Britishers lost over £27 million to forex and crypto scams throughout 2018/19. The average money lost in such scams stands at £14,600.
And that’s merely the tip of the iceberg. A simple Google search about forex scams in the UK returns hundreds of thousands of results. According to experts, most of the scams start with the promise of unlocking the secrets of forex trading and promising unbelievable returns with a small investment.
Scammers use social media, phone calls, emails, and advertisements to entice forex enthusiasts. Once they make a connection, fraudsters use multiple convincing, high-pressure tactics to dupe investors of their hard-earned money.
The critical question is whether it’s possible to identify and protect yourself from these scams. Yes, it is possible, and we’re going to help you identify forex scams with some simple techniques.
How Brits lose thousands of pounds every year on forex scams
The Financial Conduct Authority puts the total number of scam reports at 1,800 during 2018/19, but experts believe that a significant amount of these cases are never reported.
According to a report published in the Guardian, a fake operation run out of Ukraine operated with an army of over 200 traders, and the firm made over £55 million through frauds last year. The ads run by the fraudsters on Facebook and various mobile games featured celebrities like Hugh Jackman, Gordon Ramsay, and Martin Lewis.
In another recent scam, a fraudster featured as a successful trader on Instagram and enticed people with his extravagant lifestyle, expensive cars, and luxury vacations. Dubbed as a Gurvin Singh, the scammer duped over 1,000 people of £3.5 million. Singh operated using a website, social media, and a fraud firm registered overseas.
What surprises most is the amount of preparation forex scammers put in their operations and the lack of information among new investors that land them directly in such traps.
How to spot a forex scam using these signs
If you’re a new forex trader or investor planning to get started in forex trading, here are some tell-tale signs of a potential forex scam.
Broker isn’t listed on the FCA register
Every forex broker is required to have a registration that permits the firm to operate, serve clients, so as soon as you get a call from a forex broker, the first thing you need to do is to check their registration.
Visit the FCA website and check the register against your broker’s credentials. If you can’t find the broker on the register, check the FCA’s Warning List. The FCA adds any potential scammers or shady firms to this list. You can call the FCA’s consumer helpline for further details.
Here is a list of a couple of firms in the FCA’s Warning List:
Can you see a pattern here? Scammers are using names of established national as well as international companies to avoid suspicion.
You must understand that it’s quite common among forex scammers to maintain a website, phone number, or email as a part of the fraud. The trick is to do your research first.
Broker promises guaranteed returns on trades
An obvious sign of a scam is overselling or phoney investment advice. The involvement of risk is a fundamental law of any financial investment, so if a broker says otherwise, you should run to the hills immediately.
Victims of one of the scams we discussed earlier, involving Mr Singh, cited guarantees and assurances from the fraudster.
One must understand that most of the forex scam artists allure investors with exciting returns, so as a rule of thumb always ignore brokers who promise a too good to be true deal.
Broker uses multiple pressure tactics to force a deposit
Any legitimate broker would want his customers to take a look at the platform, get comfortable with dummy trading or demo account, and then move forward with a deposit.
But in the case of a forex scam, the entire cycle is reversed. Scam artists use a variety of techniques to pressure or overwhelm investors into making a deposit. Victims of scams have reported being bombarded with broker calls.
Most forex scammers would have you deposit a small amount of money initially, and they might even offer returns to allure you into adding more funds. Once you invest a sizeable sum, the scammers have what they want, so they disappear.
As a customer, you should never get into pressure tactics. Make it as clear as possible, and if the ringing continues, report it to the relevant authorities.
Broker disappears after a couple of weeks
The standard modus operandi of most of the shady brokers is to provide top-notch service in the first couple of weeks and be evasive as soon as the investor deposits a large sum.
The scam operation run by Singh, referenced above, followed the same routine. The fraudster even showed fake trading account records to convince investors to put in more money, only to disappear later.
Whenever you engage with a broker, make sure that they’re accessible, have trustworthy reviews, and are listed on the FCA list.
There is no background info available
Another way forex scams attract people or gain their trust is by showcasing testimonials or guest appearances on prestigious publications. However, what most people don’t do is to follow through on these links. There are high chances that either these links are dead or they redirect you to a completely irrelevant website.
Additionally, you are unlikely to find any background information on such brokers, apart from some fresh forums or low-authority websites. That should be more than enough proof to stay away from the broker.
What you can do when a forex scammer contacts you
The world has become highly interconnected, making it easier for scam artists to victimise innocent investors. But, you’re not alone or helpless when it comes to dealing with scams. Be proactive, do not engage with a shady party, and always seek expert help if in doubt.
Have you been a victim of a forex scam? Do you have any questions regarding forex scams? Kindly share them in the comment section. Our team will be more than happy to help.