Listed below are various scam types that have historically been used. These types of scams are not exclusive to forex and can apply to other types of trading as well.
The signal seller scam is a scam which works by a person or a company selling information on which trades to make and claiming that this information is based on professional forecasts which are guaranteed to make the client money. They usually charge either a daily/weekly or monthly fee for this service and do not ever offer any information that helps the client make money. They will usually have a slew of testimonials from allegedly legitimate sources in order to gain the client’s confidence yet in reality do nothing to forecast profitable trades, simply collecting the money and running.
High yield investment programs
High Yield Investment Programs (HYIP) are (a lot of the time) a form of Ponzi scheme in which a high level of return is promised for a small initial investment into a Forex fund. However in reality the initial investors are only being paid back by the money generated by the current investors and once there are no more investors in the scheme the owners usually close it down and take all the money remaining.
Manipulation of bid/ask spreads
These types of scams have decreased over the years yet they are still around. This is why it is important to choose a forex broker who is registered with a regulatory agency, for example the CFTC and the NFA if in the USA. These type of scams would normally involve having spreads of around 7-8 pips instead of between 2-3 pips which is the norm.
Scams through software
Forex robot scammers lure novices with the promises of big gains from little effort or knowledge. They may use fake or misleading figures to convince customers to buy their product. Their promises are flawed as no robot can adapt and thrive in all environments and markets . Software is generally used only to analyse past performance and to identify trends. All software should be formally and independently tested but caution is required when trusting the reviews themselves as these can be paid for. If their product did exactly what they claimed then they certainly would not be selling it but instead using it exclusively themselves.
These can be a scam, there are many examples of managed accounts where they are. These involve a trader taking your money and basically usuing it to buy all sorts ofg luxury items for himself. When the client eventually asks for his money back there is not enough money left to repay.
Commingling is a normal trading practice whereby funds from different investors are combined to give leverage to each investment even after profits have been divided between all investors.
However because Individuals cannot track the exact performance of their investments the scammer has the opportunity to move the invested money into other accounts unrelated to the original forex account. Commingling funds gives forex brokers the opportunity to pocket much of an investor’s money without the client ever noticing any discrepancy.
Other types of scams to be aware of (not exclusive to Forex)
Ponzi or pyramid schemes
This is a very common form of affinity fraud. They promise high returns from a small initial investment upfront. The early investors usually do gain some sort of return on their money and motivated by this success they then recruit their friends and family into the scheme. However the truth is that the ‘investment opportunity’ does not actually exist and their initial return is being funded by money paid in by other members of the scheme. When the investor numbers start to drop the scammers close the scheme and take the money.
This type of scam involves the scammers usually getting people to buy shares in a worthless private company on the promise that when the company goes public their shares will increase substantially. However the company doesn’t really exist and may have a fake telephone number, office and website. Once the scammers have made all the money they can they will disappear with everyone’s investments.
Pump and dump
The scammer owns a large amount of shares in a company, the scammer then promotes these shares as an ‘Amazing deal.’ As more investors buy these shares the share price increases, once the share price peaks the scammer sells their shares and the value of the stock plummets. Leaving the investors with worthless shares.
Double dip or repeat scam
After a person has been scammed the scammer may sell your information to another scammer who will contact you claiming they can get back, for a fee, the money lost in the first scam, they then walk away with that fee.