Action Fraud Data: Brits lose £1.2 billion to investment scams every year

Chris Lee

Recent data out of the UK demonstrates the reason why fraudsters are so prevalent in our society. In that market alone, the latest figures reveal that British citizens lose £1.2 billion to investment scams each and every year. A major portion of that total is now being attributed to forex trading ruses and cryptocurrency swindles. Whether due to slowing economic trends, the inability to earn respectable returns on savings, or just plain greed, individual consumers, both young and old, are being lured by tempting ads to get rich quick on favorite Internet sites and various social media platforms.


The Internet, like it or not, dominates our lives these days. The convenience it provides, whether when we use our PCs or smartphones, has been a great benefit for our society, but it is also very easy to let one’s guard down and fall victim to a clever scheme, which used to be a more difficult proposition when the conman had to look you in the eye in a face-to-face interaction. Crooks have taken the lead in technology, first by compromising major data bases of personal information and then secondly by monetizing that data through an online ruse of some type.

Fraud is the one crime where we must respond before we can become a victim. Crooks understand this concept quite well and have devised elaborate methods for getting past this initial hurdle. Regulators have been hard at work cleaning up the forex trading space, which incidentally has grown to over $1.5 trillion per day. This figure excludes futures and options, if that really matters. Our space, however, is not squeaky clean. Per one security expert: “The opportunity still exists for many forex scams that tempt new investors with a promise of quick fortunes through “secret trading formulas,” algorithm-based “proprietary” trading methodologies, or “forex robots” that do the trading for you”.

Forex trading is not easy. It is very difficult, the reason why many conmen use this very fact as leverage to get you to bite on a simplified path to riches, where robots or so-called experts produce enormous gains with very little risk attached. To begin with, forex trading is high risk for everyone, experts included. Awareness is always your first line of defense. With that in mind, ruses to avoid fall into three basic categories: 1) Dishonest Brokers; 2) Signal/Robot Sellers; and 3) Phony Fund Managers. There are also a number of warning signs that can help you avoid the conman’s trap, as well.

Three Basic Categories of Forex Trading can be infested by scam artists

Since forex trading is difficult, casualty rates run high, as much as 65% by most estimates. If you are not cut out to be a traditional trader, there are, however, other options for you. You may try your hand a trading robots, but they do get very technical, and regardless of the propensity for high winning trade rates appearing in sales brochures, robots must be fine-tuned for the type of market conditions on a given day, or they will not perform as desired.

You may also wish to do what is called “mirror” trading, where you pick an “expert” with a good track record and then allow the broker’s software to mimic the expert’s trades, but with your portfolio. Lastly, you can handover your funds to a fund manager and participate in his gains and losses. In any of these cases, you will still need to understand the basic principles of trading in order to manage your “experts” effectively.

And then there is the potential for fraud. Unfortunately, potential scam artists are lurking in the shadows in every corner of retail forex trading. Here is a brief synopsis of what you could encounter when things go wrong:

  • Dishonest Brokers: Regulators have done a yeoman’s task of cleaning up the occurrence of dishonest brokers in their own domestic jurisdiction, but most problems today originate from an offshore broker that conceals or fakes its whereabouts, its management team bios, and even its license to do business. The FCA is constantly on the lookout for “clone” brokers that copy London-based brokerage houses, and then defraud unsuspecting customers.

In their constant effort to protect investors and traders, regulators in developed markets have tightened the uses of leverage, incentive bonuses, and any other trick of the trade. The consequence is that offshore brokers tend to offer tempting deals that counter these restrictions. Many of these operations are fly-by-night type companies that take your money and run. As others have found out, the odds of getting your money back are slim to none, and trying to exert your rights in a foreign jurisdiction is a futile exercise.

Before selecting your broker, i.e., virtual business partner, be sure you know whom you are dealing with. As this veteran trader warns: “Sham brokers plan their deception extremely carefully and almost always the base for their activities is set up in parts of the world with weak financial regulation, or even in parts of the world that are judged to be unsafe.  All these steps are designed to make it as difficult as possible for their victims to recover money taken illegally.”

  • Signal/Robot Sellers: In this case, you have determined that you would like help in the form of software to guide your trading activity. You will not have to look very far. Ads for signal services and trading robots proliferate the web. Some products may be manual or do the complete job for you, using technical analysis and breaking news to create “signals” for you to follow. Their marketing materials will tout high win rates, but only pre-testing them in a demo environment will give you any true account of their ability. These services are not cheap. They typically charge a daily, weekly, or monthly fee for their services.

The words of a veteran are also invaluable in this category: “Some analysts propose that many or even most signal sellers are scam artists. A frequent criticism is that if it were really possible to use a system to beat the market, why would the individual or firm that has this information make it widely available? Wouldn’t it make more sense to use this incredible signaling system to make huge profits? Other analysts distinguish between known scammers and more reputable information sources such as Metatrader, which offers a well-thought-out signaling service”.

Are there any good products in this genre in the marketplace? Banks and hedge funds would say “yes”, but they have invested millions in the development of their automated trading algorithms. On any given day, they may release five different “robots” to evaluate the prevailing market conditions, and then turn off the underperforming models. The lesson is that rules-based software tools only work best when the conditions are in their favor. If you can adapt your robot or signals to varying markets, then you may stand a chance of profiting via this trading method.

  • Phony Fund Managers: Ponzi schemes are still alive and well today and in greater numbers across the globe than ever before. The reason is because the success rate has never diminished. There is always someone that has heard of or who knows the next “wunderkind” in the trading world, capable of making enormous sums of money, if you would only hand over control of your money and wait for the promised avalanche of cash to come. It never does, except, perhaps, for early depositors that become shills for the fund manager.

The idea of having a commingled fund with distributed gains and losses is not a new one. Mutual funds, index funds, and EFTs have been with us for decades, and hedge funds, by their nature, fall into the same category. In the forex space, however, far too many of these efforts are on the borderline between legitimate and outright fraud. In order to attract your patronage, these fund managers will promise extremely high rates of return, entirely due to the “special” system employed or by the highly skilled forex traders on its staff. As with robots, if they are that good, why are they sharing?

Be wary of any performance record posted on the website. These can often be faked. Check for licenses and independent testimonials. Many of these conmen know how to look successful and how to fly beneath the radar of regulators. Bernie Madoff popularized the Ponzi scheme some time ago, and crooks have been refining it ever since, the difference being that they are willing to settle for millions, not billions in profits. With a small scheme, they will surely disappear early in the process, leaving many victims to sort it out.

General Warning Signs that a Scamster may have targeted “You”

Are there any warning signs or “red flags” that would suggest that a potential fraud is in the making, with you as a target? Six warning signs come to mind:

  • Lack of Regulation: Best case is to verify with your local regulator that the broker or fund manager is properly licensed and registered. Be wary of foreign-based brokers that solicit your business from offshore. They may feign regulatory oversight on their website or have none at all;
  • Outrageous Promises: If purported claims are well above general market returns, then your skeptical mind should go into high gear;
  • No Live Track Record: Fraudsters will post fictitious rates of return and refuse to disclose the win/loss record of its active traders, which is now required in many jurisdictions;
  • Pressure to Increase Deposits: If you are approached by an aggressive salesman that asks you to increase your initial deposit, red lights should go off in your mind. The same fellow will advise against withdrawing, as well;
  • Evasive Customer Service: When customer service quality drops, you can bet that the best are jumping ship before it sinks. The ones left will not be able to answer questions;
  • Operating Issues: Lastly, if you begin to experience re-quotes, slippage, and delays in honoring withdrawal requests, then you had best line up a new broker and quickly.

Concluding Remarks

If British citizens lose £1.2 billion to investment scams each and every year, then you, too, can become a victim in your neck of the woods. Maintain a skeptical mind, and invest extra time on the front end before choosing any business partners to help you with your forex trading endeavors. As always, if it sounds too good to be true, then walk the other way, and remember, you are your first and last line of defense when it comes to preventing fraud.

Don’t become a victim!

Chris Lee

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