As the industry lacks a global regulatory authority, scammers find ways to exploit market
players by looking out for loopholes in the Forex industry” – Adv. P.M. Mishra, Finjuris Counsel FZ-LLC UAE
Regrettably, fraud exists in all commercial spheres, including the Forex market. Even in 2022, unscrupulous Forex brokers continue to defraud unwary traders. Brokers that engage in forex scams are not usually represented by the brokers themselves. They are most frequently individual players who do not have businesses but present themselves as brokers. They are frequently experienced Internet users capable of fabricating misleading information on the site they developed.
The proprietors of such scam sites lack a license and hence are not adequately controlled. Sometimes they don’t even understand the basics of the Forex market. However, not everything is clear to a beginner trader who has not studied economics or finance. There are three types of Forex scam that end up blacklisting brokers. They are:
- Brokers on the run: Until recently, this was the most common type of fraud. A site is created by a group of individuals (or even one person). Often, it is only a landing page that encourages people to invest and make a lot of money. PAMM accounts may also be included. Scammers don’t care what they say, what matters is that they lure individuals and their money. As a result, they may collect deposits from traders and close the site, declare a pre-planned insolvency, or make no disclosures at all.
- Pyramid Schemes: This is maybe the most well-known sort of fraud that is utilized everywhere, not only in the foreign exchange industry. This sort of fraud has nothing to do with Forex brokers. It is about the firm posing as a broker while, in fact, it just takes deposits from traders, frequently without even seeming to be active on the interbank market. They just keep making bogus promises and chanting slogans. This form of fraud is becoming less widespread than others.
- Forex Bucket Stores: This form of scam is more polished and takes more meticulous planning, but the scammer’s potential payoff is also greater. In this situation, they build a full-fledged platform that mimics the features of top Forex brokers. The trader does not compete on the global interbank market, but rather with other traders who are only registered on their fake website, or perhaps with the platform itself. Naturally, Forex bucket shops establish unrealistic conditions in order for the site to remain profitable while traders continue to lose money.
- Robot Scams: An old and new fraud manifests itself in some sorts of forex-developed trading systems. These con artists boast about their system’s capacity to create automated transactions that earn large sums of money even while you sleep. Because the procedure is now entirely mechanized using computers, the new phrase is “robot.” In any case, many of these systems have never been submitted for official review or evaluated by a third party.
Therefore, it is very important for investors to run a due-diligence on their brokers to ensure they are legitimate. Many improvements have drove out the crooks and old schemes, while also legitimizing the system for the many legitimate businesses. However, be aware of new forex scams; the draw and temptation of enormous earnings will always attract more and more adept fraudsters to this market.