Forex daily turnover exceeds $5 trillion. The majority of brokers, operating in this market earn their money honestly, by providing financial services to the traders. However, the big money also attracts scam brokers to the industry. These companies only have one target – to quickly collect as much money as possible from the traders and disappear.
Although scam forex brokers have become a much rarer case than a decade ago, the phenomenon hasn’t disappeared. Forex-Up has been collecting information about fraudulent brokers regularly over the span of several years, putting them on the broker blacklist that you can see below.
Also, below you will find extremely useful and practical information from our top expert Nikolai Peskov, who will tell you how to avoid scam brokers and keep your money safe. He prepared a test for detecting a scam and gave several important recommendations on how to search for the trustworthy brokers.
What is a scam on the Forex market?
Both small-scale companies and rather large scam companies with staffed call centers resort to scams and fraud.
They can be conditionally divided into four categories, each having specific features:
- Scam fly-by-night websites.
- Organized scammers.
- Financial pyramids.
- Scam committed by licensed brokers.
Let’s review each of them in more detail. We have prepared a check table for each type of scam to help you systematize your knowledge, detect scam at an early stage and keep your money safe.
Type of scam
Scam fly-by-night websites.
This type of scam forex brokers is the popular one as it is the easiest to organize. In reality, this website is certainly not a broker. It is only a cover for publication of information that serves as a hook for attracting customers. The task of the scam is to attract as much traffic as possible to the website within a short period and sell a flashy idea to the novice investors. Usually, there are one or several idea developers behind such projects, while their lifespan varies from several weeks to several months.
- Such scam brokers promise enticing profits (often hundreds percent annua) without taking any effort.
- They hide behind the ‘forex broker’ sign.
- They tend to actively use the latest technological terminology. They can also hide behind investments into cryptocurrencies, AI, precious metals and highly effective PAMM accounts.
- Contact information on the website is either unavailable or false.
- They don’t hold a license on financial activity or it is fake.
Type of scam
Entire criminal organizations can operate under the guise of a Forex broker. They are usually based in one of the developing countries with a low legal culture. They exist much longer than your usual scammer – up to several years. Usually, the marketing department involved in collecting contacts of potential victims and a large multi-language call center to scam them form the backbone of such scam companies.
- Scam companies specialize in cold calls and manipulative psychological tactics during personal communication with potential victims.
- They collect contacts using teaser websites, which feature promises of easy gains or additional profit.
- They don’t hold a license on financial activity.
- They motivate people to get into debt and borrow money, without caring for the customers’ risk management.
Type of scam
These schemes are usually built on multi-level marketing. They are used to motivate the victims of the scam to invite their acquaintances and friends to participate in a pseudo investment project. It all ends in a crash.
- These scammers motivate customers to develop their network by inviting friends and relatives.
- They hide behind investments into effective PAMM accounts, cryptocurrencies or precious metals.
- They promise a profit of over 100% annual.
- They don’t hold a license on financial activity.
Type of scam
Scam committed by licensed brokers
This type of scam is the hardest to determine, because, at first glance, such companies can conduct the usual business of a Forex broker and even hold a license. Their task is to make the customer fully lose his deposit through the use of scamming tactics or reduction of risk of trading with leverage. Often, this type of activity borders with scam and fact manipulation that leads to losses suffered by the customers.
You are offered to use an increased leverage (up to 1:2000).
You receive quotes with delays.
Frequent gapping and requotes happen
Withdrawal of funds is blocked or delayed under a false reason.
How to check whether a broker is a scam: a simple test
Naturally, after reading such warnings, you may be concerned for the safety of your funds. There is good news, however. In 2021, scam is rather an unpleasant exception.
To help you to practically fully rule out the option of a scam, we will provide you with a list of suspicious features of a broker and recommendations should you discover any. We have prepared the risk scale to estimate the scam. We used 1-10 scale, where 1 means low risk and 10 – highest. Forex-UP analysts use this methodology for its List of Scam Brokers
|The broker is not regulated
|We do not recommend using the services of companies that are not regulated, because in this case the probability of a scam sharply increases. Our broker blacklist mainly includes companies that are not regulated.
If a broker has not provided information about regulation, stay away from it. Also, a number of brokers provide false information on the website. You can check the license on the regulator’s website, which usually takes only a couple of minutes. The license holder usually provides the names of the company and domains under which it provides services in its documents.
|The broker promises guaranteed profit (usually over 100% annual)
|Equip yourself with knowledge and healthy skepticism. A promise of a guaranteed super-profit is one of the most evident signs of a scam broker. Be realistic and remember that nobody will be able to guarantee such profits for you on the Forex market, just as on any investment.
A broker is only a connection between the forex market and the customer. The broker can earn profit through execution of orders and accompanying service, but does not have the right to make any promises in general.
|Calls from a blocked number
|If somebody is calling you persistently from a blocked number and introduce themselves as an employee of the broker you’ve heard nothing about, just hang up. You may be promised high profits, additional earnings and claim that you’ve provided your contacts to somebody. Those are just tricks.
|You are asked to provide information about your debit/credit card
|This is a clear sign of a scam. Never and under no circumstances should you provide your card information to strangers!
|You are experiencing issues with withdrawal of funds
|It is a sure sign of a scam, if the broker interferes with withdrawal of your funds. To check this feature, we recommend you to read the reviews of active customers on our website.
|If the broker’s main activity is concentrated on exponential expansion of the network, it could be a sign of a pyramid. You need to treat the promises of high guaranteed returns for referrals with caution.
|This certificate is a mandatory condition, because it helps establish a secure connection with the server and eliminate a number of fraudulent methods of obtaining information. The majority of browsers warn about insecure connection. Chrome will show you the following message if you attempt to establish an insecure connection: “Your connection is not private! You need to leave such a site immediately.
|Domain is registered several months ago
|A simple check of the website using who.is service will help you establish the domain’s registration date. If the domain was registered a few months ago or if the broker claims it has been operating for many years, but the domain has only been registered recently, it is a cause to consider whether such broker is honest.
|You are not warned about the risks
|Some scam brokers intentionally provide customers with an overstated leverage in order to provoke financial losses. Remember, the higher leverage you use, the higher are your financial risks. Usually the brokers that do not bring the deals to the market (dealing desk) use such practices. For a beginner, it is extremely undesirable to use a leverage higher than 1:40 – this is the maximum limit set in the EU countries.
|It is best to avoid companies that offer very high (over 30%) deposit bonuses and similar things. This sign is not a guarantee that it is a scam, but could be a reason to be skeptical. There is no such thing as a free lunch, after all.
|Delayed quotes, gapping, requotes
|If all of these signs exist, it is likely that the broker does not bring the transactions to the currency interexchange. We recommend using the companies that offer direct access to the liquidity suppliers using NDD/ECN/STP technologies.
|Focus on PAMM accounts and binary options
|We do not recommend using binary options, as they carry a high probability of losses. Binary options are prohibited in the majority of countries.Also the brokers that build their operation around PAMM accounts with promises of high profitability should not be trusted. Remember that few professional managers are capable of ensuring stability profitability at over 30% annual.
In order to check a broker, simply sum up the points from the Risk scale column in the table above:
How to understand the test results.
- If the broker has 0 points, it is reliable. The risk of spam is minimal.
- If the broker has 0-20 points, there is a risk of spam, but it is moderate.
- If the broker scored over 20 points, the risk of spam is high. We do not recommend using the services of such companies!
We also strongly encourage you to check the list of scam brokers on our website, where our experts include scam companies after a serious review.
List of Scam Brokers
In order to help our readers to discover the scam companies faster, Forex-Up regularly updates the broker blacklist. You will find the latest list of scammers on our website.
As soon as our experts discover a new scam Forex broker, it is immediately included in the blacklist. We also attentively review the feedback of the customers, who came across a scam. If the company does not allow to withdraw funds or if it shuts down its operation completely, the readers of the website will be among the first ones to know.
Our blacklist includes fly-by-night companies you are highly advised to stay away from. In the list, you will find the name of the scam company, its website, reviews of the customers and a short list of tricks and promises it uses to attract new victims.