Forex Frauds in Canada: How to Catch & Bypass Different Forex Scams

Of all the Internet-enabled innovations, the most common that convinces people is — how can they ‘Get Rich Quickly.’

The global forex market is worth more than $753.2 billion, making it a hot commodity for fintech professionals, ordinary investors looking to maximise profits, and even fraudsters.

Let’s look at some fraud red flags and warning signs in forex that can scam you if you are not careful.

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What is Forex fraud?

A Forex Fraud is a general term for fraud in foreign exchange trading. There are many high-profile examples of Forex scammers using social engineering to commit large-scale blunders. At times, forex scams can be as small as password compromises and account takeovers. But other times, they can be deadly.

The common goal of all masquerading forex scams is to steal funds from unsuspecting individuals or organisations. 

Why do people get scammed on Forex?

Forex trading has become a major online industry, and by its very nature, it promises both profit and risk. Additionally, regulations are constantly changing, and authorities are concerned about the potential for money laundering. Hence, it is a target area for cheaters and scammers.

To understand how you can be tricked into sending large amounts of money, let’s first look at the financial opportunities legal foreign exchange trading offers. In other words, what pretext do scammers use to lure victims? 

Derivatives and Speculations

First, there are derivatives and speculations where trades are executed based on market forces or potential movements in related interest rates. These instruments can be used for pure profit speculation or volatility loss mitigation. Since it is a derivative, it is not a currency but a financial product like insurance against currency fluctuations.

Forex Arbitrage 

Then there is a Forex Arbitrage, where two parties agree that they will buy one currency and sell another on specific dates to profit from exchange rate fluctuations or limit losses due to exchange rate fluctuations. Profits come from exchange rate differences, so a large investment is required to deliver value. While not strictly illegal, it is widely disliked and often violates forex trading terms and conditions.

While there are reputable (and large) companies doing business in the forex world, individual forex retailers, which account for just 5.5% of all transactions, are not profitable as advertised by scammers. 

Front end Forex scams and frauds

Typical front-end forex scams include:

• Forex pyramid schemes – Scammers pretend to represent forex exchange, investment groups, or account management firms to solicit investors. A fee is charged in a typical pyramid scheme, and investors are encouraged to attract more people. Some plans may pay a small initial profit to convince the investor that the scheme “works,” but the mastermind takes away all the invested money.
• Fake signal trade bot sellers – Scammers can accurately tell customers when to buy or sell forex based on their expertise or some form of trading software and charge a premium for these services. But most of the time, they only charge for fraudulent services, using invented numbers to “prove” the value of their software.
• Fake forex brokers or account managers – Here fraudulent entities wielding the call of a valid forex exchange broking will provide to deal with your investments by handling your entire account and otherwise folding your budget into a current portfolio. However, it will drain the account and document fake returns until the rip-off is discovered.
• Fake funding fraud – Here you will see fake representatives displaying off flamboyant existence to lure people through Instagram or different social media. They use their obvious achievement to attract “traders” to their faux foreign exchange exchange and steal all of the invested cash. 

Backend Forex fraud targeting FX firms

For reputable forex exchanges, brokers, and account managers, backend forex fraud poses an even bigger problem when security is not a priority. While front-end fraud is mostly trust-based, most attacks against forex exchange security gateways do not require human vulnerability.

Backend forex scams involving account takeover and bots typically involve fraudulent activities aimed at manipulating the forex market for personal gain. 

• Account takeover refers to unauthorised access and control of someone else’s forex trading account. Scammers employ various techniques to access these accounts, such as phishing attacks, malware, or social engineering. Once they have control, they can manipulate trades, withdraw funds, or perform malicious actions without the account owner’s knowledge.
• Bots – Bots are automated software in the forex industry; people are using these to manipulate users to execute fraudulent trading strategies. Sadly there is a possibility to drive them to trick users further.
• Pump and Dump Schemes – This strategy is brilliant, and the frauds can employ different approaches that can cause the inflation of some currencies. They achieve this by spreading false information so more people are attracted. This strategy can cause huge losses because scammers can sell their holdings after a specific time. 

What does Forex fraud look like? Case study

In late summer 2022, the BBC published a revealing article about a typical forex scammer.

• Scammers’ digital footprints initially appeared to be just Instagram accounts that glittered with flashy emojis, expensive cars, extensive swimming pools, and lots of cash.
• The account in question briefly gained notoriety after sharing a video of them handing out money while holding hands in a busy UK street.
• Investigative journalist Mobeen Azhar delved deeper into the network of recruited ‘investors.’ 
• His play reveals a story sadder than roadside generosity. One victim has reportedly invested after being attracted by the scammer’s significant online presence. After sending the money, the victim allegedly watched the profits grow through a private WhatsApp group until he was told the balance was almost zero.
• The so-called investment group operates in the Bahamas, outside the jurisdiction of the FCA, and his funds were gone as soon as they were transferred.

The face of this type of scam may change; perhaps the same scammer will target victims through the metaverse tomorrow, but the red flags and intent remain the same.

Forex Scam prevention and red flags

Fraud in the forex trading industry wears many masks and approaches from many angles. Alongside research, education is vital for anyone looking to expand their financial horizons into Forex. 

Who are you investing in? Who can you trust? 

It is an essential factor in avoiding falling victim to evil schemes.

It is important to remember that forex exchange trading is inherently risky. But higher risk means higher potential returns.

Once you understand this, applying common sense when evaluating a would-be scammer’s sales points becomes easier. 

Terms and concepts to be aware of include:

• “Risk-free” investing is an oft-cited term. But there is no such thing. Also, be suspicious of companies that claim there is no such thing as a bear market.
• Unsolicited offers of any kind are generally a red flag. Anyone who approaches you individually should be treated with caution.
• Time and quantity pressure is a common marketing tactic, with scammers implying that the best deals run out quickly, so ‘get in now.’ Due to the nature of the investment market, fluctuating over time may reduce his ROI, but reputable companies do not need to encourage investors to sign up.
• Unrealistic ROI is one of the most common red flags to look out for. Whether scammers are flaunting expensive lifestyle luxuries or promising huge wins, the reality is seldom the same.

• Beware of people who choose phrases such as “I am happy to waive my normal fees…” or “It would normally charge…” to offer favours or identify attribution in exchange for investments. It’s a common sales tactic to do. 
• Beware of people who request to send money as soon as possible, especially by wire transfer or post and not through a verifiable online broker’s gateway. Beware of voices urging you to send money regardless of the period.
• Conclusive background information about an individual or commercial entity is always a red flag. Established forex traders will have a large presence online. Be sure to do your research on companies approaching you. Double-check the credentials provided, as many scammers refer to a valid financial institution and later request to transfer money to an unconnected account.

The last part, identifying information, is key in deciding whether to trust the apparent forex investment group. Any valid account manager or broker should be ready to answer your questions to create an atmosphere of trust. Reluctance to provide information should be taken as a sign of potential risk. Pay attention to discrepancies in the data provided, especially regarding destinations.

PureVPN – Your answer to staying safe from Forex Scammers

Considering the horrific situation we discussed, it is important to keep yourself secure when you are on the Internet, and one sure way is PureVPN. 

It helps you 

• Safeguard your digital footprint
• Mitigate the risks of unauthorised access to your data 
• Block all kinds of online trackers so you can browse securely 
• It offers dedicated IP so you are more than secure while making transactions

Final words

Forex scams are deceptive activities that exploit people in the foreign exchange market. You must learn the market techniques to realise how it runs and what scams you can encounter.

Being informed about the risks is the first step to mitigate it. So stay cautious and alert while rowing in the Forex market.

Frequently Asked Questions