Technical Analysis

Everything You Need to Know About Forex Scams and Trader Fraud

It’s the great mystery of the social media age: This person makes that
much money doing what?

A mental step back, maybe a cup of tea, and a few moments of collected
thought will probably lead you to some obvious if annoying truths:

  1. That
    one is extremely
    good-looking and is a 7-out-of-10 dancer.
  2. This
    one knows how to change
    their personality so that it connects with small children
  3. The one over there is really good at a particular video game.

That’s all pretty reasonable in today’s influencer economy.

But there are still some inexplicable outliers. Why, at the bottom of
your friend requests, are there so many people who apparently made their
fortunes from forex trading? And why are they wearing the same aviator
sunglasses, posed against the same expensive but tasteless cars, looking out
over the same sunset vistas? And who carries around a briefcase full of cash,

Forex is a portmanteau derived from foreign exchange. As a financial
vertical, foreign exchange investment is traditionally in the form of arbitrage
opportunities. Sums of money are moved between different currencies in order to
take advantage of small discrepancies in exchange rates, turning a profit.

Forex fraudsters, that’s who. And their lavish insta-lifestyles are as
fake as the opportunities they offer.

A typical example might look like: a forex investor exchanges USD to
euros, then euros to Hungarian forints, forints to RMB, then back into USD,
perhaps ending up with a profit of 0.2% of their initial investment. With a
0.2% ROI, very large sums of money have to be wielded in order to make a
worthwhile profit – 0.2% of one million dollars is $2000.

Forex fraud, thus, is any sort of malicious activity within the forex vertical. In a general sense,
any activity where information was misrepresented, and that information led to
a foreign exchange investment that never had a realistic chance of developing
returns, could be considered forex fraud.

While there are certainly enterprise-level scams within the forex
exchange community, the most common example of forex fraud for most people will
happen in their social media channels.

What Do Forex Scams Look Like?

Many forex scams du jour will generally be promoted by a network of
“affiliate marketers”.

These accounts will be fine-tuned to capture the imaginations of the
vulnerable, touting designer brands, imported cars, exotic vacations, and of
course inexplicable wads of cash. The lifestyle shown will be presented as something easily achievable, or as an
as-yet-undiscovered secret. With true marketing team savvy, the text will be
optimized to be eye-catching, with exciting statistics and evocative emojis.

In August 2022, a BBC special recounted how unlicensed traders stole
£3.8 million from legitimate forex customers by manipulating them with false
signals and not letting them access their funds.

At this point, many people might notice the strangely empty,
movie-set-like quality of the posted photos. There may even be a small,
instinctual voice that says, “something’s not quite right here”.

But maybe not.

If this at-a-glance marketing ploy is successful, a potential victim
may start reading the content of the fraudulent forex trader. Their posts will
promise huge returns on relatively small investments, taking advantage of
newbie enthusiasm and pitfalls in trading psychology. They might be willing to share the
secrets of their success, provided you join their investment group – membership
payable via BTC only.

From here, even without knowing that a huge return on a small
investment is impossible in forex
trading, all but the most impressionable will turn back. But the
impressionable, the never-before-scammed, make up a significant number of
people, and a significant potential return for fraudsters.

After converting their fiat currency to Bitcoin and sending the initial
investment, the victim will be invited to a group on a messenger app like
WhatsApp. There, the fraudster will assure them that their money is available
anytime – it’s actually already gone – and their investment is reversible and
covered by SEC/FCA mandate – it’s not. In the group chat, each “investor’s”
money can be seen increasing in value, potentially leading them to invest even
more, but attempts to withdraw it will be met with threats. Eventually,
inevitably, the number will zero out, or nearly so.

A small consolation: after the Bitcoin left the victim’s account, their
return was always going to be zero anyway.

There will be no recourse for recouping the lost money. Cryptocurrency
in general has no infrastructure to trigger an automatic reimbursement. Contacting
the apparently wealthy original influencer will result in no solutions. After
all, that influencer was always just an affiliate marketer, posing for pictures
in a lifestyle that an offshore, investment bank paid for.

Forex Fraud on the Rise

Social media-based forex fraudsters have settled on a working formula
when it comes to enticing new victims. Their Instagram pages are designed to
make young peoples’ get-rich-quick brains percolate.

For the most connected and tech-capable generations, it’s much more
likely to rub shoulders with a fraudster than in the unconnected world. By the
same avenue that the internet and social media make the world smaller and
closer together, so too do they connect the young and innocent with the cynical
and malicious.

Many of us learn our most valuable lessons through the process of trial
and error. We might waste five dollars getting upsold, or get scammed out of
twenty by trusting the wrong person. Relatively small mistakes, and ones that
can inform your inner trust barometer when you find yourself being pursued by a
forex “influencer”.

However, getting duped by a forex fraudster running a glorified Ponzi scheme is a decidedly more expensive
first lesson to learn. Keeping educated on the potential dangers and warning
signs is a less expensive option, albeit less tearful and thus potentially less

Tips for Spotting Forex Scams

Even if you have a skeptical brain from a lifetime of experience,
shifting those experiences to social media can be a challenge. What do the
traditional, on-the-ground scams you’re already familiar with look like when
they’re on Instagram? What’s the forex fraud equivalent of three-card monte?

What sophisticated, efficient fraud prevention does involves
scrutinizing a user’s behavior at various touchpoints, enriching what we can
observe with additional data points to determine the likelihood they are

What does this look like on the side of platforms, exactly? There are
ample examples, based on the industry. For example, in banking, digital onboarding can be a
challenge because challenger banks look for the most seamless, user-friendly
experience but they still cannot afford to become victims of fraud.

So the idea is to gather data at this stage and evaluate it behind the
scenes. This applies to forex, too. Digital onboarding, authentication,
know-your-user protocols, deposits, payouts, and several other customer actions
can all be studied in real-time to assess how risky they are.

A high score indicates a high risk of fraud. Similarly, here is a list
of potential red flags that your brain should be considering when someone
approaches you on Instagram with a too-good-to-be-true deal (adjust your
personal risk threshold accordingly):

Unsolicited contact: Serious investment bankers don’t “cold call” through
Instagram. An unknown person reaching out to you offering a great opportunity
is actually offering anything but.

“Risk-free” or “No downturn” investments: No investment is risk-free, and every market
has periods of downturn. Characterizing an investment opportunity as either of
these things is an obvious misrepresentation, and should be treated carefully.

Requests for personal information: Not exclusive to forex scams, anyone
approaching you online asking for personal info should be kept at a distance.

Dangling unrealistic returns: Wordings like guarantees of large returns on
small investments, or being just a few steps away from wealth if you just continue down this path, should
make you wary, as no such investment opportunities actually exist.

Unconvincing clout: Forex scammers will be trying to convince you of their
legitimacy, and will often overshoot reasonability. The person with the lavish
Instagram account will also be a VP, cite other big investors, or be sitting on
a big secret they’re willing to let you in on. People with real clout like this
don’t go about advertising it, particularly to strangers.

Suspicious velocity/currency: Scammers will want to “close deals” by
impressing a sense of urgency on the “deal”. There may be only hours or days to
become an investor, pressuring you into making a fast (bad) decision. As well,
payment via a method that you aren’t familiar with is an easy way to keep you
rattled and compliant. Be wary of people asking you to pay in BTC or through an
app you’re unfamiliar with.

Staying Frosty and Fraud-Free

Though it’s unadvisable to invest money through anything but a trusted
broker, there are ways to keep yourself as secure as possible beyond a cagey
disposition and good working knowledge of the fraud landscape.

Real-time data lookups give you a massive pool of information on any
(legit) online persona. This way, personal data points provided by an
apparently legitimate “forex trader” can be checked for validity.

You will find out how risk-prone this person is based on their device,
connection details, and overall digital footprint, or if they appear on any
sanctioned lists like PEP or OFAC. If they have provided a fake name, you will
see just how unrealistic the digital presence of Thick McRunfast is, and why
they should not be trusted.

And why should forex platforms care? Simply put, users reward good
service, and punish those platforms that do not protect them. At the very
least, a platform may incur chargeback requests and consumer complaints. So
everyone benefits from the prevention of forex fraud. Everyone except
fraudsters, that is.

Though there is no definitive way to ward off the occasional bout of
gullibility, having a strong checklist for suspicious behavior is a good
fallback plan when interacting online. Fraud-fighting technology provides a
massive digital checklist, but the other half of the battle is making sure you
have your own.

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