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Forex Fraud and How to Avoid It

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Forex Fraud and How to Avoid It

If there is one thing that we are hearing about more than ever these days, it’s the fact that you always need to be careful when it comes to scams. Fraudsters are getting very creative these days in their attempts to trap people, including setting up fake websites and advertising their services on social media. The internet is a fantastic invention that has done wonders for businesses and people in general, but with it has also come a lot of problems. In fact, the internet has made it easier than ever for fraudsters and scammers to target people.

You will find that someone who is willing to scam people will do whatever it takes to get what they want. In this case, they want traders to hand over their money, and they’re going to employ every tactic they can think of in order to do it. In this article, we’re going to be taking a look at what forex fraud is, some of the latest scams and schemes, as well as information to help you avoid these. The more you know what to look for, the more likely you are to avoid a scam. 

What Is Forex Fraud?

Forex fraud, also known as foreign exchange fraud, is the use of any kind of trading scheme in order to defraud currency traders. This is done by convincing traders that they can expect a high profit by trading in the foreign exchange market. More often than not, someone who is committing forex fraud will offer the potential for a high return with a very small amount of risk, which always sounds tempting. 

Over the last couple of decades, forex fraud has been subject to increasing regulation. The Financial Conduct Authority (FCA) is responsible for the regulation of financial services and other companies. They have an obligation to prevent fraud where it is possible and are one of the bodies responsible for regulating forex fraud. The Serious Fraud Office (SFO) is responsible for investigating and prosecuting the really serious allegations of all fraud. The SFO also covers forex fraud. These agencies work with other organizations, both domestic and international in order to prevent people from abusing the foreign exchange market as much as possible.

What Are The Latest Scams And Schemes?

Fraudsters use a lot of sophisticated techniques in order to steal money. A lot of this is done through scams that have been around for quite a while, but people are still getting sucked in. There are a number of different scams on the market right now, so you need to understand what they are before you can do anything to combat them. As you learn forex trading, learn about the ways that you may be targeted for scams, as well.

Forex Robot Scams

A forex robot is a software programme that can automatically buy and sell currency for you. It does this by using an algorithm to calculate the risk and reward of such purchases and is a legitimate way of trading for a lot of people. Forex robots can be tested and reviewed in order to make sure they work.

However, some criminals sell untested or completely fake software that makes random trades. The goal here is to lose investors money by not doing the correct research into the numbers of the specific trade. It’s for this reason that it is essential to complete as much research as possible if you are going to be using a forex robot to help you with your trading.

Single Seller Scams

Single sellers are businesses that offer recommendations about the best time to buy and sell currencies based on what they claim to be market analysis. These sellers charge investors and traders a fee for this information, getting their money and then providing them either false or inaccurate advice.

More commonly, a single seller scam happens when a company charges the investor without giving them any advice. Or, they give them a very small amount of trade detail that may or may not be correct, and then disappear. These scammers always promise that their data will guarantee successful trades and high levels of profit, without actually doing so.

Forex Pyramid Scheme

A forex pyramid scheme focuses on bringing new members into an investment group that claims to offer advice and data to help make them successful forex trades. The members of these investment groups will be charged a subscription fee, and often encouraged to get other people that they know to join. This is usually sweetened with the offer of being able to earn a commission.

Unlike the other types of scams that typically make money from forex trading, this scheme works by taking the membership fees. The more people that join the investment group, the higher up you will go, earning more money each time, hence the name of the scam. It’s common for these schemes to close, with the lender taking all of the money as soon as memberships start to drop.

Forex Broker Scams

There have been cases where criminals pretend to be legitimate forex brokers. They often do this through investment platforms that already exist and have legitimate brokers on them, as this will make their services more believable. Once they have the trust of the trader, they trick them into investing in non-existent forex funds, instead taking the money for themselves the second the money is available.

It’s very common for scammers and fraudsters to use the name and registration number of a legitimate, authorized forex broker. However, you should always check the FCA register. All contact details of registered brokers will be stored here, and ideally, you will only ever use the information provided from the register. Do not listen to anyone who tells you the number is wrong on the FCA register, as brokers are required to update any details they change.

How To Spot A Forex Scam?

In some extremely sophisticated scams, it can be extremely difficult to tell that there is something amiss. You need to be extremely vigilant and look out for any sign that this could be a scam. There are some common telltale signs that should help you identify a scam. The first is anything that offers you an unrealistic return. Forex scams usually promise to provide high returns from your initial investment. Essentially, if it seems like it is too good to be true, it more than likely is.

You should also not give in to any kind of time pressure that someone tries to put on you. Scammers may try to tell you that you have to invest immediately or you are going to see a lower profit, or they may even try to offer you a bonus to invest. Anything like this is likely to be a scam, and you should consider another option for trading.

Always be wary of anyone who contacts you out of the blue about an investment opportunity. Unsolicited offers are a huge red flag when it comes to forex investments, and you should never give your personal information to these people. Also, even if it seems legitimate, never transfer money to the firm as this is the quickest way to lose it.

There is no such thing as a risk-free investment, and anyone who tries to claim there is, is lying. Investing always has some level of risk attached to it because of the nature of the trade. If someone is offering you risk-free forex investments, they are definitely a scammer and you should ignore them. 

If you think that someone is legitimate, then take the time to conduct your research. Look for user reviews that are mostly positive, but keep in mind that every trader is going to have losses during their time on the market. This isn’t always avoidable, so when checking out reviews, look for things like traders not being able to withdraw money as this indicates a scam.

How Can You Avoid Forex Fraud?

The best way to avoid a forex scam is to know what you are looking for. You need to know all of the signs that we just covered, and look for them every time you are trading on the market. You need to be cautious of everyone until you know for sure that they are legitimate, and in it to help you rather than steal your money. It’s a sad reality of the world that we live in today, but the threat is very much a reality, and as such, the best way to protect yourself, your money, and your future investments is to tread carefully.

Never choose a company that has no background information or contact details, as this is a definite red flag. If you have any reservations at all about something to do with your trading, it’s prudent to back off until you have the information that you need. You do not need to make any decisions in a moment’s notice, especially not without the correct information at your disposal. 

It might also be a good idea to join a variety of discussion groups and forums. This gives you a variety of others to consult if you have questions or concerns. There are forex trading groups and forums available on a number of platforms, including social media and trading sites. Consider taking a forex trading course to get to know other traders and investors.

Penalties For Forex Scams

If an individual is convicted of fraud under the Fraud Act, the maximum penalty they will receive is up to 10 years imprisonment. If the crime is severe, then the individual may end up having to pay a fine on top of the imprisonment, and there is no limit as to what this fine can be. If they are lucky and do not go to prison, they are still likely going to have to pay a fine. It is up to the judge that is presiding over the case to determine what the fine is going to be. 

The biggest financial penalty that has ever been imposed by the FCA was when Barclays was ordered to pay £284,432,000 for forex failings. 

What To Do If You Have Been Scammed

If you have fallen prey to a forex scam, then you need to act quickly. The first step is that you need to evaluate what has actually happened and gather as much information as you can. Once you are sure that something isn’t quite right, you should contact your bank if you made a payment using your debit or credit card, or if you made a payment through bank transfer. Also, if you gave away any personal information, you need to let your bank know. They will be able to provide information to the correct authorities when it is required, so make sure you have as much information as possible when you get in touch.

The next step is to report the scam to Action Fraud and the FCA so that they can investigate. They may be able to recover your money during or after their investigation, but don’t count on it as a lot of scammers are extremely clever. By reporting what has happened, you may help someone avoid falling victim to the same scam that you have, so it’s important to report any fraud that you encounter.

It’s important to understand the complexities of forex fraud, what it is, and how you can avoid it. When you’re new to forex trading, it can be easy to fall into some of the scams discussed above. The more you educate yourself on the matter, the easier these issues are to avoid. Keep your eyes peeled at all times so that you do not become a victim of forex fraud. It’s also important to report anything that you think is suspicious to the correct authority as this may well help prevent scams from happening. And always remember that if you’re concerned that something is a scam, you can take the time to research and ensure that you’re working with legitimate brokers and companies. 

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