Forex trading involves exchanging one currency for another and if you know what you’re doing, it’s possible to make money from the process. However, although there are plenty of honest traders who’ve kept their heads down and have made good money, the industry is rife with forex trading scams too.
Scam artists use forex’s mystery and complexity to con ordinary people out of their money. Scams are getting increasingly sophisticated, making it difficult for the average person to determine who’s telling the truth and who isn’t.
Often, these scams are disguised as ‘life-changing opportunities’ or a way to ‘make a living from anywhere in the world with just your phone‘. Enticing, right?
It’s no wonder so many people fall victim to these forex trading scams – and the number of victims has risen over the pandemic. £535m is estimated to have been lost to investing scams in the last year.
If you’re interested in learning how to trade or you’re thinking of paying someone else to do it for you, read this first. Here’s a quick rundown of some of the most common forex trading scams and warning signs to be wary of.
You’ve been approached by a stranger on social media
Have you had a message from a stranger offering to help you build passive income, quit your job or get rich? They might have put this image in your head of you living it up on Bondi Beach and never having a boss again. They might show you pictures of their car or fancy watch or share videos of themselves enjoying a sunset meal in Mykonos. If this sounds familiar, there’s a very high chance you’re being approached by a scammer.
Thanks to an increase in the number of forex trading MLMs, in some cases, this person won’t even realise that what they’re doing is dishonest. They may have been recruited into a forex trading scheme or academy which promised to teach them how to trade. Often, when people join these schemes or educational programmes they realise that trading is much harder than they anticipated. Sometimes it’s easier to make money encouraging other people to join – and so that’s why they’re messaging you.
Joining these schemes can leave you feeling trapped, especially if you pay a membership fee and it’s not easy to cancel.
If you’re approached out of the blue on social media with someone offering an investment opportunity, it’s probably a scam. Authorised firms are unlikely to approach you in this way.
A friend has encouraged you to join their team
Unfortunately, it’s not only strangers we need to be wary of when it comes to forex trading scams. Forex MLMs are so rife that a friend of yours may have been recruited into one. If you see them as trustworthy, you may be tempted to give them the benefit of the doubt.
Generally speaking, if a friend is encouraging you to join their team (and we’re not talking about a genuine employment opportunity here), it’s probably a good idea to turn them down.
They’re not registered with the Financial Conduct Authority
The Financial Conduct Authority (FCA) says that if you want to trade in high-risk investments such as foreign exchange derivatives, eg. contracts for difference (CFDs), only deal with FCA-authorised firms.
The FCA warns: “If they’re not authorised by us, it’s probably a scam.“
They’re on the FCA’s warning list
Check out The FCA’s Warning List feature. This will let you search the name of companies you’re thinking of working with to see if they’re dodgy. It’s worth noting that there are fraudulent companies out there that aren’t on the list, so if your search gets no results this doesn’t automatically mean you’re good to go. I tried a couple of companies I’d avoid but they didn’t show up on the list.
The opportunity seems too good to be true
It’s a sad reality that if an opportunity seems too good to be true, it usually is. While people might paint forex trading as a way to get rich quick, it can take a long time to learn and there’s no guarantee you’ll make any money at all.
You might have heard people say that 80%-90% of traders actually lose money and while I’m struggling to find concrete data from a reliable source to confirm the exact figure, this doesn’t sound all that surprising.
You’ve been a victim before
Some forex trading scams are framed as an antidote to other scams. A victim might post on social media that they almost fell victim to a trading scam only for sophisticated scammers from another company to approach them with a ‘solution’.
The Financial Conduct Authority warns that victims of scams are likely to be targeted a second time. Sometimes their details will be sold onto other criminals. It warns: “The follow-up scam may be completely separate or related to the previous fraud, such as an offer to get your money back or to buy back the investment after you pay a fee.”
If you’ve fallen victim to a scam more than once, you might be even more afraid to talk about it. But this secrecy is what allows forex trading scammers to thrive!
What to do if you’ve been scammed
If you’ve come across a forex trading scam, you can report it to the FCA by contacting its consumer helpline on 0800 111 6768 or using its reporting form.
Unfortunately, if you’ve invested with a company that’s not authorised by the FCA, your investment is not protected by the UK’s Financial Services Complaints and Compensation Scheme and so you might not get your money back. Please get in touch with the FCA for more information.
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