Forex Trading Fraud

Forex Trading Fraud Warnings

A forex fraud is any trading scheme used to defraud individual traders by convincing them that they can expect to profit by trading in the foreign exchange market. These scams might include churning of customer accounts for the purpose of generating commissions, selling software that is supposed to guide the customer to large profits, improperly managed "managed accounts", false advertising, ponzi schemes and outright fraud. It also refers to any retail forex broker who indicates that trading foreign exchange is a low risk, high profit investment.

An official of the National Futures Association was quoted as saying, "Retail forex trading has increased dramatically over the past few years.  Unfortunately, the amount of forex fraud has also increased dramatically..." Between 2001 and 2006 the U.S. Commodity Futures Trading Commission has prosecuted more than 80 cases involving the defrauding of more than 23,000 customers who lost $300 million, mostly in managed accounts.

The CFTC lists 9 warning signs for foreign exchange trading fraud - read more
 
Commodity Futures Trading Commission
Release:  5312-07
For Release:  April 2, 2007

Forex Fraud

Government Charges Texas Man and his Investment Company with Defrauding Customers in Connection with Internet Solicitations

U.S. Commodity Futures Trading Commission Alleges that Foreign Currency Futures Trading Accounts Managed By Defendants Resulted in More Than $1.5 Million in Losses to Retail Customers - read more

 
 
COMMISSION ADVISORY
BEWARE OF
FOREIGN CURRENCY TRADING FRAUDS

Have you been solicited to trade foreign currency contracts (also known as "forex")?
If so, you need to know how to spot foreign currency trading frauds.

The United States Commodity Futures Trading Commission (CFTC), the federal agency that regulates commodity futures and options markets in the United States, warns consumers to take special care to protect themselves from the various kinds of frauds being perpetrated in today's financial markets, including those involving so-called "foreign currency trading."

The CFTC has witnessed the increasing numbers and growing complexity of financial investment opportunities in recent years, including a sharp rise in foreign currency trading scams. While much foreign currency trading is legitimate, various forms of foreign currency trading have been touted in recent years to defraud members of the public - read more
 

Forex Trading Scams

A forex scam is a confidence game played in the context of the foreign exchange market by "customer brokers" against fairly unsophisticated, under-capitalized "retail speculators". The U.S. Commodity Futures Trading Commission which loosely regulates the foreign exchange market in the United States, has noted an increase in the number of these scams recently.

The foreign exchange market is a zero sum game in which there are many experienced well-capitalized professional traders (e.g. working for banks) who can devote their attentions full time to trading. An inexperienced retail trader will have a significant information disadvantage compared to these traders.

The retail trader always pays the bid/ask spread which makes his odds of winning less than those of a fair game. Additional costs may include margin interest, or if a spot position is kept open for more than one day the trade must be "resettled" each day, each time costing the full bid/ask spread - read more
 

Spotting Forex Trading Scams
 
In recent years, investors have witnessed increased number of investment opportunities and offerings. While the complexity and success of these investment products vary, technological innovation has made the Forex market one of the fastest growth areas. Many of the leading Forex brokers reported up to 500% rise in the number of new retail customers. However, the growth of the Forex market has been accompanied by a sharp rise in foreign currency trading scams.

Many of these Forex scams are promoted on the radio, television, newspapers and the Internet. Investors who fall victim to these schemes, often lose all of their money.

As an illustration, let’s examine the facts of a recent case involving Forex fraud and its consequences. W learned of a foreign currency trading opportunity through an infomercial on the radio. K, the owner of a Forex asset management firm, spoke during the infomercial, promising viewers significant profits with minimum risk. After seeing the infomercial, W contacted K, and later attended a seminar presented by K and his firm. The seminar was so convincing that W wrote a check to K for $100,000 - read more
 
NATIONAL FUTURES ASSOCIATION
FOREX INVESTOR ALERT
FEBRUARY 2007

In August 2003 NFA issued an Investor Alert discussing the risks of trading in the retail off-exchange foreign currency (forex) market. Since that time, participation in forex trading by retail investors has increased dramatically. There are current 37 active Forex Dealer Members registered with NFA. These 37 firms hold over $800 million in customer funds.

Unfortunately, the amount of forex fraud has also increased dramatically. Since 2001, the Commodity Futures Trading Commission (CFTC) has filed 93 enforcement actions in federal court against hundreds of firms, owners and employees for defrauding over 25,000 customers who lost over $395 million in forex schemes. In addition, NFA has taken enforcement actions against a number of its Forex Dealer Members.

It is critical, therefore, that individuals who are considering participating in the forex market understand the risks associated with this product and conduct due diligence before making any investment decisions - read more

 

 
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