In a previous article, we discussed how to uncover and avoid potential forex scams to protect your investments from devastating losses. However, such fraudulent activities are prevalent in the financial trading world. As an informed investor who understands the patterns of these scams, it is crucial to be extra vigilant and mindful of your every move. Where do these scams typically occur, and how do they unfold？

Forex PAMM (Percentage Allocation Management Module) Scam

PAMM, or Percentage Allocation Management Module, is a great way to earn passive income from forex trading. It involves investors entrusting their funds to fund managers who then pool the funds together and invest collectively. In simple terms, it is fund management.

The returns are calculated based on your investment and the total pooled funds. The fund managers earn income through fees they set on the total profits. For example, they may charge 10% of the profits as compensation for their services. They may also add their own investments to the pooled funds to gain additional returns.

How do these scams occur？

The fraudulent brokers claim that their affiliated fund managers are qualified and experienced when in fact they are not.

They attempt to convince you with historical data and a large or exaggerated number of returns, which often exceed market standards.

They set management fees that are significantly higher than what most PAMM fund managers charge. Some even fail to provide an exit option or disclose information about penalties for early withdrawal.

Nothing attracts investors more than high returns, which is why many people become victims of investment scams

For example, in January this year, many professionals from Malaysia and abroad fell into a trap promising returns as high as 50%. Although the culprits were successfully arrested, there is no news on whether the investment funds can be recovered.

Similarly, in the last quarter of 2020, a fraudster was arrested in Singapore. He promised returns as high as 8%, and the victims invested over $1 million in his so-called forex trading scheme.

If something sounds too good to be true, it's best to think twice. It's likely a trap!

Signal Seller Scams

Signal sellers are traders who provide trading ideas, including entry and exit prices, stop loss, and target levels. They play a crucial role in social and copy trading.

However, it's important to avoid the following types of signal sellers:

• Those who claim they can make you rich quickly.

• Those who boast about identifying the best currency pairs for trading.

• Those who provide unverified results.

• Those who sell signals at exorbitant subscription fees.

• Those who are only willing to sell signals if you sign up with their affiliated brokers.

Electronic Fraud

Automated trading systems allow you to trade on pre-programmed software. They utilize technical signals and other computational patterns to enter and exit trades without human intervention.

However, if you encounter the following, it's likely an electronic forex scam:

• Guarantees of 100% profit or extremely high returns.

• Unrealistic marketing claims.

• Offers that are free or require only a low fee.

• Claims of being able to develop your own strategy.

• Claims of using a “set-it-and-forget-it” approach for long-term success.

Remember these points to protect yourself from electronic fraud.

False trading investments

Beware of fraudulent trading investments that promise high returns on initial investments in forex funds and unscrupulous brokers who trap unsuspecting investors. Scammers excel at promoting meticulously crafted marketing materials to entice you to put money into their pockets, only to disappear later.

Take, for example, GoldFx Investment, an investment company in Cambodia. They promised investors monthly returns of 5% to 10% through forex trading. With over 30,000 clients, their returns seemed irresistible.

Unfortunately, the company abruptly collapsed in April of this year due to embezzlement of $20 million by three former foreign board members. Reports indicate that GoldFx Investment was involved in at least $27 million. With $20 million gone, how can investors recover their investment？

Multi-level marketing (MLM) forex scams

Some pyramid schemes centered around currency trading require members to pay monthly subscription fees to access signals or educational information. Later on, members are encouraged to recruit more individuals in exchange for tiered commissions or rewards.

Since the focus of these schemes is on attracting new members or investors rather than trading, the company may collapse or incur significant losses if recruitment numbers dwindle.

Here's a notable example: Emas Fintech, a company involved in trading virtual currencies, promises daily profits ranging from 2% to 4% and monthly profits of 30%. Additionally, investors can earn commissions of up to 70% based on the scheme they invest in.

However, experts indicate that these enticing offers are fabricated, as brokers cannot guarantee high profits, especially when all trades are conducted online.

Forex trading is also exploited in Ponzi schemes. In fact, the alleged mastermind behind the Forex-3D Ponzi scheme was arrested in Bangkok after a year on the run. Apiruk Kothi claimed to have operated three forex companies with over 60,000 clients in Dubai, Hong Kong, and Singapore, but he failed to provide substantial evidence.

Spread manipulation

Similar situations occur when spreads are manipulated. Since the spread is essentially a trading commission, some brokers may take advantage of it. If the prices offered by these brokers differ significantly, such as by 7 pips or more, you should be suspicious of it.

Price manipulation scams

In addition to spread manipulation, some forex brokers deceive investors through negative slippage and stop hunting. The former involves entering or exiting trades at unfavorable prices, while the latter involves brokers canceling traders' stop-loss orders before the correct price is reached. This can result in trading losses.

Copy trading or social trading scams

Fraud can be involved in copy trading or social trading if the trader fails to provide verified results or real-time trade data. Blindly copying trades can lead to losses. It's important to thoroughly review the trading experts you are following.

Exercise caution when following traders on social media as well. Accountant Jonathan Reuben lost £17,000 due to suspected fraud by Gurvin Singh, who was believed to have gotten rich quickly through forex trading. Initially, Reuben saw his profits increase, likely because Singh was attempting to sell his strategy. However, a few months later, Reuben's funds plummeted, and he was unable to withdraw the remaining funds. Singh later disappeared.

In summary, it is evident from the mentioned forex scams that thorough research is key. By avoiding blind investments in the forex market and carefully reading the rules each time, you can protect yourself from falling into forex traps and incurring losses.

Therefore, it is essential to investigate the background of brokers and the legitimacy of the financial services they provide. If you engage in copy trading or social trading, verify the authenticity of the provided data. Lastly, always remember to read carefully.