Forex trading offers exciting opportunities for profit, but it also comes with risks that go beyond market fluctuations. Scams are rampant in the industry, preying on both novice traders and seasoned investors who let their guard down. Recognizing the warning signs and understanding how these schemes operate can reduce the risk of becoming a victim.
Forex trading is full of potential, but it’s also a space where scams thrive. Fraudsters rely on your trust, your ambition, and sometimes your desperation to turn an illicit profit at your expense. Staying informed, sceptical, and diligent is your best defence against their tactics.
Remember, legitimate trading opportunities don’t come with guarantees, and it is also a good idea to stay far away from anyone employing high-pressure sales tactics. Be vigilant, do your research, and always verify who you’re dealing with before investing a cent or sharing any personal data.
The Ever-Present Threat of Forex Scams
Forex scams aren’t just relics of the past. While the shady phone calls and dubious paper fliers may have diminished, scammers have adapted to the digital age with finesse. They’ve mastered the art of persuasion using professional-looking websites, social media ads, and even false endorsements from celebrities. Their promises often sound irresistible—guaranteed profits, unbeatable trading systems, or exclusive access to insider knowledge.
For US traders, one of the most glaring red flags is a broker targeting U.S. traders despite not having the proper authorization from U.S. authorities. Legitimate brokers active on the U.S. market are registered with regulatory bodies like the Commodity Futures Trading Commission (CFTC) or the National Futures Association (NFA). Any firm lacking the appropriate credentials is a firm you should stay away from. Always verify a broker’s legitimacy by checking directly with the appropriate agency. It is also good to see what a reputable review websites such as Daytrading.com is saying about the broker.
How Forex Scammers Operate
There are many different types of forex scams, and there are also scammers that combine several scam types, e.g. by merging the forex scam with a classic romance scam. It is therefore not possible to say that all forex scammers operate in a certain way.
With that said, many forex scams are crafted to exploit strong emotions, such greed and fear. They can for instance target your dreams of financial freedom, your desperation for a better life for you and your loved ones, and your anxiety about missing out on opportunities.
Many scams revolve around the promise of high returns with little to no risk. However, in trading, there are always risks, and claims to the contrary are a major red flag.
In the 21st century, social media has become a fertile ground for scams, and influencers can for instance promote fraudulent brokers or trading systems, or promote legitimate brokers but with inflated claims. These individuals may flaunt luxury lifestyles as proof of their success, but more often than not, it’s a facade – or a lifestyle financed by other means, including kick-backs from the fraudsters they promote.
Phishing emails and unsolicited messages also remain popular tools for scammers. These communications may promise “exclusive” trading opportunities or alert you to supposed market conditions requiring immediate action. Such urgency is designed to bypass your critical thinking, pressuring you into making hasty decisions – without thinking things through and without discussing it with someone who might point out issues with the offer.
Spotting the Warning Signs
A key characteristic of many forex scams is their reliance on high-pressure tactics. Scammers want you to believe you’re about to miss out on the deal of a lifetime. Whether it’s an “exclusive” trading strategy or a “once-in-a-lifetime” market opportunity, these pitches are engineered to rush your decision-making process.
Promises of guaranteed returns are another red flag. No legitimate broker or trading platform can ensure profits, as forex markets are inherently volatile and unpredictable. Similarly, be wary of platforms or individuals who refuse to provide verifiable credentials. Transparency is a hallmark of reputable businesses, and any reluctance to disclose licensing or operational details should raise suspicions.
The Romance Forex Scam – Two Different Scams Combined Into One
Combining a romance scam with an investment scam is not something new, but today´s fraudsters have access to the internet and can target hundreds or even thousands of potential victims simultaneously, hoping that at least a few will fall into their trap.
According to data from the U.S. Federal Trade Commission (FTC), nearly 70,000 people reported a romance scam in 2022, and the reported losses amounted to a staggering $1.3 billion, with the median reported loss being $4,400. Romance scams work in a multitude of ways, and some of them involve forex trading. One common lie associated with romance scams is offers to teach the victim how to invest or trade – and in this category we find quite a lot of forex trading scams and cryptocurrency trading scams.
Romance scammers are present on all online dating sites and social media networks, and the more skilled ones tend to pay close attention to the information you share, and use it to create a fake persona that will pique your interest. With that said, there are also scammers who will cold-call you out of the blue, e.g. by calling or sending messages to your phone, posing as someone who accidentally called the wrong number. These “accidental callers” tend to have very attractive photos and be overly eager to talk to the recipient of their accidental call.
In the world of online romance scams, many of the scammers come equipped with great reasons as to why you two can´t meet and go on a normal date right now, and they will typically state them right from the get-go to make them more believable. They are working on an offshore oil rig, they are in the military stationed abroad, they are taking care of family matters in their native country but will return to your country soon, etcetera.
The 2023 report from the FTC shows that romance scammers targeting U.S. victims often use dating apps, but that making contact though social media platforms are even more common. For the year 2022, 40% of the reported romance scam cases in the U.S. involved victims that had been contacted on social media. Worthy of note is that regardless of how first contact is made, scammers tend to be eager to quickly move communications away from more well-monitored platforms like Tinder and Facebook to chat services such as WhatsApp, Google Chat, or Telegram.
How to Stay Safer
Protecting yourself from forex scams begins with education. The more you understand about forex trading, the harder it becomes for fraudsters to manipulate you. Familiarize yourself with basic trading concepts, such as leverage, spreads, and market trends. This knowledge not only equips you to trade responsibly but also helps you identify implausible claims.
If you’re considering a new broker or trading service, start small. Deposit the minimum amount required and test the withdrawal process. Scammers often make depositing funds easy but complicate or entirely block withdrawals. By testing these systems early, you can detect potential fraud before committing significant funds. You should be aware, however, that some fraudsters are in it for the long run and will act impeccably until they really have you hooked.
Keeping your trading account safe
If you already have a trading account, you need to keep it safe from the type of fraudsters that attempt to gain access to other people´s trading accounts, and who will either drain them directly or utilize them for their own purposes in other ways.
While some of these scammers will target you directly and try to convince you to give them access, e.g. by posing as financial advisors or selling trading software, there are others who prefer to target trading accounts through unsecured internet connections, computer viruses or weak log-in routines.
Avoid accessing trading platforms on public Wi-Fi networks to minimize the risk of cyberattacks. Use strong, unique passwords for your trading accounts and enable two-factor authentication whenever possible. Follow all the general advice to keep viruses, trojans and similar out of your devices.
What to Do If You’re Scammed
Even the most cautious traders can fall victim to scams. If it happens, act quickly. Since fraud is illegal, you can report it to your local police. It is also a good idea to contact any relevant governmental agencies and self-regulatory organization (SROs) to file a report with them, since they have other resources available than the local police.
In the United States, you can for instance report the incident to the Federal Trade Commission (FTC) or the Commodity Futures Trading Commission (CFTC). Filing a complaint helps regulators track fraudulent operations and can sometimes lead to recovering stolen funds.
The Federal Trade Commission runs a special website called ReportFraud.ftc.gov, which makes it easy to report suspicious activities and find out what the next step will be. If a forex scam involves identity theft, you can also contact Identitytheft.gov.
Additionally, share your experience with other traders. Posting honest reviews or warnings online can prevent others from falling into the same trap. The forex trading community thrives on shared knowledge, and your story could make a significant difference.
Examples of relevant agencies and organizations in the United States
- The Commodity Futures Trading Commission (CFTC) is an independent agency of the US government that regulates the U.S. derivatives markets, which includes futures, swaps, and certain kinds of options.
- The National Futures Association (NFA) is the self-regulatory organization (SRO) for the U.S. derivatives industry, including on-exchange traded futures, retail off-exchange foreign currency (forex) and OTC derivatives (swaps).
- The Financial Industry Regulatory Authority (FINRA) is a private U.S. corporation that acts as a self-regulatory organization (SRO). It regulates member brokerage firms and exchange markets, and the U.S. Securities and Exchange Commission (SEC) delegates a lot of its enforcement and rule making authority to FINRA. In the United States, all trading firms not regulated by any other SRO must be a registered member of FINRA.
- The U.S. Securities and Exchange Commission (SEC) is an independent agency of the United States federal government with a three-part mission: to protect investors; maintain fair, orderly, and efficient markets; and facilitate capital formation. SEC contains several divisions, including the Trading and Markets division which is responsible for overseeing all broker-dealer firms and investment houses, while also overseeing the SRO´s (e.g. FINRA).
The Follow-Up Scams
If you have fallen victim to a forex trading scam, be aware of the risk of follow-up scams. The fraudster know that you have been scammed and that you are eager to get justice and recover lost funds.
Be very suspicious if you are contacted by someone offering to help you, e.g. some one claiming to be a foreign lawyer working on a class action lawsuit or someone who claims they can get to an offshore broker that the U.S. authorities can´t touch. To reduce the risk of follow-up scams, go through the formal channels and turn down suspicious and unsolicited offers of help.
It is also important to know that some follow-up scammers do not simply offer help; they will actually threaten you to get you to comply. There are for instance scammers that will impersonate governmental agencies, such as the FTC or FBI, and claim that you must comply with their demands or risk prosecution for your alleged involvement in financial crimes. You may also be told to transfer money to keep it from being confiscated.
If you are being threatened or extorted, report it to the police. In the United States, you can contact the FBI directly. Do not notify the criminals that you will involve the police, as this can compromise law enforcement´s ability to investigate.