The foreign exchange market, also referred to by many as forex, fx and the currency market is the global exchange for currency futures and trading. The foregin exchange market also provides a function for the purchase, sale and exchange of international currencies at current or determined prices.
The foregn exchange market is the largest currency exchange in the world, with the credit market trailing in closely behind. Current estimates suggest that around $6.5 trillion pass through the foreign exchange market every single trading day.
Forex trading first became accessible to the retail market in 1999, and since this time, thousands of fake forex exchange platforms have emerged. These fake exchanges are responsible for the theft of millions of dollars from unwitting traders each year.
The majority of these fake exchanges for the most part, look very legitimate and professional and the operators know exactly how to draw their victims in. It takes a keen understanding and a well trained eye however to identify the fake from the genuine.
The Emergence of Forex Scams and Fake Exchanges
As mentioned, the foreign exchange market is massive and thousands of online, government-regulated and licensed exchanges are currently in operation. There are however, many more unregulated, fake exchanges with business models that are based solely on the misappropriation of clients’ funds, running into many millions of dollars on an annual basis
The internet became a major drawcard for binary options scams and fraud at the beginning of the 21st century. Fake forex exchanges emerged as a direct result following the collapse of the binary options trading industry. Operators drew in investors by guaranteeing quick returns on their investments, bonuses for signing up and an intuitive and easy-to-use platform on which to trade and track investments.
Bringing us back to the present, with a new name and design, the scam still exists, subtly disguised as legitimate foreign exchange trading.
The Most Expensive Video Game You’ll Ever Play
One would expect that an online foreign exchange, with a professional, state-of-the-art looking platform, would be the best place to start learning the ins and out of trading. In reality however, when it comes to fake exchanges, the flashy banners and market visuals are all a simulation designed to create the illusion that active trades are taking place.
The prescribed trading procedures, licenses and regulations that legitimate trading platforms require, are of course non existent when it comes to fake forex trading platforms and exchanges. Furthermore, the lack of a valid trading license and registration from recognized regulatory bodies leave the exchanges without the access to live updated forex indicators, rendering the platform unusable and ineffective.
The gains and losses, the ups and downs and the entire user experience is effectively a giant smoke screen designed to keep the user engaged and believing that they are immersed in financial trading. The entire system is one big deception to convince the user that it’s real.
Where’s my Investment?
Unregulated operators advise their clients that their deposits are kept in secure, segregated accounts. This is obviously a prerequisite for the platform as no real trading can be done without these accounts in place. Fake exchanges go on to prove their integrity by guaranteeing full access to clients’ accounts with immediate withdrawals when required. The reality however is that there are no segregated accounts and all deposits go directly into the fake exchange’s account.
Clients that sign up to fake forex exchanges start realising that something is amiss when they are ready to withdraw their funds from their account. Exchanges will use a variety of techniques to delay and complicate the process. Tactics can include sending clients from one department to another, not responding to queries for lengthy periods of time, verbally abusing clients or just ignoring clients completely. This goes on until the client is so exhausted and fed up with the process and resigns to the fact that they will never be able to recoup their money.
Furthermore, there are firms that will direct their clients to the exchange’s terms and conditions that were signed before becoming a member. If they review the fine print, they’ll find that funds can only be withdrawn once an impossible target has been reached or once the fictitious bonus that they gave them at the beginning is paid back.
To make matters worse, fake exchanges generally base themselves offshore in “safe havens” where financial authorities are non-existent. The most popular destinations for fake exchanges seem to be Eastern European countries and isolated island states due to their very weak and oftentimes non-existent accredited financial regulators.
Points to Consider When Choosing a Trading Exchange
Due to the professional and sophisticated nature of fake exchanges, finding a legitimate, regulated broker can be a difficult task. The following steps however, will help you distinguish between the two.
Check the Website and Social Media
It would be a good idea to spend some time going through the website belonging to the exchange. Look out for critical information pertaining to the company such as where they claim to be located and the financial regulatory body they subscribe to.
Confirm the exchange’s listed contact number and physical address and cross reference this information by performing a Google and Google Maps search. Fake exchanges will do everything they can to conceal their contact details and locations.
It is also recommended to try to determine the year the company was established and when the domain was first registered. Fake exchanges generally tend to trade for a very short period of time, before closing down, rebranding and starting up again. A good quality and trusted brand takes time to develop and establish itself.
Confirm License and Registration
A legitimate online trading platform should be licensed and registered with a recognised financial regulatory body and this information should be displayed on its website. It is also possible to visit the website of the regulatory body the platform claims to be subscribed to and to perform a search for the exchange. These websites should have information on the registration, current status and any complaints that may have been lodged against it.
Recommendations from Family and Friends
Many traders, new to forex and forex trading will have discussed this with family members, friends or work colleagues. If there is someone you know who is involved in forex trading, run a few options by them as they would have some experience and advice to bring to the table. Another option is to discuss this with a trusted investment advisor who has a name and reputation to stand behind.
Independent Review Sites
There are a number of online review sites that can be trusted and come with a lot of information on a particular broker, including user reviews and ratings of various platforms. The collective personal accounts from users around the world will give a good overview of any company or exchange you are looking to trade with.
Recovering Your Funds Following a Scam
For the average user who just realized he got scammed, there is very little recourse since the companies are based offshore and have done everything in their power to protect their business model.
Users are urged to always confirm that their financial or investment firm is a legitimate trading entity, licensed by a strong financial regulator. It is also advised to ensure that the firm has not had a scam warning issued by a regulator, professional association or consumer protection agency.
As the popularity and shift towards cryptocurrencies increase, so too do the number of scam artists and cybercriminals. Hundreds, if not thousands of fake crypto exchanges have been set up which are responsible for the theft of millions of dollars around the world on an annual basis.
Fake exchanges use a number of deceptive techniques to convince prospective clients that they are making an incredible investment decision, identifying the fake from the friendly is becoming more difficult by the day.
Before going ahead with any online investment company, it is important to ensure that all due diligence and research is conducted before and funds are committed. This way, you will be better informed and will be able to protect your investment from the numerous threats that are lurking around online.