Investment scams are as rampant as they have ever been, particularly in developed nations such as the US, UK, and Australia. The Federal Trade Commission (FTC) in the US has recently reported that around $1.7bn was lost to investment-related scams in 2021. In Australia, while the amount lost due to investment-related scams is much lower than in the United States ($170m in 2021), when the size of the population is compared, such scams are actually more prevalent in Australia than in the US.
Forex trading scams are a widespread form of investment-related scams. Let’s look at how these scams work, how to avoid them, and who to contact if you are a victim based in Australia.
How do these scams work?
The most common Forex trading scams Australia experiences come from four main sources: phone, internet, social networking, and email. These sources accounted for almost 90% of all losses due to investment-related scams in Australia in 2021. A typical scammer will contact you using any of these sources of communication and try to persuade you to invest your money with them. The scammers might present themselves as a well-established Forex broker and ask you to invest a sum of money that they would then trade on your behalf. They are likely to promise extremely high and quick returns; however, once you send them money, they will often stop responding. Sometimes they come up with another investment idea and ask for even more cash instead of allowing you to withdraw your money.
Here’s an example of how such a scam would work on Facebook. If you are interested in Forex trading, you will likely encounter Forex trading groups on Facebook. Many of them have member posts that are breeding grounds for scammers. One such post may promise extremely high returns on investment and offer advice on how to achieve significant financial gains.
Suppose you are tempted by such high returns and message them to enquire more about the opportunity. In that case, you are likely to be caught in a scam. The criminals will have clever and creative ways to deceive you and convince you to send your money to them for an “opportunity of a lifetime”. They may utilise ‘fear of missing out’ (FOMO) to pressure you into making a quick unreasonable decision. As we’ve mentioned, once you send your money to them, the money is, in most cases, lost for good.
How is Bitcoin involved?
Cryptocurrencies such as Bitcoin have a major role in Forex trading scams because scammers often use Bitcoin and other cryptocurrencies to receive payments. Since cryptocurrencies are decentralised, based on blockchain technology and encrypted, many of them are virtually untraceable, so the transactions are irreversible. That explains why many fraudsters use cryptocurrency wallets to receive money, giving them anonymity and security.
In addition, scammers might present the investment opportunity related to cryptocurrencies such as Bitcoin. For example, some Bitcoin scams in Australia may present Bitcoin as both the form of payment and the source of the investment itself. Therefore, the scammers might trick you into believing that they want you to send the money in Bitcoin because it is the asset they will be trading on your behalf. Do not be tricked, as it is a false reason created to make you feel secure in sending your money using an untraceable payment method.
How to avoid Forex Scams in Australia?
The best way to avoid Forex scams in Australia is to be aware of some of the red flags surrounding them. That is especially true for those in their 40s and above; over 70% of the losses come from people aged 45 and over. The rule of thumb in Forex trading scams is simple: if something seems too good to be true, it probably is. You should always watch out for those who offer guaranteed or extremely high and fast profits with little risk.
It is worth understanding that there is “no free lunch” in financial markets. With higher returns comes more risk, and there is never a guaranteed return that anyone can offer because any investment or trading strategy carries a risk of losing your money. Any investment may eventually fail to provide the promised returns due to simple factors such as creditors failing to meet obligations or domestic or international economic changes. If it’s a trading strategy, there is no bulletproof formula that is immune to losses. Professionals often refer to trading as a probability game, since you need to find a strategy that correctly predicts the outcome of a trade as profitable more than 50% of the time. Every professional trader knows that a 100% trading success rate is impossible.
Scammers might also support their claims by stating that they have some “secret” information about a company or the markets, making their strategy seemingly guaranteed. However, it is worth noting that even if it were true, trading with any “secret” information about a company or the markets is utilisation of insider information, and it is illegal to profit from in the developed financial markets.
Additionally, scammers might send you fake screenshots of trading profits or photos of their lavish lifestyle. Often, that is more than enough to qualify as a red flag. Scammers know that many of their unsuspecting victims are gullible and prone to psychological manipulation. Therefore, they are likely to tell you fake stories about how they became successful, how that enables them to live the life of their dreams, and how you can have the same lifestyle if you invest some money with them.
There are ways to deal with these situations; an excellent way to avoid such scams is to ask for the company name that the person you are in touch with is representing. Then, you should ask whether the company is registered with the Australian Securities and Investments Commission (ASIC) and whether it has a licence/registration number. If they say they have a licence, you can always ask for details and check with ASIC. If they say they are awaiting registration, it is a clear red flag, as you should avoid investing your money in any unregistered financial business.
A trader who lost over $50,000 to a trading scam, was initially contacted via phone by someone who introduced themselves as an expert representing a binary options, cryptocurrency, and forex trading company. The scammer said the company was on the cutting edge of investment and offered guaranteed returns. The unsuspecting victim invested with the company using their online platform, which, at first, seemed to work very well. After registering a decent profit and wanting to cash out, the victim was told he would have to pay taxes on the profits earned. After he did so, his trades turned south, and he was told he would need to invest more money as emergency funding to avoid losing his initial investment. Eventually, the scammers extracted a significant amount of money from the unsuspecting victim.
How to report a scammer?
If you think you or someone you know has encountered or has been affected by a scam, do not hesitate to contact Scamwatch and report the scam.
Additionally, if you were using social media platforms such as Facebook, Instagram, Telegram, WhatsApp or others upon your encounter with the scam, you may want to report the scammer’s profile on the platforms. Some of them have an embedded feature within the platform or application, while some have a dedicated email for such matters.
Who else can I contact?
If you are a victim of Forex trading fraud or have spotted a scammer, do not hesitate to inform the local authorities. Here are some other agencies that can help:
- Australian Securities and Investments Commission (Australia)
- IDCARE (Australia and New Zealand)
- Securities and Exchange Commission (US)
- FINRA – Financial Industry Regulatory Authority (US)
- Internet Crime Complaint Center (US)
- Financial Conduct Authority (UK)
- Action Fraud Police (UK)
Safe Forex Brokers in Australia
If you are interested in Forex trading, it is essential to learn more about Forex, stay safe, and avoid fake brokers. Here is a list of safe Forex brokers in Australia:
| Broker | Features | Min Deposit | EURUSD Spread | ||
|---|---|---|---|---|---|
 Your capital is at risk
US Clients: No Regulated : Yes
|
– Flexible leverage up to 500:1 |
$200 | From 0.1 | ||
 Your capital is at risk
US Clients: No Regulated : Yes
|
– 40% New Member Bonus
|
$100 | Fixed |
Sign
Up
Europe* CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 79% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
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 81% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.
US Clients: No Regulated : Yes
|
– FCA (FRN 509909), ASIC, FMA, and FSCA Regulated. |
100GBP/AUD/EUR/USD | variable |
Sign
Up
81% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.
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 Between 74-89 % of retail investor accounts lose money when trading CFDs
US Clients: No Regulated : Yes
|
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$200 | NDD 0.09 / Standard 0.69 |
Sign
Up
Between 74-89 % of retail investor accounts lose money when trading CFDs
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 Your capital is at risk
US Clients: No Regulated : Yes
|
|
$5 | From 0.0 pips | ||
 76% of CFD traders lose money
US Clients: No Regulated : Yes
|
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$50 (varying by Country) | from 1 |
Sign
Up
76% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.
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Conclusion
With the rise of online trading, investment scams are becoming more and more prevalent. However, we can do things to avoid losing our own money to such frauds and to help others be aware of them. Spreading the word about the most common warning signs and examples or stories about Forex trading scams certainly helps. Keeping safe by using only reputable brokers will further ensure that scammers get none of your hard-earned money.