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Abstract:Over 50% of Forex scams find their victims on social media
As the lockdown triggered by the Covid-19 pandemic wreak havoc on the economy and impacting household income, a significant number of desperate people have fallen victim to Forex fraud.
The Financial Service Conduct Authority (FSCA) has issued several warnings about bad Forex brokers and scammers purpoting to be Forex traders, however, with the numerous digital platforms at their disposal it has become increasingly difficult for the non-discerning eye to tell which one is legit and which one isnt.
Members of the public should always check that an entity or individual is registered with the FSCA to provide Financial Advisory & Intermediary Services and what category of advice it is that the entity is registered to provide.
There are instances where persons are registered to provide basic advisory services for a low risk product and then offer services of a far more complex and risky nature.
“The FSCA again reminds consumers who wish to conduct financial services with an institution or person to check beforehand with the FSCA on either the toll free number (0800 110 443) or on the website www.fsca.co.za as to whether or not such institution or person is authorised to render financial services,” says the FSCA.
It is important to note that not all Forex traders are scammers, some are just bad brokers. Their crime was their poor handling of client funds which came at a huge cost to desperate people trying to earn a legitimate income.
According to the following report, more than 50 percent of Forex scams find their victims on social media.
Forex Scams Report: Face *books Forex Fraud Problem
Main Findings:
⦁Over 50 percent of Forex scams find their victims on social media
⦁34.2 percent on Fac*book and 19.6 percent on Instagram
⦁Almost 20 percent of victims paid their scammers in Bitcoin
⦁47 percent of victims were scammed by individuals
⦁13 percent of all broker complaints were about JP Markets
As is made clear from the chart above, 56.1 percent of people who reported being defrauded by a scammer or broker were first contacted via social media. Also made clear is that Fac*book and Instagram are by far the most popular hunting grounds for scammers and bad brokers.
Again, this is not particularly surprising. Fac*book‘s problems with content moderation are well-documented and are the subject of intense scrutiny from law-making bodies around the world. While most of this scrutiny is focused on Fac*book’s political content, we believe that lawmakers should also consider the financial damage inflicted on its users.
This data does highlight the level of trust that people place in relative strangers they meet on social media. Many of the complaints we receive detail the painful process that these victims go through. A recent complaint is a prime example of the method used by Fac*book scammers:
I came across the Fac*book posts of [REDACTED] who appeared to be a legit Forex broker. I then contacted him via Fac*book Messenger, and he informed me that I can deposit any amount I have from my account to their trading website [REDACTED].
He promised me that I will receive 500 percent profit after seven days of investing. On the day I was supposed to withdraw my profit, I got an email from [REDACTED], informing me that I have to make a deposit of $300 before I can withdraw. I raised this with [REDACTED] and he told me that he also didnt expect this.
Because I was desperate to get my money back, I deposited $288, with the hope that I will withdraw my profit but was later informed that the company charges commission and I would first have to deposit $450. As a result, I contacted [REDACTED] to inform him of my decision to demand a refund, since this trading company does not appear to be legit. He has since been ignoring my WhatsApp messages. I recently got an internship and I have to pay the money I invested back to the person I borrowed it from.
Reading through these complaints is a heart-breaking exercise, especially when so little can be done in majority of cases. While the FSCA does do its best to track down scammers, many of these people use fake names and are often based overseas. The anonymity provided by Fac*book – whether through its main platform or on Instagram – offers the perfect cover for many fraudsters and leaves victims with no recourse.
Bad Forex brokers are still bad
While we receive many reports like that above, we also receive hundreds of reports detailing dubious practices by supposedly legitimate Forex brokers. These mainly focus on withdrawal requests being ignored or delayed and deposits not reflecting to trading accounts.
This is remarkable, considering that one of the main justifications for the FSCAs recent liquidation of JP Markets and de-authorisation of Oinvest was their poor handling of client funds.
A complaint made against an FSCA-authorised broker illustrates this problem:
I have requested a withdrawal from the broker, they sent me an email confirmation that it has been approved. However, the money never reached my bank account. I have tried several times to contact them through telephone, email, and WhatsApp.
Eventually they requested my bank statement after a month of contacting them to confirm that the money was really not received. After that I have never heard from them, its about to be 3 months now and I text, call almost twice a week to follow up but no one is responding.
JP Markets attracted more than 13 percent of all complaints we received against brokers, but other well-known FSCA-regulated brokers also receive many complaints regarding their poor handling of client funds.
Frankly, this kind of behaviour from FSCA-regulated brokers is little more than greed-driven stupidity. The FSCA has made it very clear that it will no longer let Forex brokers ride roughshod over consumer rights law. Given the current climate, brokers that engage in these practices are likely to find themselves out of business and potentially facing criminal proceedings.
Bitcoin bandits
One finding that did surprise us is the number of scammers who request money from their victims in Bitcoin … A Bitcoin wallet allows users to buy, sell and send Bitcoin and is a particularly popular method for fraud.
The guy messaged me about how trading works and asked me to install [widely used] app. Then I sent Bitcoin to his account so we can start trading. All of a sudden, my profits grew very fast every day. If I want to withdraw the profit the guy said I have to upgrade the software. He said I had to deposit $600 before I can make a withdrawal.
It is interesting to see the large number of scammers using Bitcoin; it seems to be the perfect currency for online theft. Like Fac*book, it preserves the anonymity of the conmen and leaves no method of recourse for the victim. Once the Bitcoin is transferred there is absolutely nothing the victim can do to get their money back.
It is no wonder that the FSCAs director of investigations recently stated that “anything to do with crypto is highly suspect”. The FSCA is obviously aware of the increasing number of scams involving Bitcoin.
Stealing from the poor
The amount of money lost to Forex scams and bad brokers is terrifying – and we are only witness to small portion of it.
But it is the smaller thefts that are the most distressing. Many poorer people have lost more than they can afford, and some were already in dire straits before they were swindled.
It is important that Forex traders (and Forex brokers) are aware of these findings – especially the close relationship between social media and scams.
We have always warned against signing up with a broker or a “financial advisor” found on social media. Until such time that Fac*books platforms are better regulated. It is always best for traders to conduct their own research.
Good brokers are still good
Finally, it is also important to note that most Forex brokers have their clients best interests at heart.
Good Forex brokers will educate traders that need it, will never pressure clients into handing over money and will have customer support teams that always assist as best as they can. Good Forex brokers know that successful clients and a profitable brokerage go hand-in-hand. Good Forex brokers also look forward to the day when their industry is no longer tainted by scams and avarice.
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Disclaimer:
The views in this article only represent the author's personal views, and do not constitute investment advice on this platform. This platform does not guarantee the accuracy, completeness and timeliness of the information in the article, and will not be liable for any loss caused by the use of or reliance on the information in the article.
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