By ForexFraud.com
Investors beware! Summer is just around the corner, and the one thing that you can count on is that the criminal element in our society has polished up their best schemes to defraud and is preparing to launch their seasonal offensive to fleece a new round of unsuspecting fools. When there is money involved, especially in any investment field, you can be assured that fraudsters are on the sidelines ready to pounce. Awareness is the best defense, but it often helps to review where others have defrauded over time.
One of the most popular investment mediums over the past decade has become currency trading and all of its various forms, whether it pertains to an individual trader, using an account manager, or accessing many of the various products and services related to the craft. During the early years of retail forex following the millennium crossover, the industry was like the wild-wild west. Forex brokers were openly unscrupulous, manipulating accounts for their own gain or disappearing with customer deposits, never to be seen again.
The Commodity Futures Trading Commission (CFTC), the federal agency responsible for regulating currency trading, took action and has, over the past few years, rid the industry of its most blatant criminals. Their actions did not stop with cleaning up the broker community. They were also forceful in jailing crooks in all supporting arenas and in educating the consumer about the risks and what a potential fraud looks like.
Today there is a great deal more information on the record about various forex brokers, making the selection of your business partner behind the scenes a little less troublesome. There are ample review sites on the web. The CFTC publishes an annual listing of registered brokers and their capital and trading volumes. Due diligence is now a much easier task than it was years ago. (For more broker information, click here).
What are the various types of scams to be wary of in today’s market? Let us accept for the moment that there are many reputable domestic forex brokers available to support your access needs. Marketing claims from brokers located overseas may tempt you, but the CFTC cannot be active in these foreign jurisdictions. You must rely on other regulators, but risk and tax issues will be higher.
The first lesson to learn from past mistakes with brokers is to be wary of “marketing claims”. Every fraudster’s first objective is to sink the hook in really deeply, and he does this by relying on our inherent greed and the desire to get rich quick. Nearly all schemes depend on this shortcoming of human nature. Caution is the best path to take. Be skeptical at the outset.
This lesson applies especially to all forex related sales of services and products. The most notorious of these have to do with software trading systems and signal providers. Yes, there are legitimate products out there, but there are many hucksters promising outrageous returns and success rates that boggle the mind. In these cases, small amounts may be involved, but when you attempt to get a refund, all bets are off.
The largest frauds in foreign exchange, however, relate to Ponzi schemes and their many variations on the same theme. The most famous one in recent times involved Trevor Scott and two of his associates in Minnesota. Starting in 2005, Scott bilked over 700 investors out of $194 million, many from elderly retirees.
Scott used a Christian radio talk show host to assist him in rounding up his victims. He claimed to have over $4 billion under management and used early collections set up shop in the historic Van Dusen mansion, just south of downtown Minneapolis. Impressive computer screens and electronic equipment convinced unsuspecting investors that a sophisticated trading room was raking in the profits. It was all a façade. Scott and others are now serving jail sentences in excess of 20 years for their crimes.
“Beware the tipster” is the lesson with these “affinity” Ponzi schemes. There are several more cases where credibility was promoted through an ethnic community to gain access to easy marks. Notable cases have involved the Hispanic community in South Florida, as well as the Caribbean and the African-American communities of Brooklyn. In each case, fraudsters used phony trading credentials and bogus account statements to legitimize their fraud. (For more information, click here).
The moral is keep your greed in check. Be skeptical of outrageous marketing claims, and remember that being forewarned is being forearmed.
