I think we can all agree that fraud is a bad thing, even though it still goes on. I’m willing to bet everyone reading this post right now has been the victim of fraud or knows someone who was. Personally, I have had the misfortune of being conned several times, a few of those in this Forex industry. My story is a combination of clever trickery and ignorance on my part, but the good thing is that I learned from my mistakes. Every day I browse through online forums and Forex broker review website, there is no shortage of FX broker scams, and it seemingly isn’t going to stop unless someone does something about it. I am not too naïve to believe I will be the one to end scams in the Forex industry, but I can make an impact, however small, on everyone that reads this post.
As I experienced myself, scams within the Forex market and even elsewhere usually have more than one party to blame. You may not want to hear this, but you are partly to blame if you have ever been the victim of a scam. That is where we are going to start in this post. We shall look at some scams that have happened in the past so that you can see that you are not the only one to fall for them. Then we shall look at some of the warning signs based on those past cases that will help you spot a scam in the future.
Most of the time, the scams we hear on the news involve the stock markets, but that does not mean the Forex market isn’t as prone to the same. In fact, there have been some newsworthy Forex scams in history that had managed to con investors with millions worth of capital.
One of these was the Black Diamond case that was prosecuted by the CFTC from 2011 and concluded in 2015. The name Black Diamond was used by the CFTC to simplify the extent of the scam itself. Starting in 2007, one Keith Simmons had launched the Black Diamond Capital Solutions, LLC. The company solicited clients with the promise that their funds would be used to invest in the Forex market for huge returns. Among the promises were:
Since these Forex schemes started in 2007 until the time it collapsed in 2009, there were about 240 investors who had made deposits worth about $35 million. The scam had got so profitable in its two-year short lifetime that Keith Simmons had brought several partners into the fold. These included Deanne Salazar of Life Plus Group, LLC and Black Diamond Holdings, LLC. Then there was Bryan Coates who ran 4 separate companies including Safe Harbour Ventures, LLC and Divine Circulation Services, LLC and two more.
10$
N/A
N/A
1:500
2019
MT4, WebTrader
€10
Vanuatu
Rolling Swap, Contest
1:500
2004
MT5, WebTrader
N/A
MFSA
1:30
N/A
Custom
N/A
FCA
N/A
N/A
2019
MobileTrader
200 USD
Hellenic Capital Market Commission, (German branch is registered with BaFIN), Follows MiFID regulations.
N/A
30:1
2017
Xcite Platform, Mobile Xcite, Web Xcite
$500
N/A
N/A
1:200
2018
MT4
$200
CIMA
Yes
500:1
2018
WebTrader
100 GBP/EUR,150 USD
FCA, FSC
N/A
1:300
2006
Trading 212
250$
CySEC
N/A
1:30
2018
MT4, MT5
25$
CySEC, ASiC
N/A
1:200
2003
MT4, WebTrader
$200
FCA
1:200
MT4, WebTrader
5$
FCA
N/A
1:200
2005
MT4
$200
ASIC
1:500
2017
MT4. MT5, WebTrader
$200
CySEC
N/A
1:400
2017
MT4
$100
FSA
N/A
1:200
2018
MT4
$200
CIMA
1:500
2017
MT4
$500
CySEC
N/A
1:200
2014
MT4
$100
N/A
$30 Signup
1:300
N/A
MT5/Proprietary
5$
N/A
30%, 100% bonus
1:1000
2015
MT4
$0
VFSC
N/A
1:500
N/A
MT4/Mobile
$250
N/A
20%-100% Deposit
1:500
2012
Proprietary Desktop
5$
CySEC
N/A
1:200
2015
Sirix
100$
N/A
N/A
1:200
2018
MT4
200$
CySEC, FCA
N/A
1:100
2008
Custom
100$
FCA
N/A
1:300
1996
Custom
$10
SVGFSA
10% Welcome
1:500
N/A
MT5/MT5
50 US (10 USD for Cent accounts)
The Financial Conduct Authority of the UK (FCA), and the Financial Services Commission of the Republic of Mauritius
N/A
Unlimited
2015
MetaTrader 4, MetaTrader 5
$100
SCB, ASIC
N/A
1:500
2016
MT4, MT5, WebTrader
100 USD
Vanuatu Financial Services Commission (VFSC)
N/A
500:1
2004
MetaTrader 4, MetaTrader 5
$10
N/A
20%
1:1000
2014
MT4
50 EUR
CySEC
N/A
1:30
2019
Custom
$100
CIMA
N/A
1:400
2008
MT5/Sterling Trader Pro/Rhino Trader
$200
ASIC, IFSC, CySEC
Max. 40%
1:500
2007
MT5/Mobile
$100
N/A
N/A
N/A
2004
Custom
1$
ASIC
N/A
1:200
2019
Custom
$200
FCA
N/A
1:50
2020
MT4, MT5
$250
N/A
N/A
1:500
N/A
MT 4
$100
SVGFSA
100% Smart Bonus
1:1000
2006
MT4
$250
SVGFSA
10%/20%/30%
1:400
N/A
WebTrader/Desktop
$30
VFSC
N/A
1:200
2018
MT5
$250
CySEC
N/A
1:30
2015
MT4, WebTrader, MobileTrader
$500
MiFID, CySEC
MiFID, CySEC
1:30
2015
WebTrader 4
$10
FSC Cook Islands
N/A
1:500
2018
MT4, MT5, WebTrader
$250
IFSC
15% Refferal
1:500
N/A
Desktop/WebTrader
50 USDT
N/A
5%/10%/15%/18%
1:200
2017
WebTrader
$250
N/A
100%
1:100
2017
WebTrader
$100
CySEC
N/A
1:200
2016
MobileTrader
$1
N/A
N/A
1:200
N/A
MT4/WebTrader
$10
N/A
Deposit Bonus Up To 35%
1:1000
2010
MT5
$5
MFSA, VFSC, LFSA, BFSC
N/A
1:1000
1999
MT5, DTrader
2500 EUR
N/A
N/A
1:100
2018
WebTrader
100$
ASIC
N/A
1:500
2019
MT4, MT5
100 USD
SVGFSA
N/A
1:1000
2012
MT4
100 USD
FSC (British Virgin Islands)
35 USD welcome bonus on 1st deposit
1:1000
2010
MetaTrader 4, JRFX App
$500
IFSC, FCA
N/A
1:1000
N/A
MT4, cTrader
250$
N/A
N/A
1:200
2016
MT4
250$
N/A
30%
1:200
2018
MT4
1$
FSA
N/A
1:200
2018
UTIP
500$
N/A
N/A
1:20
2018
Custom
$50
ASIC, CySEC, CMA
N/A
1:400
2006
MT4
$300
N/A
N/A
N/A
2018
Web
250 USD
N/A
N/A
100:1
N/A
Custom
100$
N/A
N/A
1:500
2017
MT4
10$
IFSC
N/A
1:1000
2014
MT4
$200
LFSA, CySEC
20% Deposit
1:500
2016
MT4
100$
N/A
20$
1:400
2016
MT4
$500
N/A
N/A
2013
N/A
$500
N/A
N/A
MT4, WebTrader
500
N/A
N/A
N/A
N/A
Browser
100 USD (50 with bank cards)
Unlicensed
100% trading bonus
1:1
Unknown
Custom
$200
N/A
75%
1:400
2018
MT4
$300
N/A
N/A
1:400
2018
MT4
$300
N/A
N/A
1:200
2015
MT4, WebTrader, MobileTrader
5$
IFSC
N/A
1:1000
2010
MT4
500$
N/A
N/A
1:200
2016
MT4
$250
CySEC
N/A
1:30
2017
MT4, WebTrader
100$
N/A
N/A
1:100
2017
MT4
$200
BFSC
N/A
1:30
2017
WebTrader
250$
N/A
N/A
1:500
2016
MT4
100$
SFSA
$50
1:300
2017
MT4, Webtrader, Mobile
1$
N/A
N/A
1:100
N/A
MT4
$200
N/A
N/A
1:30
2017
WebTrader
500$
N/A
N/A
1:200
2017
MT4
$0
N/A
100 DOGE
N/A
2019
Web
€250
N/A
N/A
1:100
2018
WebTrader
250 EUR/GBP
N/A
15%
1:200
2018
WebTrader
$1,000
SVGFSA
25%
1:500
2018
Web Trader/MT5
€1,000
N/A
N/A
1:20
2017
Web Trader
€250
N/A
N/A
1:400
2019
WebTrader
N/A
N/A
N/A
N/A
N/A
N/A
250 GBP/EUR
N/A
N/A
1:500
2019
WebTrader
$500
N/A
N/A
1:500
2019
MT4
$250
FSU
N/A
1:100
2019
WebTrader
$10
FSA
$5000
1:1000
2018
MT5
250$
N/A
30%, 40%, 60%, 80%, 100% deposit bonus
1:200
N/A
Custom
$5
FSA Seychelles, FSCA South Africa, VFSC, CySEC (for institutional traders)
25$
1:1000
2020
MetaTrader 4, MetaTrader 5
$1
MISA, MWALI
100%, 333%, 5000%
1:3000
2022
Zetradex app, Zetradex web trader
No limit
FSA
25%
1:1000
2007
MT4, MT5, WebTrader
500 Euros
N/A
Loyalty Bonus
N/A
N/A
N/A
€250
N/A
N/A
1:200
2018
MT4, WebTrader, MobileTrader
$250
CySEC, FSC (Mauritius)
Refer a Friend, Deposit Bonus
1:400
2016
MT5
25$
FSA
N/A
1:1000
2005
MT4, Custom
100$
N/A
N/A
1:400
2015
Custom
500 USD
N/A
N/A
1:600
N/A
MT 4
250£
N/A
N/A
1:200
2017
Custom
0$
CySEC, FCA
N/A
1:200
2014
MT4
100$
FCA
N/A
1:500
2015
100$
CySEC
N/A
1:100
2016
MT4
500$
N/A
N/A
1:20
2019
Custom
100$
CySEC
50$
1:100
2007
MT4
100$
SIBA
N/A
1:200
2012
MT5
100$
N/A
N/A
1:200
2011
MT4
500$
N/A
N/A
1:100
2009
MT4
250$
N/A
N/A
1:100
2007
MT4
1000$
N/A
N/A
1:100
2005
ActTrader
100$
N/A
N/A
1:500
2005
MT4
100$
CySEC, FCA
N/A
1:100
2009
Trading Station
100$
CySEC
N/A
1:200
2011
MT4
0.0005 BTC
N/A
N/A
N/A
2018
WebTrader
$250
N/A
N/A
N/A
2006
N/A
40 GBP
N/A
N/A
N/A
2019
N/A
$250
N/A
N/A
N/A
2018
Browser
$250
N/A
N/A
1:400
2019
WebTrader
250$
N/A
N/A
1:1
2016
Web
250$
N/A
N/A
1:1
2015
Web
250$
N/A
N/A
1:1
2016
Web
250$
N/A
N/A
1:1
2016
Web
250$
MIFID
N/A
1:200
2015
MT4, WebTrader
$100
N/A
N/A
500:1
2015
MT4
250$
N/A
N/A
1:500
2013
Custom
5$
N/A
up to 5000$
1:1000
N/A
MT4
250$
N/A
N/A
1:100
2017
Custom
$100
N/A
N/A
1:1000
2018
cTrader
$300
MFSA/MIFID/FCA/BaFin/AMF/CONSOB
N/A
1:100
N/A
MT5/Mobile
100 USD
Kazakhstan
None
1:2000
2020
MT4 WebTrader
Starting in 2011, the investors figured out that it was just a Forex pyramid scheme because they were no longer able to withdraw their funds, nor were they getting the 4% returns they had been receiving in the first two years. By the time the case was concluded, the total fines imposed on the defendants totaled $76 million and they were all given jail sentences.
This scam regarding the Forex market has some of the main markers of a scam that we can all learn from to avoid future scams. To see where the scam lies, I usually like to look at what the company promises its clients. In the case of Black Diamond, they had some pretty unrealistic promises that should have been a red flag. For example, they promised a 4% monthly return! That is a 60% annual return. That right there should have been the first warning sign which everyone should have been skeptical about. Do you remember the Bernie Madoff case? Experts during the scandal were criticizing the investment as being unrealistic when it was just guaranteeing a 10% annual return. Now here comes one that promises 60% annual returns, which makes me wonder why the investors fell for it.
Another sign of an FX broker scam has to do with the company itself. Black Diamond Capital Solutions, LLC, ran by Keith Simmons was never licensed to operate as an investment firm or regulated by the CFTC in the US. Neither were any of those other companies that joined the scam later. This is why I always advise anyone seeking to invest money to do their research on the legitimacy of the company and to, most of all, confirm whether they are regulated. Apparently, those 240 investors didn’t do any of this, and they ended up losing their money. Fortunately for them, they eventually made some of their money back, but not all victims in the past have been so lucky.
Consider Gerald Leo Rogers who ran Premium Investment Corp., TriForex International Ltd. and InForex Ltd. In just a year between 2004 and 2005, the perpetrator had made away with almost $30 million in clients’ funds before being caught. Even then, he only returned $11 million to the defrauded clients, which was about 40 cents on the dollar. The scam ran by Rogers was quite tricky because the transactions and dealings were conducted offshore, which made it difficult for the authorities to get the money back. This shows that investors don’t always get lucky when they fall for fake Forex brokers.
I don’t mean to praise these scammers, but most of them are usually very smart people. I can’t see how an idiot could put together a scam that made tens of millions of dollars. However, just as the scammers may be smart people themselves, it doesn’t mean they don’t have tells because they usually do. If you can observe these tips, therefore, you will be much less likely to fall for a scam in future. So here goes:
We always talk about finding out if a retail Forex broker is licensed and regulated, but you also need to find out everything you can about the company itself. Warren Buffet once said that he invested only in the companies he knew very well, and not just those that seem profitable. This would explain why he hasn’t invested in cryptocurrencies and continues to discourage others from doing so. Anyway, before you make that deposit, find out as much as you can about the company itself.
In the case of Black Diamond and other Forex frauds, the investors would have quickly learned that there was something suspicious about it by looking at its structure. First, it wasn’t licensed to operate in the US and not regulated by any financial regulator. Furthermore, it wasn’t even based in the US. As for Gerald Rogers, the guy had previously been convicted for fraud and was actually on parole when he created Premium Investment Corp. As you can see, these two major FX scams could have been avoided simply by doing a bit of research into the companies and the people behind them. To put it simply, make Google your friend before making the leap.
If there is one thing the internet has made very easy to access is information. I personally don’t like how much time people spend on the internet sharing their problems, but in this case, I do appreciate it. For example, last year when there was a wave of ICOs being launched, much of the information I got as from online forums and social media, and that helped me weed out the bad apples. You can also use this resource to learn more about a Forex broker and avoid Forex brokers scams.
However, you need to be careful where you get your information because there are some review websites that are used by the fraudulent brokers themselves to spread the fake positive news. It may be a bit tricky to select the good review websites from the bad, but you should look at whether the comments seem faked or inconsistent. Fortunately for you, I have made a separate post to cover this exact problem in more detail.
In the first case of Black Diamond, the most obvious sign that it was all a Forex brokers scam was in the extent of promises made by the company. Always remember that, when the deal is too good, think twice. When it is extremely good, assume the worst and run. For example, the most successful hedge funds make about 5% in a good year, so anything above that should be enough to raise your eyebrow. Then look for any signs where the broker tries to downplay the risks involved. Forex trading is a very risky venture, perhaps even riskier than most other forms of investment.
Therefore, if the broker tries to promise that there are minimal risks or none at all, just assume that they are lying. Consider what the most recent Forex regulations set out by MiFID II require that all Forex brokers indicate clearly that Forex trading is extremely risky. Moreover, they ought to warn traders that it is possible to lose more than you initially invested. As a result, do not believe anyone who claims that there is only minimal risks involved.
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