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Scam Broker Warning Signs to Pay Attention To

Every now and then, we hear about someone being scammed on the financial market. Whether they’ve been involved with binary options brokers, crypto trading frauds, or Forex scams, the end result is always the same. Clients’ money is defrauded, and it’s time to look for refund solutions.

There are different types of scams and various kinds of brokers. Believe it or not, a small percentage of fraud is conducted by regulated companies, showing you that it can happen to anyone under any circumstances.

So, let’s go through the most mainstream broker types and how they can defraud you, so you will know what to pay attention to when investing your money.

Regulated Forex Brokers

Regulated brokers have obtained a license from any regulator in the world. It’s important to know that there are different types of regulatory bodies, and they have been divided into Tiers.

The strongest and firmest regulatory bodies are in Tier1, and those are, for example, the UK’s Financial Conduct Authority, the German BaFin, or the Australian ASIC. These regulators belong to the first group since they have taken numerous steps to care for clients’ funds.

Most of them obligate Forex companies to form significant compensation funds with over $700,000 and keep clients’ money in segregated bank accounts. All for more transparency and safety.

Other regulators, for example, South African FSCA, belong to the Tier2 group. These regulators impose rules and take care of the clients’ funds, but on a lower level, with fewer demands.

And finally, we have offshore regulators, who are the loosest. Investing your money with a broker holding the FSA of Seychelles or the FSU of Dominica license means there’s no compensation fund, and your funds can be kept in any bank.

As you can understand from this, the weaker the regulation, the easier it is to scam clients. Sometimes, even Tier1 regulated companies open separate offshore entities to scam clients. So before investing any money, ensure to check what kind of license your broker has and whether you’re dealing with a regulated entity or offspring based out of the country.

Unregulated Forex Brokers

Any company that hasn’t opted for a license anywhere globally belongs under unregulated scam brokers. Sometimes, you may hear different excuses and be told that a license is not your guarantee for anything, and it’s just a cost for the brokerage itself, but don’t believe it. It’s another attempt by fraudsters to steal your funds and justify themselves.

Unregulated brokers have no authority body who would supervise their activities. Thus, they feel free to conduct scams and steal money in vicious ways. They will ask you to download AnyDesk or TeamViewer and use remote access to your online banking to steal everything you have.

You may be asked to deposit crypto, and once you do so, the money will switch so many wallets that tracking it down will be impossible. You may even be promised a certain interest rate and convinced that you’re putting money into savings, not a trading account. We’ve heard it all.

Be aware that you have nothing to hold on to without a license, and no government body will be able to reimburse you.

How to Avoid Forex Scams

Since we’ve explained the importance of regulation, that’s the first thing to pay attention to. Check who your broker is, which Tier its regulator belongs to, and whether the regulation is real.

Sometimes, some companies add false regulations to their websites, but visiting the authorities’ websites and doing checks will show you the truth.

Furthermore, you should always check Forex broker’s reviews. There are so many websites where people share their experience with a particular company, and that’s something to help you avoid scam brokers and trading scams.

And in the end, never trust any promises. Honest financial advisers are there to advise, not promise or guarantee anything to you. If your account manager tries too hard and promises a percentage or any ROI, it should immediately signify that something is wrong.

Follow these several steps and, while we cannot guarantee that you won’t be scammed, we can tell you that you’re increasing your chances of working with a legitimate company. If you experience any issues, make sure to file a report and seek assistance with the chargeback procedure.


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