Forex scam or shady unscrupulous business practice – Which is it?By: Tom Cleveland
Spring is here, which is also the time when scam artists begin to unveil their new and improved con games for public consumption. The criminal element of our society has been busy at work over the past few months, polishing off old fraud schemes with an updated flare and creating new and innovative tricks designed to fleece their targets by using the latest in technology. Why now? Consumers have their minds on more leisurely activities and tend to be much more susceptible to the conman’s siren call.
Read more news about forex scams
Now is not the time to let down your guard, especially while on the Internet. Over the last year or two, cyber attacks have been big news. The majority of these early battles, if you will, were directed at our financial institutions, the brokerage community, and even businesses in general. Recent headlines have also highlighted the geopolitical aspects of hacking on a global scale, from attempts to influence elections, infiltrate government agencies, and mess with the minds of the body politic. Like it or not, cyber crime and related scams are the “new normal”, and the gun sights of these crooks are now focused squarely on the public at large, i.e., you and me.
The foreign exchange industry, unfortunately, is fertile ground for fraudulent schemes of all kinds, primarily because our business deals with a great of money. Crooks are no dummies. They know to focus their priorities on the targets that will yield the greatest opportunity for success, and we just happen to be one of them. We have noted in prior articles that cyber types of crime are now the majority of reported incidences in the UK, more than likely due to the fact that London is the center of the forex world. We have often been warned to be wary of glitzy looking ads of active trading rooms, filled with computer screens, a ruse used quite often to deceive novices and newcomers.
In today’s world, however, we must be skeptical of not only obvious fraud schemes, but also of what have lately been termed, for want of a better phrase, shady and unscrupulous business practices. There is nothing to be gained by arguing over the definitional nuances of the tools used by clever crooks. If you are a victim and lose a great or even a small amount of money, your last concern is how you were duped. You want your money back and quickly. Once again, the scam artists have already anticipated how you will react and are likely gone for the hills or resident of a foreign jurisdiction, where enforcing your legal rights is a nightmare ready to happen.
Binary option brokers have a lock on the “shady business practices” moniker…
Unless you have been asleep in a cave somewhere for the past year, you are well aware of the shady business dealings that have tarnished the reputation of the binary options industry. This segment of the forex trading space has been the fastest growing sector for quite a number of years by a wide margin, due to its simplicity and potential for an enormous payoff in only a short period of time, mere minutes in some cases. Critics have always charged that this activity was nothing more that high-stakes gambling, where the House always wins, and losers fund the entire show.
In many cases, these new broker offerings escaped stringent regulation by operating in jurisdictions where the local Gambling Commission had oversight, which was lenient at best and completely absent at worse. Unbridled growth drew competitor offerings, as well, while traditional forex brokers viewed the actions of this new breed with scorn. The early pioneers did not boast of high-end investment experience and expertise, but resembled a more entrepreneurial crowd, out to make a fast buck while the time was right. It is no wonder that many of these new firms could have cared less about the customer’s success. The stream of new recruits was fast and furious, as were casualty rates.
Competition soon became fierce. Aggressive marketing and bonus campaigns drew in more unsuspecting victims, until the ugly underbelly of the industry was revealed in early 2016. As we reported, “It was not until the Times of Israel published an exposé in March that everyone began to connect the dots. Simona Weinglass, an investigative reporter for the paper, determined that, “Fraudulent binary options is a vast criminal enterprise, employing thousands of people in over 100 companies, many of them in Israel, but also in countries like Romania, Bulgaria, Ukraine and the Philippines.” The losses in the EU alone are in the billions of dollars. Israeli authorities are cracking down.”
Who is to blame for the stigma that is plaguing the binary option industry?
The misfortune that has befallen the fledgling binary options industry is actually textbook in nature. A simple concept, based on providing convenience and ease of use in a complex arena, together with the tempting possibility of instant profits and large returns, when other mediums paled by comparison, would, as a rule, draw a host of competitors to it, once the financial dynamics demonstrated themselves. The onrush of new entrants would then overwhelm the ability of the industry to support all of its participants. A sense of desperation ensues, leading to disillusionment and desperate survival tactics.
We are currently in the next phase that follows – market punishment, consolidation, and renewal. The question is whether a renewal process will ever take place. Regulators have taken a very dim view of the proceedings and are taking steps to tighten the screws even more. Who are the guilty parties? Those in the know suggest there are four major factors emanating from four individual sources:
1) Platform Providers: What, you might ask? Yes, in any of today’s new age companies, software is at the heart of the value proposition. Developers always migrate to where demand is high and the potential for exponential growth is present. The problem is that too many fools rush in to grab far two few prizes. Such was the case with platform providers in the binary options space. When competition heats up in this area, providers take on all prospective customers, regardless of capacity or management quality. If they have the upfront capital and can pay monthly maintenance fees, sign them up and ask questions later. In this case, too much later was the rule;
2) Brokers: One industry insider summed it up, as follows: “If we turn our attention to the brokers and how they have been operating, many have done a good job of ‘keeping it clean’ but unfortunately there has been no shortage of brokers who simply went for the quick buck. What started the cancer growing in the industry, were those brokers who promised the impossible and whose sole intent was to drain every last cent from their traders. They also especially preyed on those who didn’t have the means to even start trading.” Unfortunately, a few dubious and shortsighted brokers set the standard for others to follow. If you chose the high rood, then you soon lost market share;
3) Regulators: An unfortunate reality, including the UK for example, was that regulators with forex market oversight were loath to commit resources to the growing binary option phenomenon, demeaning it as pure gambling and allowing local gambling commissions to go about their merry way by doing nothing to ensure that integrity and high standards were the rule. As a result, brokers found no need to be regulated in the first place. New entrants sprang up with registrations in far-flung foreign locales by address only, choosing a pure virtual existence as their modus operandi. Demand was so high and bonus programs so tempting that new clients ignored the dangers of dealing with a foreign broker and threw caution to the wind;
4) Affiliates, IBs, and Marketers: Every industry has a supporting cast of service providers that work on commission and drive new business to their respective companies. Binary options were no different. All manner of introducing brokers and marketing affiliates jumped into the fray, resorting to any technique that would line their coffers. Many of the shady and unscrupulous business practices originated from these “invisible” participants, whose only motive was to earn commissions. Their attention after customer signage would only exist if a continuing stream of rebates were in their respective contracts.
We should also assign a share of the blame to traditional forex brokers, as well, the ones that sat on the sidelines and did nothing to raise the standards bar for all participants. Can the industry be saved? One insider’s opinion speaks volumes: “It’s clear that the four main players, platform providers, brokers, regulators, and affiliates, all have their share of responsibility. There is no time to keep finger pointing or talking in circles – all the stakeholders now need to pull together and start working together to stabilize and clean up the industry. If we don’t take action now, everyone is going to feel a lot more pain before it can get better, if at all!”
Is there an opposing argument in defense of the binary options industry?
As bad as the situation has gotten, it must be remembered that there are many legitimate brokers and service providers in the binary options arena. Traditional forex brokers have also come out with their own versions of the offering, which surely brings back a bit of luster to an already sullied reputation. Image can be everything, and it will take time to repair and renew. Defenders of this trading product, however, are quite disappointed that actual customers, who claim to be victims, have not accepted their share of the blame.
Warnings and disclaimers about risk in this genre are highly visible, and the flood of new traders ignored every step in the due diligence process to ensure that a broker was truly on the up and up. Consequently, greed took over, and losses were the result. Were deposits stolen? The first question to ask is who sent the deposits to these offensive brokers in the first place? When withdrawals were not quickly forthcoming, were there available funds in the account and had bonus trading restrictions been met? In most cases, the customer should have known better, but his own greed and desire to get rich quickly were the seeds of his own eventual demise.
Have you suffered a loss at the hands of your chosen broker? Are you wondering if it was outright fraud or unscrupulous business practices that did you in? In today’s world, traders must be on the lookout for both! Stay skeptical and cautious!Like this article? Please share!