Forex scams
What is forex?
Forex stands for Foreign Exchange. The forex market, also referred to as the currency or FX market, is basically the simultaneous buying of one currency while selling another. Profits and losses depend on the fluctuations in the exchange rate between the two currencies.
What is a forex scam?
Forex scams offer investors the opportunity to invest in foreign exchange, but, in the end, the money is lost to those running the scheme. Sometimes the scammers steal it to fund a lavish lifestyle, or they may lose it by making poor trading decisions.
Making money in this market is difficult, even for large financial institutions that employ professional traders, run million-dollar trading accounts, and use sophisticated technology.
How does it work?
Promoters often find investors through placing ads on TV, the radio, in newspapers, or on the internet. Some will depend on affinity groups, friends, or family to find willing investors, promising an opportunity to invest with expert traders employed by financial institutions.
Either way, the promoters often promise high returns. They work hard to get you to sign paperwork, attend trading seminars or buy software that will unlock the mysteries of the forex market.
When you respond to their promotions, sellers or their affiliates may encourage you to invest in a forex opportunity. They provide you with a contract and encourage you to wire your money offshore. After you invest and some time passes, you may find out the investment is a sham or even a Ponzi scheme
.
Trading seminars and software programs may not be outright scams, but they will probably not get you the results you believe you were promised. If you invest in the forex market and do not understand how it works, or the risks involved, you may lose a lot of money. Not all forex investments are scams, but they are all high risk. See forex in our high-risk product section for information on these investments.
Watch out for one or more of these common characteristics:
- An offer to pool your money in a fund that will be managed by expert currency traders
- A guarantee of little or no risk and high investment returns
- An unwillingness to discuss the past performance or track record of the specialist traders who will purportedly handle your money
- High-pressure sales techniques to buy an investment, purchase software or take courses
For more discussion on forex, see our Investor Watch about Forex.
Research before you invest
Check our Fraud warning signs section to familiarize yourself with the language and techniques found in almost every investment scheme. There are also videos of people who talk about how they had their savings taken by a fraud artist.
Visit our Avoid investment fraud section to learn about techniques and tools you can use to protect yourself against fraudulent investment schemes and their promoters.
Report it and warn others
If you have been approached or know of an investment that fits the description above contact your provincial securities regulator immediately.
In BC, contact BCSC Inquiries. You can also anonymously report suspicious activity through InvestRight’s Report a scam webpage.
Residents from other Canadian provinces can find contact information for their provincial securities regulator at
www.securities-administrators.ca.
If you know a person who has put money into, or is considering contributing, to an investment like the one described above, give or send them this information, and encourage them to do more research.