Global Forex Scams Continue to Fleece Consumers Despite Warning Alerts

It is summer time, at least in the northern hemisphere, and, as the song goes, the living is easy. The only problem with that type of thinking these days is that scam artists are on the ready to fleece you big time, if you are not alert to their tricks. Sadly, despite ample warnings from regulators, the press, and websites like ForexFraud.com, fraudsters are ramping up their attacks across the planet, and consumers are falling for the same old tried and true schemes that continue to work their magic by enriching the crook’s bank account, far, far away. Global Forex scams are on the rise, and here’s how you can avoid falling victim.

You need not feel alone, if you have become a victim to the latest crime wave that has been sweeping the Internet. The criminal element of our society has also targeted forex brokers. It seems they are prone to con games, too, especially when they are looking for prospective business partners that will help them make money in our highly competitive industry. In today’s networked business place, it is every bit as difficult to check on the credentials of an overseas partner, as it is for you to validate the legitimacy of a forex broker operating in the virtual world wide web. Stories have been surfacing over the past year of just such con jobs, where brokers have been taken in and bilked for millions.

Fraudsters have also gone global in a big way, if press headlines are to be believed. News of major crimes on the forex front have typically been concentrated in developed markets, like the UK, the United States, and Europe, where currency trading has been prevalent for decades. Lately, reports no longer focus on London or New York, but also include developing markets like Malaysia and South Africa, among others. The amounts of money in these widespread capers may seem much less that a Bernie Madoff type billion-dollar scam, but the crime world is, as they say, making it up on volume alone. A smaller profile can also help to keep law enforcement at bay, since there are only so many cases that local authorities can pursue before budget constraints kick in.

What forex schemes were perpetrated in Malaysia and South Africa?

Not mush has changed in the past year. We reported back in May of 2016 that, “Fraud is also prevalent on a global basis. It does not discriminate by geographic region, but it does tend to focus on groups that are more susceptible to its cleverly designed traps. Forex scams come in a number of flavors, each one calling upon our greed and our everlasting desire to get rich quick. Currencies may seem familiar, since they are real money, but the trading of foreign exchange pairs is complex, and that complexity can often cloud our judgment. We can easily be led to believe that experts can make mountains of cash and outrageous returns in no time at all.”

The above statement was not a blanket indictment of the forex industry. We also noted that, “There are definitely many legitimate brokers and managed account providers to choose from, but there are also a number of shady businesses that prefer to prey on ignorant, uninformed consumers.” The issue is that the complexity of foreign exchange trading is often used by crooks to “mystify” their marks, convincing their targets that only experts can make a lot of money at this endeavor and that only they can connect you with the right people. NOT! Do not forget that the “con” in “con man” stands for confidence, which is the initial objective. Once there is trust, then the rest is easy.

Globalization over the past two decades has redistributed a great deal of wealth from developed markets to developing ones. New “wealthy classes” are evolving across the planet, and these individuals are looking for ways to invest their newfound wealth. The issue is that regulatory infrastructures are lacking, behind the curve so to speak. The level of education and consumer awareness is low, especially when it comes to something as complex as forex trading. Unfortunately, this type of environment is exactly what crooks thrive upon. Crooked money management schemes are the order of the day in these developing markets, where the vast majority of the populace is unaware of the risks that will soon take over their lives.

Here are just two brief reports from two different markets:

• Malaysia: We actually wrote about this fraud scheme in April when it surfaced and began dominating industry headlines. After a few months, law enforcement officials have gathered more evidence of the perpetrated crimes and have revealed that, “Some 23,259 investors have become victims of forex investment schemes with losses estimated to reach almost RM80 million ($18.4 million USD). Investigations found that the company lures unsuspecting victims to make a minimum investment of between RM2,000 to RM40,000 and that profit payments would be made on a daily basis. “The investments were made in foreign exchange, but the profits promised were not paid.” Six individuals have been arrested and assets seized, but the value of these assets is estimated at less than 1% of the total loss value. Funds have obviously been deposited in offshore bank accounts of unknown origin. The fraud emanated from an entity by the name of “VenusFX”. The local crime investigation director has added that, “I want to remind the public to be alert and not to fall prey to such fraudulent investment schemes.”

• South Africa: Fraudsters will often associate with public figures to enhance their credibility and trustworthiness. Such is the case where Brendon Naidoo, a rather flashy spender in bars and entertainment venues, made himself visible in the tabloids by romancing a local DJ star, a Miss Zinhle Jiyane. Unfortunately, while wining and dining his new starlet for all to see in the local tabloids, he “has allegedly been enriching himself by scamming retired teachers and business people,” not to mention several unwitting investors and pensioners, out of more than $1.4 million USD. According to one report, “Apparently, Naidoo convinced his “victims” by showing them pictures of himself next to a flashy Audi R8 and producing bank statements of how much money he was making.” The bank statements were fakes, and, as in most cases of this type, funds were drained from client accounts to finance a lofty lifestyle, well beyond the norm of society. Needless to say, his relationship with Zinhle has ended, and he has been remanded to Johannesburg Central prison where he will stay until his next court date.

Why are we so susceptible to these schemes, regardless of cultural issues?

As long as conmen have swindled an unwitting public, there have been books written about why we fall so easily for the schemes that are so easy to spot, when you are not looking through the eyes of a victim. In fact, a new best-seller that hit bookstores last year was entitled, “The Confidence Game: Why We Fall for It … Every Time.” The author, a New York psychologist by the name of Maria Konnikova, reveals many of the reasons, but there is no news here. Her poignant comments follow:

• “We’re very good at being objective about others, but not about ourselves. So oftentimes people say, ‘if it’s too good to be true, it is, get out.’ But that’s very easy to say about other people, it’s really hard to say about ourselves because nothing’s too good for me, I’m a person who really deserves this.”
• “The first thing that con artists do when they’re trying to con someone isn’t a trick so much as research. So they really look up the people that they’re going to be conning.”
• “They will use — and this is a trick — they will make you emotional very, very quickly. Because the way that our minds work is, it’s very difficult to be logical when you’re also emotional.”
• “People who are in moments of transition are particularly vulnerable to con artists because transition creates emotional vulnerability because it creates uncertainty, and we really don’t like uncertainty. They’re going to sell you certainty.”
• “We often can’t say no because it puts us in this situation of a bad guy. Basically have exit scripts for any situation in your mind that are automatic, rather than in the moment, because it’s really hard to think in the moment.”
• “The best ones? There are no red flags, they’re just great, fun people. That’s why they’re so good. If they were sleazy, if they seemed like a used car salesman like our stereotype of them, they wouldn’t be good con artists. We would never fall for them.”

Perhaps, there are one too many quotes above, but it’s difficult to gain one’s attention, no matter how well meaning quotes can be. If you stop and think about the people in Malaysia and South Africa that were duped and then try to picture yourselves in their positions, what would you have done? How would you have reacted?

What schemes have befallen a number of global forex brokers of late?

Yes, uninformed consumers can be easy marks for an accomplished con man, but how have members of the forex brokerage community been duped? It may come as a shock to you, but businessmen can be susceptible to the same tricks and schemes as the rest of us. They are not immune, nor do they easily escape the far-flung web of the criminal element of our community. The latest fraud game relates to new customer acquisition, termed appropriately as the “make-money affiliate networks”.

The scheme is a glorified pyramid network where IBs promise brokers new customers, while those potential customers are persuaded to sign up more friends in the process. As one insider noted, “The two caveats to bear in mind with regard to these systems are that brokers could fall foul of these tactics, sign up to this type of network, and lose money yet gain no new clients, and that retail customers of brokerages could be persuaded to become ‘affiliates’ in their own right, to find that actually they have money taken off them and no deposits from the network would arise.”

Concluding Remarks

Consumers beware, and forex brokers, as well. Ponzi and pyramid schemes are alive and prospering on a global basis. If it looks to good to be true, as most schemes do that promise exorbitant returns and as most “make-money funnels” do that promise a steady flow of new customers and first-time deposits, walk the other way. Greed and seeming desperation can lead to even greater problems in the long run. Beware the conman!

Chris Lee

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