange’s mid-day trading prices.
US trade accounted for 16.5 percent of total trade, followed by Singapore and Hong Kong, which each accounted for 7.6 percent and Japan, which accounted for 4.5 percent. From 2004 to 2013, the turnover of exchange-traded foreign exchange futures and options increased at a rapid pace, reaching $145 billion in April 2013. (double the turnover recorded in April 2007).
Exchange-traded currency derivatives account for 2% of over-the-counter (OTC) foreign exchange turnover as of April 2019. Foreign exchange futures contracts, which were first traded on the Chicago Mercantile Exchange in 1972, are exchanged more often than most other futures contracts, according to the Chicago Mercantile Exchange.
In most developed nations, the trading of derivative goods (such as forward contracts and options on forward contracts) is permitted on national stock exchanges as well. All of these wealthy countries already have capital accounts that are completely convertible. The fact that some developing market governments maintain capital controls prevents them from allowing foreign exchange derivative products to be traded on their exchanges. Many emerging markets are seeing an increase in the use of derivatives. Despite the fact that some countries, such as South Korea, South Africa, and India, have capital controls, currency futures exchanges have been formed in these countries.
Between April 2007 and April 2010, the volume of foreign exchange trading climbed by 20%, and it has more than doubled in the decade from 2004. Increased turnover can be attributed to several factors, including the increasing importance of foreign exchange as an asset class, the increased trading activity of high-frequency traders, and the development of retail investors as a significant market segment.
The expansion of electronic execution and the availability of a greater variety of execution venues has resulted in decreased transaction costs, increased market liquidity, and more involvement from a wider range of customer types. Trading in the foreign exchange market has been easier for retail traders in recent years, thanks in part to the introduction of computerised trading through internet portals. By 2010, it was projected that retail trading accounted for up to 10% of spot turnover, or $150 billion per day, on a daily basis (see below: Retail foreign exchange traders).
In contrast to the stock market, the foreign exchange market is segmented into different tiers of access. The interbank foreign exchange market, which is comprised of the world’s largest commercial banks and securities dealers, is at the top of the food chain. Interbank spreads, which are defined as the difference between bid and ask prices, are razor-sharp in the interbank market and are not known to anybody outside the inner circle of participants.
As you move down the levels of access, the spread between the bid and ask prices expands (for example, from 0 to 1 pip to 1–2 pips for currencies such as the EUR) and the spread between the bid and ask prices narrows. This is due to the sheer amount of data. The spread between the bid and ask prices can be reduced if a trader is able to guarantee a big number of transactions for a large amount of money.
This is referred to as a better spread. The size of the “line” determines the levels of access to the foreign exchange market that are available to participants (the amount of money with which they are trading). Approximately 51 percent of all transactions take place on the top-tier interbank market. On the other hand, smaller banks are followed by major multinational firms (who must hedging risks and paying personnel in multiple locations), large hedge funds, and even some retail market makers.
The financial activities of corporations seeking foreign exchange to pay for products and services account for a significant portion of the foreign exchange market’s total volume of transactions. When compared to banks or speculators, commercial enterprises often trade in very small sums, and their trades have little impact on market rates in the short term. Trade flows, on the other hand, are a significant element in determining the long-term direction of a currency’s exchange rate. Due to exposures that are not publicly understood by other market participants, some multinational corporations (MNCs) might have an unforeseen impact on the market when very big positions are covered by insurance.
When it comes to the vast bulk of trades, there is no unified or centrally cleared market, and there is virtually no cross-border regulation. For this reason, due to the nature of currency markets, which are conducted over-the-counter (OTC), there are numerous interconnected marketplaces where different currencies instruments can be traded. In this case, there is no single exchange rate, but rather a variety of separate exchange rates (prices), which vary based on which bank or market maker is trading and where the trade is taking place. Because of arbitrage, the rates are relatively close in practise.
Because of London’s dominance in the market, the quoted price of a given currency is almost always the same as the London market price. Electronic Broking Services (EBS) and Thomson Reuters Dealing are two of the most important trading exchanges, and major banks also provide trading systems. When the Chicago Mercantile Exchange and Reuters launched Fxmarketspace in 2007, they hoped to fill the role of a central market clearing mechanism, but they were ultimately unsuccessful in their efforts.
The most prominent trade centres are London and New York City, however Tokyo, Hong Kong, and Singapore are also significant trading hubs in their own right. Banks from all over the world are taking part. Currency trading takes place continually throughout the day; as the Asian trading session comes to a close, the European trading session begins, followed by the North American trading session, and then the Asian trading session again.
Currency fluctuations are typically triggered by both actual monetary flows and anticipation of changes in monetary flows, with the former being the most common. Changes in gross domestic product (GDP) growth, inflation (purchasing power parity theory), interest rates (interest rate parity, Domestic Fisher effect, International Fisher effect), budget and trade deficits or surpluses, large cross-border mergers and acquisitions, and other macroeconomic conditions are all factors that contribute to these fluctuations. Major news is released publicly, frequently on fixed dates, allowing a large number of individuals to be aware of the same information at the same time. Large banks, on the other hand, have a crucial advantage: they can see the order flow of their customers.
In a fixed exchange rate regime, exchange rates are determined by the government, whereas in a floating exchange rate regime, a number of theories have been advanced to explain (and predict) the swings in exchange rates, including:
International parity conditions include: relative purchasing power parity, interest rate parity, the domestic Fisher effect, and the international Fisher effect, among other things. In part, the theories discussed above offer an understandable explanation for variations in exchange rates, but these theories fail because they are founded on questionable assumptions (for example, the free flow of goods, services, and capital) that are rarely true in the real world.
Model of the balance of payments: Although this model emphasises tradeable products and services, it does not take into consideration the growing importance of global money flows. It was unable to provide any explanation for the continuing appreciation of the US dollar during the 1980s and most of the 1990s, despite the ballooning US current account deficit during this period.
The asset market model considers currencies to be a valuable asset class for the purposes of developing investment portfolios. It is people’s willingness to hold existing quantities of assets that has the greatest influence on asset values, and this willingness to hold depends on their predictions about the future worth of these assets. Asset market models of currency depreciation and appreciation assert that “the exchange rate between two currencies represents the price that just balances the relative supplies of, and demand for, assets denominated in, those currencies,” according to a statement by the International Monetary Fund (IMF).
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CHAPTER 2: All You Need To Know About Forex Trading Scams
Foreign exchange fraud refers to any trading technique that is used to defraud traders by convincing them that they may expect to make a large profit by trading in the foreign currency market. Foreign exchange fraud can occur in a variety of ways. According to Michael Dunn of the United States Commodity Futures Trading Commission, currency trading became a frequent form of fraud in the early part of 2008. When all is said and done, trading in the foreign exchange market is a zero-sum game, which means that for every gain made by one trader, another loses. Due to the fact that brokerage commissions and other transaction expenses are removed from the returns of all traders, foreign exchange is considered a negative-sum game in this context.
The churning of customer accounts for the goal of generating commissions, the sale of software that is supposed to guide the user to enormous gains, badly managed “managed accounts,” false advertising, Ponzi schemes, and outright fraud are all examples of types of fraud. Also included are retail forex brokers who advertise that trading foreign exchange is a low-risk, high-profit investment opportunity.
Unscrupulous conduct in the non-bank foreign exchange industry has increased in recent years, according to the Commodity Futures Trading Commission (CFTC), which oversees and supervises the United States’ foreign currency market. More than 80 cases were prosecuted by the CFTC between 2001 and 2006, involving the defrauding of more than 23,000 clients, who collectively suffered a loss of US$350 million. Between 2001 and 2007, around 26,000 people lost a total of US$460 million as a result of currency scams.
Tougher Rules = Lower Scam Rate
Since tougher rules were implemented, many forex scams have been reduced in prevalence, but there are still certain issues to contend with. Forex brokers who use wide bid-ask spreads on particular currency pairings are engaging in dubious business practices, making it more difficult to make profits on trading transactions. Be wary of any broker who is based in an uncontrolled offshore jurisdiction. It is possible that individuals and businesses who market systems, such as signal sellers or robot traders, would sell products that have not been evaluated and will not produce successful outcomes. Commingling cash or restricting customer withdrawals could be signs that something is wrong with the forex broker’s business practices.
Investing online, particularly in the world of the Foreign Exchange Market, can be a risky proposition. Foreign exchange frauds are common in the realm of internet trade, fueled by scammers who are shielded from detection by the anonymity afforded by online trading. Identifying a potentially risky broker in time can save investors from suffering catastrophic consequences. In addition to being accessible and easy, online investing and trading (which includes buying, selling, and investing in financial assets) is also extremely dangerous.
The combination of internet/retail brokers (brokers that cater to the needs of individual consumers) has made it possible for anybody, anywhere, to participate in the financial markets. This has opened the door to investing to everyone with any level of experience and in any financial category, offering chances for reputable brokers as well as scam artists.
There has been a legal protection system put in place for each case of Forex exchange fraud. This system is comprised of lawyers who have specialized in trading and, in particular, forex, who explore all feasible methods of recovering money for investors who have lost money through trading.
A recurrent scam, both old and new, manifests itself in some forms of forex trading methods that have been produced. These con artists boast about their system’s ability to execute automatic trades that, even while you sleep, generate large amounts of money for you. Today, the term “robot” is used to refer to the fact that the process is completely mechanized using computers. In any case, many of these systems have never been subjected to a formal review or have never been tested by an independent third party.
The evaluation of a forex robot must comprise the testing of the trading system’s parameters as well as the testing of the robot’s optimization algorithms. If the parameters and optimization codes are not acceptable, the system will produce random buy and sell signals, which will be displayed on the screen. Unsuspecting merchants will be forced to do nothing but gamble as a result of this. Despite the fact that tested strategies are available on the market, prospective forex traders should conduct some preliminary study before committing their funds to one of these ways.
This type of forex scam is also sometimes referred to as a software scam. Forex robot scammers entice newbie traders with the promise of large profits with little work or understanding on their part. They may employ deceptive or misleading figures in order to persuade customers to purchase their product. Their claims are untrue since no robot can adapt to and thrive in all contexts and markets, as has been demonstrated.
Professionals typically utilize software solely to analyze historical performance and find trends, which is a limited application. All software should be formally and independently examined, but it is important to exercise caution when relying on the reviews themselves because these can be purchased for a price. Because of their product achieved everything they stated it could do, they would not sell it and instead would use it exclusively for their own purposes.
Managed accounts are a sort of Forex fraud, and there are numerous examples of managed accounts on the internet. These scams frequently involve a trader taking your money and, instead of investing it, using it to purchase a variety of high-end luxury products for themselves. When the victim eventually requests for their money back, there isn’t enough money in the bank to cover the cost of the repayment.
People who don’t have the time to learn how to trade forex or who don’t have the time to trade their own forex account can still profit from the foreign exchange market by using managed foreign exchange accounts (MFAs). The triple threat of scam, ineptitude and unscrupulous brokers is also exposed to investors when they use these services. The first issue is that there are several managed account scams to be found on the internet. These frauds are, in some ways, far more serious than forex broker scams or forex product scams. Managed account scammers typically attempt to persuade victims to invest as much money as possible, sometimes even their whole life savings, in their managed accounts.
They may propose taking out a mortgage on the victim’s home or obtaining other loans in order to increase the amount of money available for investment. It is possible to have your entire life ruined by falling for this type of hoax. Just to make matters worse, even a legitimate forex account manager can cause your account to be wiped out by their own lack of expertise.
You must first learn how to distinguish between a typical managed forex account and a pooled account if you are to avoid the most common managed account frauds. The money in a conventional managed forex account is transferred from you to your forex broker. An account manager receives your money and is then responsible for pooling it with the money from other clients into a trading account that is under the account manager’s direct management.
However, despite the fact that there are valid pooled accounts under supervision, pooled accounts are far more vulnerable to fraud. Anyone with access to a computer has the ability to produce fictitious account statements. With a pooled account, you’ll never know where your money is at any one time. Many of these types of accounts guarantee a high rate of return on investment on a monthly basis. There is no such thing as a guaranteed high percentage return on investment in forex, and anyone who claims to be able to provide one is almost certainly a fraudster.
Boiler Room Scams
Boiler rooms are places or operations (often call centers) where high-pressure salespeople phone lists of potential investors to peddle risky, and sometimes fraudulent, securities to those who are willing to listen. Using high-pressure sales tactics, salespeople in a boiler room attempt to induce investors to purchase securities, including speculative and fraudulent securities, in order to increase their profits. Cold calling is the most common method of contacting potential investors by boiler room salespeople.
Some significant boiler room techniques include making claims that cannot be easily confirmed by the investor, requiring quick payment, and sending threats if the investor does not comply with the boiler room terms. These practices, even if they are not unlawful, plainly contravene the norms of fair practice established by the National Association of Securities Dealers (NASD). The Securities and Exchange Commission’s Rule 10b5, which prohibits dealers from making false claims, omitting material facts, or engaging in other deceptive behavior, also applies to boiler room sales practices.
This sort of fraud involves scammers convincing consumers to purchase shares in a worthless private firm on the promise that their shares will gain significantly in value when the company becomes public. When they use “urgency,” they are insinuating that a chance will be lost if they do not move soon, which stops the target from being able to adequately research the opportunity and make an informed decision.
However, it is possible that the company does not actually exist and that it has a fictitious telephone number, office, and website. Once the scammers have amassed all of the money they can, they will vanish with the money that has been invested by everyone. Boiler room scammers, according to the Securities and Exchange Commission (SEC), approach investors by making cold calls, which are unsolicited phone calls to people with whom the salesman has had no previous contact.
This strategy places the prospect in a position where they have no frame of reference or background from which to evaluate the caller’s assertions. While this implies that the prospect has no reason to believe the caller, it also implies that they do not have any background information with which to challenge their assertions.
Pressure sales tactics may involve making claims about an investment opportunity that the target cannot independently verify. This is known as the “push sales strategy.” The salesperson may insist on the prospect making an instant payment to them. They may also adopt a hostile stance, threatening the prospect with immediate action. Promises of huge returns with no risk may also be used to compel prospects to make an investment decision.
Boiler-room tactics are occasionally employed to persuade investors to overspend on the purchase of assets that are actually worth less than the money they have invested in them. Indeed, the securities may turn out to be worthless or non-existent, and the monies generated are intended only to be used for the personal gain of the individuals who orchestrated the operation. Boiler-room strategies can be used to perpetrate a wide range of fraudulent schemes. This can include binary options fraud, advance fee fraud, and microcap fraud, to name a few types of deception.
These systems are no longer restricted to basements and boiler rooms; instead, they can be maintained in a number of settings, including offices and private residences, as well. In addition to phone calls, boiler-room marketers may use various methods to attract new business possibilities. It is possible to initiate contact with a prospect through electronic means such as email, SMS, and social media.
The Signal-Seller Scam
The signal seller is a type of modern-day fraud that is very prevalent. For a daily, weekly, or monthly fee, signal sellers provide a system that they claim will identify favourable times to buy or sell a currency pair based on professional recommendations, thereby allowing anyone to become wealthy. Signal sellers include retail firms, pooled asset managers, managed account companies, and individual traders.
They boast about their extensive trading expertise and abilities, as well as testimonials from others who attest to the person’s abilities as a trader and friend, as well as the enormous fortune that this person has amassed on their behalf. All that is required of the naïve trader is that they pay an amount of money in exchange for the pleasure of receiving trade advice.
Several signal-seller scammers just take money from a certain number of traders and then vanish into thin air. Some will advise making a good transaction every now and again in order to keep the signal money flowing in. This new swindle is gradually becoming a more widespread issue. It pays to be suspicious, even though there are signal sellers who are honest and fulfil the trading functions that are intended by the signal seller.
It is important to keep in mind that when a person or corporation sells information on which trades to do, they are perpetrating a scam. They say that the information they are offering is based on professional forecasts, and as a result, the unskilled trader will gain money. For this service, they typically demand a daily, weekly, or monthly fee, but they do not provide any information that will assist the trader in making money. A large number of testimonials from purportedly reliable sources will normally be provided in an attempt to build the trader’s confidence. Still, in reality, they will do little to foretell profitable transactions.
Bid/Ask Spread Manipulation Scam
Despite the fact that these types of frauds have reduced in frequency over time, they continue to exist. This is why it is critical to select a Forex broker who has been approved by a regulatory authority. Such scams would often involve having spreads of roughly 7-8 pips rather than the regular 2-3 pips, as is the case with the majority of forex traders.
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CHAPTER 3: Contact A Scam Recovery Specialist if You Have Encountered Any of These Flags
The foreign currency market is a zero-sum game in which there are many skilled, well-capitalized professional traders (for example, those working for banks) who are able to dedicate their full attention to trading on a daily basis. Retail traders who are new to the market will be at a major information disadvantage when compared to these traders. Retail merchants are undercapitalized in comparison to other businesses.
As a result, they are vulnerable to the problem of gambler’s ruin: in a “fair game” (i.e., one in which there are no information advantages), the player with the smaller amount of capital has a higher probability of becoming bankrupt than the player with the higher amount of capital. The retail trader is always required to pay the bid/ask spread, which reduces their chances of winning to those of a true game of chance.
Additional expenses may include margin interest or, if a spot position is held open for more than one day, the trade may be “resettled” on a daily basis, with each “resettlement” incurring the full bid/ask spread each time. Occasionally, in some variants of forex trading, customers may not receive standard fungible futures contracts but rather enter into a contract with a specific company. Even if the corporation claims to operate as their “forex dealer,” the company has a vested financial interest in seeing that the retail customer loses money on their purchase. Because the contract is directly between the customer and the pseudo-dealer, it is classified as an off-exchange contract, which means it cannot be registered with or traded on traditional futures markets.
Individuals who want to prevent being scammed should first understand how to deal with the foreign exchange market properly. This is the single most important thing they can do. This is made more difficult by the fact that it is tough to identify trustworthy Forex brokers and Forex teachers who can be relied upon. The novice must be certain that the broker has actually made the money that they claim to have made; due diligence is essential in this situation. The Forex market is not a game of chance but rather a very serious industry where trillions of dollars worth of currency units are traded every day. Before you start trading with real money, practice on demo accounts to understand how to make long-term earnings. Be aware that, as with any professional skill, mastering forex trading takes years of practice and dedication.
Anything that claims that you can generate money rapidly should be avoided at all costs. Do not accept the assertions presented at face value; instead, put in the effort to conduct your own investigation. When trading for the first time, novice traders should be critical in their approach, analyzing statistics and developing their own routines that they have tested and found to be successful on a sample account before moving further. This will take time to do, but it will benefit the new trader more than relying on a computer programme that is programmed to trade for them. Do not be enticed into making an investment that appears to be “too good to be true.”
The validity of the organization making the claims or selling the expertise/course are two other aspects that a person might want to look into as well. Examine the place or jurisdiction where the company is registered. Many Forex scammers may trade from a location where they believe the local legislation will make it difficult for them to be prosecuted worldwide.
The fact that some experts have been successful in arbitraging the market and earned an exceptionally big return does not imply that a larger number of experts could earn the same returns, even if they had access to the same tools, techniques, and data sources as they have. As a result, the arbitrages are effectively pulled from a pool of finite size. In contrast, information on how to capture arbitrages is a nonrival commodity. The arbitrages themselves are considered rival goods.
As of April 2019, the spot FX market, which includes currency options and futures contracts, was worth more than $6.6 trillion each day on average. Unscrupulous operators are attracted to forex scams because of the massive amount of money flying around in an unregulated spot market that trades instantly, over the counter, and with no accountability. Forex scams provide the opportunity to make fortunes in a relatively short period of time.
While many once-popular scams have been put out of business as a result of aggressive enforcement actions by the Commodity Futures Trading Commission (CFTC) and the establishment of the self-regulatory National Futures Association (NFA) in 1982, some old scams have persisted, and new ones are constantly emerging. An old point-spread forex fraud was based on computer manipulation of bid-ask spreads, and it was known as the point-spread scam. The point gap between the bid and ask price is essentially a representation of the commission charged by a broker in a back-and-forth trading transaction. Most of the time, the spreads between currency pairs are different. When such point spreads change significantly amongst brokers, a fraud can develop.
Possibility of Losing Your Entire Investment
A negative aspect of leveraged trading is that it can be extremely risky. This is due to the fact that, while you can maximize potential profits, you can also increase the likelihood of experiencing potential losses. If you are a Retail Client, this means that you run the risk of losing your entire investment if the trade goes against your wishes. Professional clients may suffer losses in excess of their deposits, and they may be required to deposit additional funds in order to cover their losses in the event of such losses. That is why it is critical to incorporate risk management tools into your positions in order to ensure that you are not exposing yourself to excessive levels of risk. It is also critical to ensure that your account has sufficient funds to avoid unwelcome stop-outs from occurring.
In the financial industry, positions held overnight are subject to a fee known as “overnight financing.” Financing costs are accrued on a daily basis, which means that the longer you keep your CFD trades open, the greater the amount of money you will lose in financing costs. The financing charge is based on the interest rate of the underlying asset and is calculated daily. To put it another way, the charge is a form of interest payment to cover the cost of the leverage that you are using overnight.
Margin Call/Close Out
A margin closeout will occur if your trading account is in the red due to open losing positions and you do not have enough equity to cover those positions. Keep an eye on your trading account at all times to ensure that you always have enough funds to cover the total margin requirements for your open trades while also taking into account market volatility as a safety net. Avoiding an unexpected margin call, which will result in all or some of your positions being automatically closed out once your equity falls below 50% of the margin requirement, will protect you from receiving an unwanted call.
CHAPTER 4: Victim of a Forex Scam? Take These Steps Immediately
If you’ve been a victim of fraud and have lost your money, it can be extremely difficult to come to terms with the situation. It’s understandable that if you’ve been the victim of an online scam, you’re at a loss for what to do next. It’s possible that you’ve come to believe that your money has been lost for good. But this is not always the case in practise, as we’ll see. There is still a glimmer of hope. If you are successful in your lawsuit, you may be able to recover your funds. If you suspect you’ve been a victim of a forex scam, you should take action immediately. If you have any of the following, you must inform your bank as soon as possible:
A payment was processed through the use of a debit or credit card, a payment was made using a bank transfer, or personal information has been divulged. You should also report the scam to Action Fraud and the Financial Conduct Authority (FCA) so that they can investigate and, if feasible, retrieve your money. This can also assist in preventing other people from becoming a victim of the similar scams
A Fund Recovery Company Can Get You a 100% Recovery From Scammers
People who have fallen victim to a Forex scam need to be aware of the options available to them in order to report the scam and, if necessary, take legal action against the trading company responsible. In this manner, the prospect of recovering at least a portion of your investment becomes a possibility. Suppose you have reason to believe that a company has violated the law or acted dishonestly in the handling of your funds. In that case, you have the right to file a complaint with the appropriate authorities and demand that they investigate the situation. You must first determine whether or not the actions of a trading company are considered legal before filing a complaint against them.
A law firm with experience in Forex litigation can investigate brokers and trading companies that engage in unfair or illegal trading practices and determine whether or not the brokers are, in fact, scammers by conducting an investigation into their practises and business practices. Scammers prey on those who engage in forex trading, but it is true that just because a broker has failed to generate profits for you does not necessarily imply that they are scammers; it is possible that they have only made exaggerated claims in their marketing to attract your business.
Keeping this in mind, you should contact the authorities if you notice any of the following suspicious activities: You were coerced into opening an account by a broker who put you under duress, and you have a strong suspicion that your account has been mismanaged, resulting in losses, even if you do not have concrete evidence to support this suspicion, but rather a series of events that have led you to this conclusion. If you have any questions about this, please contact us.
Consequently, you only discovered additional costs (for example, commissions) or were unable to redeem a promised bonus after the fact due to ambiguous contractual provisions. They did not represent your interests in a thorough or thoughtful manner, and they may have advised you to invest in a product that has since been proven ineffective. However, even though your balance sheet appears to be active, you are unable to withdraw any funds from it. After suffering a significant or unexpected loss, you are unable to contact your broker to discuss your options.
The identification and credentials of the broker should be checked prior to becoming a customer of a trading company. If a broker operates out of a tax haven where he is not subject to regulatory oversight, the likelihood of him disappearing with your money increases. In order to establish trust, a trustworthy company must be registered with a regulatory body, such as the Consob (Italy), Cysec (Cyprus), BaFin (Germany), CFTC (United States), NFA (United Kingdom), FINMA (Switzerland), or AMF (France). The ability to track the activities of a broker who is registered with one of these authorities makes it easier to file a complaint if something goes wrong when trading with them. In the footer of their website, brokers who are properly licensed will typically display the information about their license.
Suppose you have attempted to file a formal complaint through the channels listed on the broker’s website but have encountered roadblocks along the way. In that case, you should contact the regulatory body with which the broker is registered. It can be extremely beneficial in these situations to have the assistance of an attorney who has extensive experience representing investors before regulatory authorities on their behalf. As a matter of fact, if your investment has been mismanaged, the only way to recover your funds is to bring an action against the company for monetary damages. When it comes to avoiding prosecution, scammers and even brokers who are not scammers but have mishandled investors’ funds rely on the inability of victims to report them and hold them accountable.
It is important that you include as much information and evidence as possible when filing a complaint against a Forex broker in order to be successful in your claim. Regardless of how inconsequential something appears, it should never be overlooked. Consider the following as an example of what your attorney may require in order to proceed with your case: correspondence between you and the scammers (including but not limited to: email, text, and/or WhatsApp messages); screenshots of conversations between you and the broker (even if they took place over social media); and anything else you believe is relevant to the investigation.
It is necessary to provide the following information: Telephone conversations recorded on tape; bank and credit card statements showing the amounts and dates of transfers; the names and addresses of all financial institutions with which you have done business; the names of the individuals with whom you have done business.
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CHAPTER 5: Expert Consultancy Based on Common Forex Scams of 2022
Scenario 1 – Unlicensed Forex Brokers or Dealers
Retail forex and CFD trading are regulated by regulatory authorities in some jurisdictions around the world. United Kingdom: Financial Conduct Authority (FCA), Australia: Australia Securities and Investment Commission (ASIC), Cyprus: Cyprus Securities and Exchange Commission (CYSEC), South Africa: Financial Services Commission of Africa, Kenya: Competition and Markets Authority (CMA), and so on. While retail forex trading is not regulated in many countries, forex brokers that operate in unregulated regions do so with the assistance of a foreign license from a regulatory authority that is primarily located in another country.
According to a study conducted by Safe Forex Brokers UK, forex trading is unregulated in the majority of Africa and Asia. Still, many foreign CFD brokers continue to accept clients from this region. In fact, these brokers not only accept but also actively promote forex trading without any restrictions.
While there are some reputable forex brokers with a track record of being well regulated in multiple jurisdictions, the vast majority of forex brokers in these regions are not regulated by any regulatory body at this time. Without a license, unlicensed brokers operate brokerage firms and trading platforms for the general public. Once a trader deposits money into an account, they will not be able to withdraw it. As a general rule, before dealing with any forex broker anywhere in the world, you should visit the website of the relevant regulatory body and look for a list of forex brokers who are authorized to do business in your country.
You should avoid trading through foreign brokers if forex and CFD trading is prohibited in your country of residence. In the event that there is a grey area, such as a lack of regulation, but it is not illegal, and you still want to trade, you should avoid any brokers who are not multi-regulated. Always check the broker’s credentials on the Regulators’ website to ensure that they are authorized and legal to do business.
Scenario 2 – Fake Signal Sellers
A number of scammers sell trading signals and robots that are programmed to tell a trader when to enter or exit a position in the market. These forex robots are best used in technical analysis to assist you, rather than to predict the market, and should not be relied on to do so. Sellers may claim that their signals have a success rate of 98 percent and request a fee from the trader in exchange for this claim. Following payment of the fee, the trader will begin to receive email notifications each time a new signal is released, and the trader will be able to place trades based on the signal information.
It is a problem that most of the time after a trader has parted with money, a few email signal notifications are sent before the scammer cuts off all contact with the trader. Furthermore, there is no guarantee that these signals will function. Most of the victims of these scams are novice traders who are in a hurry to make money and are looking for a passive technique that will ensure success.
Scenario 3 – Price Manipulation
In the financial industry, market manipulation is defined as any action taken with the intent of deceiving investors by manipulating or artificially inflating the price of a security or other financial instrument. In the vast majority of cases, manipulating is against the law, but regulators and other authorities may have difficulty detecting and proving it in certain circumstances. However, the goal of market manipulation is always to influence prices in order to deceive other market participants.
This may include the dissemination of false information as well as price manipulation. In the financial markets, market manipulation refers to the deliberate deception of other market participants. Although manipulation is difficult to detect and prove in large and liquid markets, it is also difficult to execute in these markets because of the difficulty in executing in large and liquid markets. Pump-and-dump schemes and poop-and-scoop schemes are two types of stock manipulation that are commonly used. Pump-and-dump schemes are used to manipulate the price of a stock. International trade disputes between sovereign countries are frequently characterized by the assertion of a distinct political claim, which is foreign exchange manipulation. It is more difficult to manipulate securities that are more liquid or widely traded than it is to manipulate securities that are less liquid or less widely traded.
A penny stock with a small typical daily trading volume is far more difficult to manipulate than the share price of a large-cap company with a daily turnover valued in the billions of dollars, according to the SEC. In order to artificially inflate the price of a microcap stock before selling it, market manipulation strategies, such as the pump-and-dump strategy, are frequently employed. A less common but still prevalent scheme is the inverse poop-and-scoop scheme, in which false, derogatory statements are made about a stock in order to obtain a discount on the stock in question. poop-and-scoop operations are another type of shorting and distortion that short-sellers engage in in order to make a profit on their trade.
To get their message across, such schemes rely on promotion and factual misstatements; however, they are frequently augmented by illegal trading tactics that are intended to deceive. To give an example, order spoofing refers to the practice of simultaneously placing a large number of buy and sell orders in an attempt to move the price of a stock, then canceling the orders once other traders have moved their own bid and ask prices in response to the orders. In order spoofing, which can occur in both the bond and metals markets, as well as the stock market, employees at large Wall Street firms and shady day traders have been enticed to participate.
Scenario 4 – HYIPs: Ponzi Schemes and Pyramid Schemes
Investment programmes known as High Yield Investment Programs (HYIPs), also known as Ponzi schemes, pool together resources from the unsuspecting public and use them to invest in forex trading or other financial instruments, with the promise that the profits will be shared among all of those who contribute. They operate in a similar way to mutual funds, gathering capital to invest on behalf of their clients.
They also promise extremely high returns on investment and immediately begin paying returns on investment to the original contributors. Their victims are drawn in by the fact that Ponzi schemes recycle the money received from initial contributors and use it to pay new contributors, giving the impression that the scheme is genuine. When investors see the value of their investment increase, they are more likely to invest additional funds in the scheme.
Having amassed vast sums of money from their victims, Ponzi scheme operators cease making payments and flee the country. They are never found. In African countries, forex scams of this nature are extremely common. As an example, there was a recent scam involving MBA Forex that primarily targeted investors in Nigeria, as reported by Reuters. A forex company with a trading platform is usually involved in forex pyramid schemes and multi-level marketing schemes, among other things.
They need to attract more traders to their platform, so they use the pyramid technique to incentivize traders to use their platform. In this technique, the person at the top of the pyramid recruits two people who will be at the bottom of the pyramid after him. In turn, those two people below him recruit three more people, and the pyramid continues to grow. In exchange for each successful recruitment, the person at the top is compensated a commission, and so on.
Scenario 5 – Promises of Rewards and Bonuses
The forex market can be extremely volatile, and there is a high risk of losing money when trading on margin. That is why major regulators require brokers to post risk disclosure statements on their websites in order to alert potential traders to the dangers they may be exposed to when trading forex and CFDs. A broker who advertises bonuses such as a $50 bonus on account opening, risk-free trading, or 80 percent returns on trading signals is, therefore, a red flag to be on the lookout for. These promises of rewards are merely red herrings intended to divert the trader’s attention away from the important task of conducting necessary due diligence. Brokers are not permitted to make any offers by the majority of major regulators.
Scenario 6 – Managed Trading Accounts
Opening an account and handing it over to a professional account manager who will trade on his behalf is an option for forex traders who are either inexperienced or too busy to trade on their own. There is a fee charged by these professionals for their services. Scammers have also taken advantage of this by offering to manage accounts for traders, only to end up defrauding them in the process.
They may make trades that are not in the client’s best interests, or they may simply disappear with the client’s money altogether. Account managers’ past performance should be investigated to determine their success rate in the past, as well as their risk management strategy and previous drawdowns to determine how efficient the fund manager is. In addition, the account manager must hold a valid operating license issued by the appropriate authorities.
Scenario 7 – Social Media Gurus
The majority of motivational forex videos and advertisements currently trending on the internet show luxury yachts, cars, and other such items, with the goal of convincing the viewer that the speaker/guru acquired all of these items through forex trading profits. These so-called gurus do not discuss the disadvantages of trading; instead, they concentrate solely on the advantages. Some of them operate or collaborate with unlicensed brokerage firms, which results in the defrauding of investors. Global market regulators have ordered forex brokers to post risk disclosure statements on their websites, which they have done.
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CHAPTER 6: Work with Experts on Your Funds Recovery Plan for A Forex Scam
With the rebranding, Chargeback.com has become Sift Dispute Management, extending the capabilities of Sift’s leading fraud-fighting platform by providing real-time tools to manage true chargebacks and friendly fraud, in addition to other types of dispute management. A wide range of products and services are offered, all of which are guaranteed to be profitable 100 percent of the time by the company.
The company also offers a variety of perks and benefits to its customers, including password-less authentication, account defense, content integrity, payment protection, dispute management, the sift connect feature, the PSD2 solution, and a variety of other new releases and improvements.
Chargeback.com is well-known, and its customer base, which includes companies in the fintech, retail, and food and beverage industries, has provided positive feedback on the service. Trust and safety, in our opinion, are essential components of any online interaction. As the industry’s pioneers in digital trust and safety, we assist more than 34,000 websites and mobile applications in striking a delicate balance between increasing revenue while maintaining the security of their business operations.
According to Chargeback.com, users are presumed innocent until and unless they are proven guilty. Clients who have demonstrated their loyalty to a company should never be denied service or forced to jump through hoops. It is now simple for businesses to reduce friction and delight their customers while simultaneously keeping bad actors out of their operations. Additionally, they believe that legacy technologies are impeding the advancement of business operations.
Their customers benefit from the technology on a daily basis, as the company was the first to use machine learning for fraud prevention. There is no other solution available that can compete with theirs in terms of speed, accuracy, and scalability. We have reached the point where we must make a change. It is the first time in history that customers have had higher expectations. There is a lot of competition in this field. In the same way that businesses innovate and scale, fraudsters are able to do the same. Sift has formed partnerships with thousands of websites and apps, ranging from digital disruptors to Fortune 500 companies, in order to achieve this goal.
CHAPTER 7: The Funds Recovery Process for Forex Trading Scams
With the explosion of social media and online advertising, there is no way to stop scammers from making money. An Instagram influencer in the United Kingdom who was working with a dubious broker caused many people to lose their life savings through forex trading recently. It’s not surprising, given the extravagant lifestyle and shenanigans on display by such influencers, who then reveal how so and so trading options have made them millions of dollars in the process.
Engaging with your broker and understanding what went wrong are some of the steps you can take to recover funds lost in forex trading. Other steps you can take include naming and shaming your broker on public trading forums, filing a chargeback request with your credit card provider, filing a complaint with the financial institution that the broker used to receive funds, and contacting the trading regulatory body in your region and urging them to take action.
CHAPTER 8: Don’t Lose Hope, You Can Get Your Money Back From a Forex Scam
The first and most important step is to notify the appropriate authorities if any suspicious activity is suspected to have occurred. For those who invest in online trading, it can be difficult to determine whether money lost was due to natural risks that occur in trading or if the loss was orchestrated unlawfully. At times, it can be nearly impossible to determine whether or not you have been a victim of a forex broker scam without the assistance of an expert.
The possibility of losing money when trading forex exists at all times, and as a result, it is acceptable to lose money as a result of improperly handled funds. Losing money, on the other hand, as a result of improperly handled funds is unacceptable. It is true that no one can guarantee that a loss will be recovered; however, in the vast majority of cases, at least a portion of the investment will be recouped.
As soon as possible, scammers should be reported to the authorities so that judicial authorities can intervene and if at all possible, freeze their funds. A scammer’s victims who report them may be eligible for compensation from an Investor Compensation Fund, as has been demonstrated in the cases of AFX Capital Markets Ltd and PlexCorps, among others. As a result, it is critical that incidents be reported as soon as possible after they occur. The fact that you are remaining silent is of no benefit to you or others who have fallen victim to these scams and should be reported.
In addition to lower margin requirements, forex trading offers easy access to global markets, the absence of shorting or day trading rules, and the absence of or minimal fees. Forex trading has a number of advantages over other financial instruments. Forex trading is not for everyone and should be avoided if possible. Losses are magnified when a high degree of leverage is employed, and paying a spread to enter, or exit positions can be prohibitively expensive when there aren’t many significant moves in the price of the underlying asset being traded.
There have been numerous claims on review sites and in comments on social media that someone has assisted them in recovering their money from a forex fraud scheme, and you may have noticed this trend for yourself. Additionally, extreme caution should be exercised when dealing with these. Gmail email addresses are provided by many businesses, as well as invitations to connect directly through social media direct messaging and requests for callbacks, among other things. If you believe you have been a victim of a forex scam, please contact the Financial Conduct Authority (FCA).
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