CFTC Warns of Forex Frauds


Trading foreign currencies profitably has enough challenges, without traders or investors having to deal with fraudulent investment service providers. Unfortunately, the huge forex market has attracted a significant number of fraud perpetrators.

As a result, individual forex investors really need to keep on their toes and dig deeply whenever considering entrusting their money to others. Two of the most prominent watchdog and regulatory organizations seeking to keep forex service providers honest in the United States are the Commodities Futures Trading Commission, or CFTC, and the National Futures Association or NFA.

The CFTC has recently issued a warning against the growing prevalence of forex fraud in investment situations, and so this article covers the role of the CFTC in preventing, raising awareness about and prosecuting cases of forex fraud.

A Brief History of the CFTC and its Purpose

The CFTC is an independent agency of the United States Government that was formed in April of 1975 to replace the Commodity Exchange Authority. Futures on agricultural commodities have been traded in the United States since the mid-1800s and have come under federal government regulation since the 1920s.

The CFTC’s stated purpose involves protecting market participants and the general public from fraud, manipulation, and abusive practices in relation to transactions involving commodities, financial futures and options. This includes overseeing the retail forex market.

The regulatory and watchdog agency also helps promote open, competitive and financially solid futures and option markets. The CFTC has taken an increasingly active role against forex fraud perpetrators in recent years, especially targeting those preying on naïve retail forex investors.

Forex Fraud Warning Signs

The CFTC lists a number of key forex fraud warning signs on its website. If you might be considering investing with a forex company that exhibits one or more of these signs, you may well want to think twice or even three times before trusting them with your money.

Some of the classic warning signs that can help you identify potential forex frauds include the following:

  • Promises of Excessively High Returns – Remember, whenever something sounds too good to be true, it probably is. Whenever a forex investment opportunity promises huge percentage returns, minimizes the risk involved in forex trading, encourages the use of an excessive amount of leverage, or offers to get you rich quickly, they may well be frauds.
  • Unsolicited Investment Approaches – Whenever you receive phone calls or e-mails that you have not solicited from unfamiliar people providing forex investment opportunities, be sure to treat them with a substantial amount of caution and suspect a possible forex fraud immediately. Avoid giving any personal information and make some serious inquiries about their background and location. Also ask how they got your contact details and why they are approaching you.
  • High Pressure Sales Efforts – Any responsible and legitimate forex investment sales person should keep your best interests firmly in mind when proposing their products to you. This means that if you start to feel pressured into doing something regarding investing in a forex related scheme, especially if you are not sure whether it would be suitable for your investment objectives, you would probably be wise to walk away immediately.

High Fraud Risk Investors

The CFTC also warns that certain investors may have a higher risk of being scammed by forex frauds. Such people will want to maintain a greater degree of caution when assessing potential investment plans, especially if they show other classic signs of being a potential forex fraud.

Several of these high risk groups are described further below.

  • Those Receiving Large Sums Recently – If you have just received a substantial amount of cash, you have probably become a much more attractive mark for forex fraud scammers and so need to be especially wary. Such sums might have come from lottery or gambling winnings, the sale of a valuable business or house, an inheritance or having access to retirement funds.

Irrespective of the source of your new wealth, scammers will undoubtedly be tempted to relieve you of it. As the scammer’s favorite saying goes, “A fool and his money are easily parted”, so act smart and perform your due diligence to avoid being defrauded of any freshly gained cash.

  • People Wanting to Get Rich Quick – Nothing works more in the favor of a forex fraud perpetrator than the greed of their potential investors. Most sensible people endeavor to amass their fortunes by working and investing wisely with reputable organizations over the long term.

Those who instead wish to get rich fast are often especially susceptible to falling prey to forex fraud schemes. Scammers will usually take full advantage of and play upon such a person’s greedy dreams of rapid financial gains with false promises of excessively profitable returns while downplaying risks.

Words to the Wise About Forex Frauds

Remember, getting your money back from a forex fraud is virtually always difficult and usually next to impossible. As a result, it really pays to look long and hard at any forex investment plan or service before placing any funds at risk with it.

Furthermore, the CFTC correctly warns potential investors that forex trading is a very risky endeavor. Forex trading typically presents a substantial risk of losses, as well as gains, especially if high leverage ratios are used when trading.

Accordingly, only use your best judgment and do not believe or trust anyone who would have you risk money you cannot easily afford to lose by trading forex. They may well be promoting a forex fraud scheme in which you could lose some or all of your investment.


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