top of page

What Are The Common Forex and Crypto Scams? How to Protect Ourselves?

Changes with the Forex Regulations and lack of regulation with the cryptocurrency market has left the investors exposed to financial scams. By using various despicable tactics and scenarios, investors has continuously been victimized.

Victimization of Investors across all financial background has triggered us to write such article. I hope it helps a bit to protect the investors around the world.

Which Concepts Are More Open and Suitable for Financial Scamming?

Fund Management: Low Interest Rates or changes with the fiscal policies, has not really been an obstacle to the Investor abstain themselves investing in alternative financial tools. Scammers are aware of that and they constantly search for victims by claiming low risk high return strategies. Unfortunately, some of them manages to collect serious amount of funds and vanishes with Investor funds. This does not mean that every fund manager is a scam. However, statics does not lie and we can protect ourselves by paying attention to few details.

What Are the Main Signs?

Synthetic Trading Statements: Scammers might present you a trading statement from a demo account. Performance and profitability of a demo account can never be an indication for a real one. Moreover, scammers might partner up with a broker and have them change the prices from the back office which would allow them to present a profitable account and this can make you consider investing with them. By using the synthetic profit factor, they would try to extract more funds from you. Also, they would try to convince to collect funds from your associates with extravagant commission offers. You would not even imagine the content of the agreement between the scammer and broker. Scammer would be getting paid out of Investor losses. Once all set, nothing can stop this 2 to manipulate the prices and create unreal losses to pocket investor funds.

Is every Managed Fund a Potential Scam? What Are The Indications?

We can not generalize that every managed fund is a scam. However, it is extremely suspicious to see an exclusively winning strategy month in and month out. There are few indications we can concentrate on.

Real Account Statement: You should see a real account opened from a reputable broker and linked to myfxbook or fxblue. Reputation of both sites are rock solid and you can see the real time data and fully analyze the performance.

Logical Performance: You should seek for at least 6 month history for healthy evaluation. Constant winning performances should be an indication for a fraud. %10 to %20 monthly incomes are not realistic. Expecting a monthly average between %2-%3 would be logical.

We have mentioned about the potential fraud cases related to fund management. Unfortunately, this is not the only concept used to scam the investor. Let's have a look at the crypto currency fraudsters.

Synthetic Crypto Currencies: We came a cross a website 10 years ago and crypto currencies were not so common back than. Our first impression was great and we all thought that this is a great invention. They were claiming a creation of decentralized cloud hub and asking from investors to contribute. It seemed like a great investment and there was not anything fishy. Obviously, they could have asked a VC firm to invest in the first place. However, this guys have developed a different concept. You could only fund the project by purchasing their in house created crypto coin. We quickly realized that this is a scam when we saw the owners whom are the very same owners of a scam binary option company. They wanted to defraud the investors by using the unstoppable bitcoin rally. People still hope what if they find out the next bitcoin in early stage and they still continue to invest in alt coins with that instinct.

In time, amount of similar concepts have only increased and investor has constantly been victimized. If there had only been a regulator who approves those coins before they are enlisted, we would not have seen such incidents, but for some reasons crypto markets continue to operate unchecked. As long as countries does not act, we will continue to see this kind of projects cherish on the expense of the investor's hard worked dollars. It is certain that crypto currencies might continue to surprise people in a good way, but it does not change the fact that they are high risk investments.

The most logical action from an investor point of view, would be not to allocate more than %5 from the main investment amount since they are extremely high risk investments.

In addition to the concept we mentioned above, we can not by pass the the Sales Representatives and their aggressive sales tactics to fraud the investors. This happens when the sole purpose of the sale person is to concentrate solely on their interests.

Sales Representatives: We should all have experienced to be called by an unknown number and a guy starts to make a conversation without making a proper introduction. We call this action as cold call. They would try to contact you without your consent. Most probably, they have captured the data of a competitor and they would solicit you without your desire. We should all remember that someone does not hold themselves stealing someone else's data, will also would not hesitate to steal your money.

How Do We Understand that The Sales Representative Is a Potential Fraudster?

Cold Call: The person calling you is obliged to explain the source of the call. They have to elaborate the details of the lead acquisition. If the explanation is not sufficient to your satisfaction, the best would be to end the conversation effective and immediately.

Payment From The Site: Let's say the sales representative has convinced you to onboard and make a deposit. Please make sure to process all the payments from the broker's original website. You should also make sure to check the bank account name if the payment will be done by wire. Practically, FX Brokers or Crypto exchanges can not receive deposit under individual names. You should not send funds to a crypto wallet provided by the Sales Person. Crypto wallets does not have any names, thus funds sent to that particular account would probably end up in 3rd party wallet and funds will probably be deposited as credit which is kind of virtual money.

Investment Advice: A Sales Representative working for a regulated and reputable brokerage can not give you a direct Investment Advice. Reputable brokers would not be willing to take the risk for possible losses. If you deal with such representative, you should keep in mind that his main goal is to push you forward for a potential loss in order to push for a redeposit since that would result in more commission for him.

Actually, the source of all kinds of fraudsters are the brokerages themselves. They hold Investor funds and they have the sole responsibility for it's safety. We can easily classify Offshore and Unregulated brokers as high risk since they have the highest fraud cases. Let's not forget to mention about the possible risks and potential ways to protect your funds.

OffShore and Unregulated Brokers: Offshore and Unregulated Forex and Crypto Brokers are the initial gate for a very potential scam. Since they are not regulated, there is not any kind of safety net for them to confiscate Investor funds and disappear. This does not completely mean you can not invest in such companies at all. So far, crypto exchanges have not been regulated, but this does not mean all of them are unsafe and will cease to exist. We all use them one way or another. However, there are still options to protect yourself and analyze the broker as an Investor. 

How Do We Assess to an Offshore Broker?

Regulation: Even though they can not onboard client from the majority of jurisdictions, most of the reputable brokers has not completely cancelled their licenses. Preserving those licenses requires serious financial strength and fiscal discipline. This is a good sign for a healthy internal dynamic check and an established company DNA. Investing in an offshore entity of an established multi regulated broker might be a reasonable choice. On the other hand, we should avoid to invest in companies without history nor any kind of license.

We can not undermine the popularity of the Crypto Exchanges. Due to their nature, it is problematic to regulate them fully. Thus, it would be wise to work with an established and preferably a domestic exchange.

Aggressive Promotions: Brokers might launch very aggressive promotions to onboard new clients. Regulated reputable brokers are not allowed to offer such promotions. They cannot offer %100 bonus, 1.500 leverage or interest rate on your balance. Investors should avoid such brokers and most of the time it ends up badly for the investor. Those firms are mostly market makers and they make their money out of client losses.

Moreover, crypto exchanges might offer their own stable coin to attract more deposits. As we all have seen with FTX case, those coins are technically virtual coins without a back up of a fiat currency. Investor should avoid such promotions and exchanges.

Execution and Price Flaws: Brokers might take some unfair measures to effect the profitability. It is common among market makers to add a delay on execution which might end with huge slippages, they might even try to manipulate the prices based on the total client exposure. They may not fill the limit orders or they might fill it from a worse price which is against the nature of a limit execution. Investors should avoid such Brokers.

Tax Cuts: Some brokers and exchanges try to deduct a considerable amount from withdrawals under tax payment. In worse scenarios, they ask you to send the amount upfront in order to execute the withdrawal request. In most cases, you end up not getting your funds and plus you make a tax payment.

According to International Legislation, Forex Broker or Crypto Exchange are not entitled to make any tax deductions unless it is domestically regulated. Therefore, the moment Investors face such a request, it would be wise to cut the ties as quickly as possible.

We tried to share our experience and deep insights regarding the financial scams related to Forex Brokers and Crypto Exchanges. I hope this article would help you to make a right choice.

If you have any further questions, please do not hesitate to visit us at 

bottom of page