How to spot a forex scam

Written by
Fact checked by
Adam N.
Updated
Nov 2023

Spotting forex scam operations is is difficult, hence the success of these schemes. You typically need to sift through tons of information and learn to tell the difference between fake and legit offers.

You can stay on the safe side of forex trading if you choose a broker supervised by a top-tier regulator and never act on unsolicited investment offers, especially if proposed in cold calls and on social media platforms. Head over to the Scam Broker Shield tool developed by our team to check the safety profile of a broker in a few simple steps.

Key recommendations for avoiding forex scams
Edith
Edith Balázs
Regulation • Fighting Scams • Safety

I have interacted with many forex scam victims and I often advise users on how to avoid deceptive brokers and spot the red flags. Here are some key insights on spotting and avoiding forex scams:

  • Do not sign up with brokers lacking top-tier regulation.
  • Promises of unusually large profits with little or no financial risk are a major red flag.
  • You have few options to get your money back once scammed.

The brokerage experts at BrokerChooser evaluate more than 30,000 brokers globally and monitor regulatory databases and warning lists. The 100+ brokers featured on our site are all legit and trusted entities, overseen by at least one top-tier regulator and required to meet very strict regulatory standards.

Do not sign up with brokers lacking top-tier regulation

Forex brokers supervised by top-tier financial authorities must meet to very strict professional standards. Top-tier regulation is your most important ally in avoiding forex scams.

If a top-tier regulated forex broker fails to meet the expected requirements that are typically aimed at ensuring fair play, it faces strict regulatory action and ultimately risks losing its license.

Here are some useful tools for checking whether a broker is safe:

Information on Webull in the BrokerCheck function.

On the flipside, there is a higher likelihood that a broker might be a scam if:

  • it is not regulated at all
  • it is regulated under a jurisdiction widely seen as an offshore haven (e.g. Vanuatu or St. Lucia)
  • it is featured on a warning list of a top-tier regulator (e.g. that of the UK’s FCA or the SEC in the US)

Promises of unusually large profits with little or no financial risk are major red flags

Trading forex is a risky endeavour and statistics show that most people end up losing some of their invested money. It follows that any promise of guaranteed or exorbitantly large profits is most probably a setup or a scam.

Other tactics including creating a sense of false urgency and pressuring their victims to “recover their losses,” basically by investing again.

Another trick is making it impossible to withdraw your funds after an investment. It is also a common scheme to have platforms conveniently malfunctioning in such cases.

Forex trading scams often involve supposed 'secrets' to successful forex trading or signal services that promise to provide profitable trading strategies and great returns. In reality, your money is either not invested at all or placed in very risky investments. Either way, you’re likely to lose some or all of your funds.

Be wary of clone forex brokers, which create websites that mimic legitimate brokerage firms, luring investors with attractive offers and trading platforms. Once investors deposit their funds, these fake brokers disappear.

You have few options to get your money back once scammed

The sad truth is that any money you lose to forex scams is - in most cases - gone for good. Nevertheless, there are a few things you can do to retrieve your money.

Make sure you save all documents and correspondence. Document everything, make screenshots and save emails and chats, so you have as much proof as possible in case you need to go to the authorities.

If you get scammed by a broker, you have a few options you can try to get your money back:

  • You can initiate a chargeback, which is a feature offered by banks and payments systems for client protection. ​​This entails the issuer bank or provider writing off the funds from the account of the seller of the service (i.e. in this case, the broker) if the service was not provided.
  • You can take legal action and get a Mareva (or freezing) injunction issued against the company. This injunction is useful to prevent the company from transferring its assets out of the jurisdiction of the court.
  • If the broker has a financial regulatory body, you can also report the scam to them.
Got questions?
Engage with our growing community of traders and investors like you to find your answers.
Join now

Everything you find on BrokerChooser is based on reliable data and unbiased information. We combine our 10+ years finance experience with readers feedback. Read more about our methodology.

author image
Edith Balázs
Author of this article
I bring 20+ years of experience as a correspondent having worked for Bloomberg, Dow Jones and The Wall Street Journal covering macroeconomics, stock, currency and fixed-income markets. I hold a Master's degree in American Studies and Journalism.
×
I'd like to trade with...