Forex Scams
Avoiding Forex Scams When Investing
Throughout the world, people are seeking ways of making quick cash through many means untested or even unpracticed means. While many people engage in legitimate activities, there are some who will go to odd lengths to defraud innocent and often unsuspecting individuals. The foreign exchange market has uniquely stood out to be a market of great potential throughout the world - both in terms of minting more money for traders and in fraudulent deals. Forex practice and knowledge may be of great assistance.
What are forex investment scams?
Forex scams can be described as activities that unscrupulous forex dealers involve in with the intention of convincing traders that they will gain high profits when they engage in forex exchange. Forex investment scams have in recent times become popular with more and more people realizing how lucrative the forex business can be. In view of the prevailing circumstances, the Commodity Futures Trading Commission (CFTC) of the U.S. appointed a special task force whose mandate is to deal with growing forex trading scams.
Forex trading scams include selling to forex trader's software which gives guidance on how to make huge profits, churning trade accounts with the sole intention of generating commissions, false advertising, improper account management, Ponzi schemes and other fraudulent activities. The indication by some forex brokers that trading foreign currency is a high profit, low risk investment is also considered to be forex scam.
In the United States alone, eighty cases of fraud have been prosecuted between 2001 and 2006. Theses cases saw more than 23,000 customers lose close to 350,000 U.S. dollars. Experienced traders have learnt several ways of avoiding forex investment scams leaving greater vulnerability to new traders. However, there is cause for greater worry with the perceived proliferation of online, non-bank portals since control of fraud in such cases will be a daunting task.
According to The Wall Street Journal, on average, the individual forex trading victim loses close to 15,000 U.S. dollars with greater risk exposure to retail investors compared to other traders.
Victims of forex trading scams are typically promised profits in the range of tens of thousand dollars in a matter months or sometimes just weeks but not without an initial deposit of a pre-set amount. Once the trader deposits this amount, instead of being invested in the stock market, the money is cleverly diverted to the trickster's account - outright fraud at its worst.
Regulation of Forex Trading Scams
The U.S. CFTC has the mandate of regulating commodities and futures trading, and warning investors of possible lee ways that the cunning fraudster will use to make the kill. Forex tricksters have a way of baiting their victims into traps through incredible adverts that promise all heaven in real time. Much caution must therefore be exercised to avoid your forex getting ripped off by untrustworthy dealers.
With this in mind, it is imperative to research the company or trader you intend to deal with. One main way of determining which trader is worth dealing with is by checking if the dealer is registered with CFTC or is a bonafide member of the National Futures Association. It will also go a long way to check out the history of the company in case it has been subjected to disciplinary action in the past. Also, verify that you are working with someone that works with the company he claims to be working for.