No! It is not advisable to join a forex pyramid scheme. Forex itself isn’t a pyramid scheme, but people have built pyramid schemes around it just like it is done with real estate, stock market, and another legitimate type of investment. As an investor, you should be able to discern the forex market from the forex pyramid scheme. The forex market is one of the largest financial markets in the entire world with billions, if not trillions of dollars, traded by investors, traders, and large corporations every single day. Investors and traders access forex every day through a forex broker online with the help of the internet and computer technology.
Forex scams are one of the challenges that investors face in the forex trading industry. In this article, we’ll show you how to spot a forex scam, the four main types of a forex scam, ways to avoid a forex pyramid scheme, and the top five legitimate brokers you should consider today.
Generally, there are different investment projects and forex brokers in the industry that are pyramids. They are divided into two major types.
Classic Pyramid.
In this type of pyramid, each of the subsequent investors is told to fund the account of the last investors. It is from the newly created account of the new investor that the funds will be generated for the previous investor. The pyramid will disintegrate as soon as the influx of deposits stops, and the fraudsters will keep the unpaid funds to themselves.
Fraudulent Projects
In this type of pyramid, the organizers (fraudsters) sets unrealistic demands where they tell investors that they can double their money within a short period of time. They will end up not paying anything to any of the investors, giving flimsy excuses on why withdrawals are unavailable.
How To Spot A Forex Scam
There are some signs that you need to look out for before joining a forex investment. If the offers seem too good to be true, then it probably is. That’s just the rule of life that you should apply when looking for forex investment. An outrageously large return is one of the common things about all forex scams. That’s not to say that one can’t make huge profits returns in the forex market, but the higher the return, the higher the risk involved. You should be conscious when an investment broker promises huge returns on your small investment within a short time. Just imagine that if the broker actually has a better way of trading forex with little downside to get big upside within a short time, he wouldn’t be disclosing it to anyone. He would just be discreet about it and keep making huge money without any hassle. Let’s check some of the signs to spot a forex scam.
Forex Scam Promises Ultra-high Profitability Within A Short Time
Incredibly high returns are the most common way to our investors into forex scams. They will come at you, telling you that you will get times ten of your investment within a short period of time. The covetousness of an investor will be exploited by these fraudsters because he/she won’t want to miss the opportunity of getting huge returns within a short period of time.
Use Of Vague Documents
A financial institution must operate under the rules and regulations of the country or state in which it provides services. Besides, it is through valid documents that a financial institution can be tested for validity and reliability. It is a smart move to run away from any institution that does not have valid legal documents. That should be a sign that the organization is either a scam or incompetent.
Highly Rewarded Multi-tiered Affiliate Schemes
When you come across a financial institution offering a highly rewarded multi-tiered affiliate program, you should be cautious. Whether the institution pays nothing to anyone or pays some token to existing customers via new deposits, it is still a scam and you should deal with it.
Main Types Of Forex Scam
In the world of the financial industry, fraudsters invent new methods to steal people’s money. But we’ve listed the four common/main types in the forest marker. They include; forex robot scams, Ponzi schemes, forex signal scams, and Pyramid schemes.
Forex Robot Scam
Normally, a forex robot should be a computer algorithm designed to help users trade forex in the market. Metatrader is a typical example of a forex robot trading platform where the robots are called Electronic Advisors, EAs. Forex robots are programmed by creators with good intentions of making legitimate money. But some fraudsters still manipulate the forex robot to steal people’s money. What they do is program the robot not to make any trade or any profit and then sell it to investors who are expecting huge profits on their investments.
Forex Ponzi Scheme
Ponzi schemes are known to be bogus investment management organizations. Investors are lured by a forex money manager into investing a huge amount of money into the scheme. The organizers (fraudsters) will then pay some of the early investors some fractions from the money invested by later investors and not from any return on investment as promised. The scheme will only continue if there are new investors.
Forex Signal Scams
A forex signal service is just like subscribing to get the alert of when to buy and sell in the forex market. It is almost identical to the concept used by fraudsters in the forex robot scam. But the only difference is that investors pay some token to receive buy and sell alerts in the forex market instead of paying a one-off fee. However, you should know that there are some genuine forex signal services that deliver reliable and valid services, which are useful to the investors.
Forex Pyramid Scheme
This is the common way of defrauding people of their money by luring new paying members into the scheme. No forex trading is done by the organizer, he only gets money from the money paid by new members of the scheme. Now, the newly admitted members will be instructed to get more members which will form the second layer of members and so on. The organizer will promise members that the higher they are in the pyramid, the more money they will make. Forex Pyramid Scheme is a serious crime and whosoever is caught in the practice will face serious jail time.
How To Avoid A Forex Pyramid Scheme
Before you corporate with any organizer of the forex pyramid scheme, you need to ask for proof of results, valid and complete set of documents. The organizer of the scheme should be able to provide the results and documents without any hassle. Follow the follow g advice to avoid getting scammed by a forex pyramid scheme.
Check For The Documents: To avoid a forex pyramid scheme, you need to check for the certificate of state registration, legal address, and financial license.
Keep Your Personal Information: No matter how convincing the organizer of the forex pyramid scheme might be, never give out your personal information or financial details to him/her.
Verify The Company Online: You can actually surf through the net for the registered investment managers and listings of registered investment organizations. The regulator of the stock market in your country should be able to provide these listings.
Ensure That The Organization Has Contacts: Most pyramid schemes don’t disclose their contact information for communication. The most common thing they do is leave an email form and a callback form. So, be aware of this before registering with them. Always lookout for the availability of communities on social media, physical office addresses, email addresses, and phone numbers.
Top 5 Reliable and Legitimate Brokers
You can only make reliable returns on your investment when you partner with trusted brokers with a remarkable reputation. This will help you be safe from getting scammed by a pyramid scheme. We’ve listed the five most reliable brokers for forex traders.
| Regulation | Markets | Min. deposit |
| Great Britain, Cyprus, South Africa, and Bahamas | Forex, CFDs on stocks, commodities, futures, indices | 100 USD |
| Cyprus, Belize, and Australia | Forex, stocks, CFDs on stocks, commodities, indices | 5 USD |
| UK, Cyprus, and Australia | Forex, stocks, ETFs, CFDs on stocks, commodities, indices, ETFs | 100 USD |
| Ireland (EU), Australia, South Africa, Japan, Abu Dhabi, and the British Virgin Islands. | Forex, Crypto, options, CFDs on stocks, bonds, ETFs, indices, commodities | 100 USD |
In Conclusion
Forex trading is definitely worth it especially if you have a good strategy and risk management procedure. Forex can make you rich if you’ve mastered all the techniques and strategies involved in making the right moves when trading. Forex trading isn’t only for individuals, even banks multinational corporations and hedge funds are all involved in forex trading. However, you need to be careful when dealing with the forex pyramid scheme. You can lose a lot of money if you fall victim to a forex scam.
References: 1 https://www.damemagazine.com/2021/03/02/is-forex-trading-the-latest-pyramid-scheme/
References: 2 https://www.institutionalinvestor.com/article/b19fcfsc2n7jw6/Is-This-Company-a-Forex-Trading-Pyramid-Scheme
Last Updated on August 6, 2022 by Ana S. Sutterfield
Magalie D. is a Diploma holder in Public Administration & Management from McGill University of Canada. She shares management tips here in MGTBlog when she has nothing to do and gets some free time after working in a multinational company at Toronto.
