Forex fraud is something that traders definitely want to avoid. So this time we will learn about forex fraud modes and how to overcome them. Read more through the article below. Don't forget to follow the GIC Instagram account for other trading info!

Forex Fraud Mode

Trading forex has been done by most of the Indonesian and international community. With the rise of this investment, there are also quite a few forex fraud modes that have carried out many fraudulent actions out there. Therefore, you must know about what modes are usually carried out by these fraudsters. The following will be discussed.

Ponzi Method

A standard Ponzi scheme is a fraudulent investment scheme in which the operator pays investment returns from capital generated by new investors, rather than from legitimate investment profits. Ponzi scheme operators attract new investors with extremely high short-term rates of return. The fraudsters profit by charging fees on the "investments," or simply running away with the investors' funds. Ponzi schemes typically collapse when there is not enough new capital to pay the growing pool of existing investors. The scheme is named after Charles Ponzi of Boston, Massachusetts. In the 1920s, Ponzi launched a scheme that guaranteed investors a 50% return on their investments in postage coupons. Although Ponzi was able to pay his early backers, the scheme collapsed when he was unable to pay later investors.

Misappropriating Official Permits

Retail forex & CFD trading is regulated in some parts of the world by regulatory authorities. The UK has the Financial Conduct Authority (FCA), Australia has the Australia Securities and Investment Commission (ASIC), Cyprus has the Cyprus Securities and Exchange Commission (CYSEC), FSCA in South Africa, CMA in Kenya, etc. However, retail forex trading is not regulated in many countries so any forex broker operating in an unregulated region does so under a foreign license, most of which use an offshore license. A study by Safe Forex Brokers UK found that in most parts of Africa & Asia, forex trading is not regulated, but many foreign CFD brokers still accept clients from these regions.

These brokers not only accept but actively promote forex without any restrictions. While there are some well-known forex brokers with a well-regulated track record in some regions, most brokers in these regions are not regulated by any regulatory body. Unlicensed brokers operate brokerage firms and offer trading platforms to the public when a trader deposits money into an account, he cannot withdraw it. As a rule of thumb, before patronizing any forex broker in the world, you should visit the relevant regulator's website and check the list of licensed forex brokers in your country. If forex & CFD trading is illegal in your country, then you should avoid trading through foreign brokers. Always verify brokers on the Regulator's website to ensure that they are authorized & legal.

Copying Official Site

Brokers must provide information about the company name, registration date, registration location, and official address. However, there are still many brokers who have all of these things by imitating other official sites. So what traders can do is to find more information about the site. Is the site being searched for official or just a fake.

How to Report Forex Fraud

When filing a fraud report against a Forex broker, make sure you provide as much information and evidence as possible. Don't leave anything out, no matter how trivial it may seem. Here is an example of what a lawyer might need to pursue your case:
  • Email, text and/or WhatsApp correspondence between you and the scammer;
  • screenshots of conversations between you and the broker, even if they took place on social media;
  • recordings of telephone conversations;
  • bank and credit card statements showing the amounts and dates of transfers;
  • names and addresses of all financial institutions involved;
  • names of people you have dealt with.

Tips to Avoid Being Fooled by Fraudulent Investments Under the Guise of Forex

Take note of these tips that can help you identify forex scams and avoid them yourself. Now that we have covered the most important signs that identify Forex scammers, it is time to look at ways you can protect yourself. Being cautious about any offer is usually the best solution, but there are also some additional ways.

Too good to be true, it's probably a scam

Common sense will help us in this situation. If someone claims to make hundreds of pips per day without losing a single trade with their strategy, it is probably too good to be true. Even professional traders lose money from time to time. If the results are not verified by an independent third party service, you are most likely dealing with a scam.

Educate yourself

There is nothing more powerful than knowledge. Scammers usually target beginners who do not have enough trading experience to identify what returns are realistic in the market. Education does not come overnight, but over time you will find it easier to spot Forex scams even just by looking at them. Invest in your knowledge in trading and gain experience, so you will not be an easy target for Forex scams.

Do not send your personal data

Never give out your personal information! Scammers can use it to steal your identity and to attract new victims in your name. Always ask yourself – “why do they need my personal information?” If there is no clear answer to this question, do not send any personal data and stop wasting your time with the company. It is very important to know how to protect your personal information. Regulated companies must store all their clients’ personal information, such as ID cards and passport copies, in a safe place and can only use the data for their internal procedures.

Contact the regulatory body

Finally, if you are unsure whether a company is regulated or not, your best bet is to contact the regulatory body of the company's jurisdiction directly. You must first know the location of the company in order to contact the regulatory body of that country. Many regulatory authorities display a database of regulated companies on their website, where you can search and find additional information about the company's license. For Indonesia itself, you can contact Bappebti. After knowing about forex fraud, methods, how to report, and tips to avoid being fooled by forex fraud, it is hoped that you will be more careful when you want to do forex trading. You can do Forex Trading at GIC by registering yourself and not getting the forex fraud itself.