Black Lists Fail To Stop Shady Marketing And Scam Brokers

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Black Lists Fail To Stop Shady Marketing And Scam Brokers

Warnings, blacklisting, fines and more regulations continue to poor in. In the last week a minimum of 4 international regulators have announced new regulations, new scams or both. In most cases the regulators are beginning to turn focus to the marketing, forcing the brokers to take responsibility for the actions of their network and, hopefully, the shady scam artist marketers out of business.

Spain’s CNMV has announced a raft of new rules and regulations for forex, CFD and binary options brokers. The new regulations are intended to make the brokers take greater care protecting their clients and are focused on costs, risk disclosure, leverage and advertising. Advertising has long been a problem for the binary options industry as it relies heavily on affiliate marketing and there is little to no control over what a 3rd party marketer can do. Brokers have 1 month to comply with the new rules which also require traders to submit a voice or written document stating that they understand the risks involved with trading.

The CFTC is also cracking down on marketing fraud in relation to binary options. The US regulatory agency just fined Neil Pecker and Vision Financial Partners Ltd $6.5 million for perpetrating just such a scam. The allegation is that Mr. Pecker, using Vision Financial, posed as a licensed commodities and derivatives investment professional in order to defraud clients of more than $3 million. The money was invested into offshore and unregulated binary options accounts which prevented the withdrawal of deposited funds. To make matters worse Mr. Pecker also skimmed a cool million directly off the top before disappearing into the wind. Two other firms are named along with Vision Financial and are expected to be fined as well.

Cyprus just suspended the licenses of several forex and binary options brokers including DragonOption and TopOption, which was recently sold to new owners. The allegations claim several violations that may endanger clients funds or disrupt the functioning of financial markets. CySEC has given the brokers 10 days to comply at which time, if no changes have been made, the brokers will have to cease operations. Until then they are not allowed to accept new clients or allow current clients to trade and all monies are to be returned pending recertifications.

The French AMF added 10 new names to its list of blacklisted brokers. Their list is growing exponentially as the country is plagued by scam brokers who will change their names and URL’s as soon as they get listed. Recent actions to ban all forms of electronic advertising of binary options has failed to produce the desired results. The scammers simply hide behind the Internet knowing that would-be get-rich-quick suckers will come looking for them anyway.

Belgian officials at the FSMA are cracking down on unregulated brokers and scam artists alike. The agency added nearly 20 new names to its list including unregulated brokers we’ve heard of as well as clone brokers and what they refer to as boiler rooms. On the list of unregulated brokers are know scams like BMB Options but also trusted brokers like FMTrader which is not a surprise, many regulators target brokers who are regulated in foreign jurisdictions. What is surprising is the focus on “boiler rooms” which turn out to be the call centers and 3rd party customer service centers that use aggressive marketing techniques and fraudulent information to strong-arm deposits from widows and retirees.

Market News

The UK’s Financial Conduct Authority updated its warning list with unregulated forex brokers MarketGBP, Capital-Traders, and FXTRADE777 on Wednesday. According to the regulator, these brokers have been providing financial services or products in the UK without its authorization.

In its official notices the UK financial watchdog keeps warning that “ some firms act without our authorisation and some knowingly run investment scams”. Our further reasearch on the three companies revealed that more likely all of them are involved in some sort of scam.

MarketGBP is a MT4 forex and CFD broker whose website features a UK phone number, but otherwise its address and the company name are unclear. Its website features the names of Estonian company Blonde Bear OU, as well as MarketGBP Limited, but there is no mention of financial regulation.

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Actually, the Blonde Bear OU is associated with several other shady forex brokerages (Mib700, Tradex1), as well as with the notorious Black Parrot Limited. That being said, the Italian financial regulator CONSOB issued a cease order against Tradex1 and has also blacklisted MarketGBP.

The other broker FCA blacklisted, FXTRADE777, is also related to Blond Bear OU. Furthermore, the broker is blacklisted by the independent external dispute resolution Financial Commission (FinaCom). According to the FCA, FXTRADE777 is a clone firm trying to mislead investors by using the details of a licensed in the UK (FINSA Europe Ltd). The latter operates Financial Spreads, Core Spreads, and PipIndex brokerage brands.

Capital-Traders, on the other hand, is operated by London-based Option Solution Online Ltd., a company which is not licensed by any financial authority. It seems to us that this broker tries to mislead investors by using a logo very reminiscent to that of an internationally renowned company (Saxo Bank).

The FCA strongly advises UK investors to only deal with financial firms that are licensed by them, and check the Financial Service Register to ensure they are. Brokers authorized by the FCA have to meet stringent requirements and are subject to tight oversight. If they fail to meet those standards and requirements, licensed brokers usually have to pay salty fines.

Broker Advantages

FXTM a regulated forex broker (regulated by CySEC, FCA and FSC), offering ECN trading on MT4 an MT5 platforms. Traders can start trading with as little as $10 and take advantage of tight fixed and variable spreads, flexible leverage and swap-free accounts.

XM is broker with great bonuses and promotions. Currently we are loving its $30 no deposit bonus and deposit bonus up to $5000. Add to this the fact that it’s EU-regulated and there’s nothing more you can ask for.

FXCM is one of the biggest forex brokers in the world, licensed and regulated on four continents. FXCM wins our admirations with its over 200,000 active live accounts and daily trading volumes of over $10 billion.

FxPro is a broker we are particularly keen on: it’s regulated in the UK, offers Metatrader 4 (MT4) and cTrader – where the spreads start at 0 pips, Level II Pricing and Full Market Depth. And the best part? With FxPro you get negative balance protection.

FBS is a broker with cool marketing and promotions. It runs an loyalty program, offers a $100 no-deposit bonus for all new clients outside EU willing to try out its services, and an FBS MasterCard is also available for faster deposits and withdrawals.

FxChoice is a IFSC regulated forex broker, serving clients from all over the world. It offers premium trading conditions, including high leverage, low spreads and no hedging, scalping and FIFO restrictions.

HotForex is a EU Regulated broker, offering wide variety of trading accounts, including Auto, Social and Zero spread accounts. The minimum intial deposit for a Micro account is only $50 and is combined with 1000:1 leverage – one of the highest in the industry.

Broker Country Regulation Platform Min Deposit Review
US CFTC, NFA MT4, Web,
in-house
$50 Review Website
US NFA, CFTC MT4 $250 Review Website
Cyprus, UK, Mauritius CySec, FCA, FSC MT4, MT5, Web $10 Review Website
Australia, Cyprus ASIC, CySEC MT4, MT5, Iress $100 Review Website
Cyprus, Australia CySec, ASIC MT4, MT5 $5 Review Website
UK, Australia, South Africa FCA, ASIC, FSCA MT4, Trading
Station,
NinjaTrader
$50 Review Website
UK, Australia, Singapore FCA, ASIC, MAS, BaFin MT4, Web,
ProRealTime,
2Dealer
$0 Review Website
UK, Cyprus, UAE, South Africa FCA, CySEC, DFSA, FSB MT4, MT5, FxPro
Markets,
cTrader
$100 Review Website
Cyprus CySEC MT4, MT5, Web $1 Review Website
Belize IFSC MT4, MT5 $100 Review Website
Cyprus, UK, South Africa, UAE CySec, FCA, FSCA, DFSA MT4, MT5, Web $5 Review Website
UK FCA MT5 $5 Review Website
UK FCA MT4, Web, MT4
for Mac
$100 Review Website

More Forex Market News

Three Bulgarians and a German arrested for a €80M binary options scam

Dominic Raucht, Dimitar Moralijsky, Vasil Kostov and Alex Petrov have been detained in Sofia, Bulgaria, in connection to an 80 million Euro binary options scam, after a joint operation of the law enforcement authorities in Bulgaria, Germany, Austria and Serbia. Read more

Some major forex brokers cut leverage due to Coronavirus-induced volatility

Dukascopy, IG, Admiral Markets, and Oanda Japan have decided to lower the leverage levels for certain instruments in light of the increased market volatility created by the Covid-19 pandemic. You may read more details on the changes in their margin trading requirements below. Read more

CySEC relexes reporting rules for brokers amid corona outbreak

Because of the extraordinary situation in the wake of the corona virus outbreak the Cyprus Securities and Exchange Commission (CySEC) gave its brokers more time to report their annual volumes. The original deadline for submitting the reports was April 12. Read more

Sharp rise in corona virus scams

Coronavirus related fraud has increased by 400% in March, Manchester City Council reports, citing data from Action Fraud, which has received over 100 reports from victims who have lost nearly 1 million GBP. Read more

FCA eases reporting deadlines for regulated companies

In the wake of the coronavirus pandemic the Financial Conduct Authority (FCA) in the UK grants regulated firms additional 6 months to publish audited annual reports. The concern is that many companies may be pressured financially because of the increased market volatility. Read more

CFTC hinders leveraged crypto trading

In a new guideline published on Tuesday the Commodity Futures Trading Commission (CFTC) in the U.S. defined what an “actual delivery” of a digital asset means. Read more

Scammers use extortion e-mails threatening victims with coronavirus

Sophos, an IT security company reports of a new form of scam where criminals send extortion e-mails to victims, threatening to infect them and their families with coronavirus unless they pay 4000 USD in digital currencies. Read more

The Swedish Finansinspektionen warns against JTtrader

The Swedish Financial Supervisory Authority (Finansinspektionen or FI) warned against unregulated broker JTtrader on Monday. Read more

SEC charges former US senator with $4.3 million crypto scam

The United States Securities and Exchange Commission (SEC) has filed a complaint against David Schmidt, a former Republican state senator, as well as two other people for their role in the alleged $4.3 million crypto scam “Meta 1 Coin”. Read more

ASIC changes its priorities amid CoVID outbreak

The Australian Securities and Markets Authority (ASIC) will suspend some of its supervisory activities that are not “time critical”, as the regulator focuses on its coronavirus response. Read more

Fraud Prevention Update: Forex fraud comes with many new cyber twists

Security professionals are always reminding us that fraud never sleeps. The criminal element of our society is very organized, and like any other business entity on the planet, it must devote resources to research and development activities. Unfortunately for all of us, the crooks have welcomed the Internet culture with open arms, invaded every aspect and corner of social media, and incorporated new technology in all of their “old tricks”. Even though the fraudsters have adapted to new market conditions and created a cyber-wave of crime like never before seen, their schemes still require you, as a potential victim, to respond to their initial “siren call”.

In two decades and a bit more, the Internet has become one of the greatest enablers of innovation the world has ever seen, but it has also enabled the criminals among us to accumulate mountains of ill-gotten loot at our expense. It is so much easier to dupe a potential victim when they cannot look you squarely in the eye, observe your body language, and feel their own gut cringe at the prospect of being conned. Crooks are well educated in human psychology and know how to manipulate their marks to make that all-important first move, and they have become more brazen in today’s culture.

Greed and the desire to get rich quick are engrained in human nature, and fraudsters know exactly which buttons to push to reel in an unsuspecting individual, cloud their thinking, and acquire their trust almost instantly. If you are blind to these first steps, then you are almost too far down the rabbit hole to crawl out. And worse yet, crooks today tend to come back for a second bite of their victims, posing as recovery experts that will hunt down the bad guys, take back your money, and make you smile again, but only for a small fee paid up front, of course.

As retail forex traders, we have to be wary of risk on several fronts. Aside from basic volatility risk in the market, we must always be on the lookout for forex scams, shady brokers, crooked salesmen, and even what we might call third-party risk, the kind that can bankrupt your broker and leave you high and dry, wondering if you will ever be able to withdraw your account balance.

We have been taught in our early tutorials that market risk must be addressed with risk management techniques that include such measures as having a defined trading strategy that you have practiced for many hours, using stop-loss orders to protect your downside, and preparing before you enter the market with risk/reward considerations that suggest the prudent size that your position should ultimately be. These procedures ensure that you can survive the bad days and come back to win again in the market.

Third-party risk can come in many forms, including new rules and regulations that the regulatory establishment deems necessary from time to time. If you are with a broker that is just hanging on by his fingernails financially speaking, the imposition of new rules might just put him over the edge. Communication and withdrawal delays tend to follow, along with wider spreads, slippage, and re-quotes, but how can you protect yourself? Your domestic regulator will typically have capital adequacy requirements to ensure that a broker can survive bumps in the road. You can check these tables, read articles about your broker, review regulator “Black Lists”, and be sensitive to support changes.

What are the latest flavors of forex fraud and scams in the marketplace?

It is amazing that, as much as things change, they still remain the same. Ponzi schemes are alive and well, as are shady money managers that will disguise their fraudulent back offices with slick marketing materials and fake monthly accounting statements. There are still salesmen with tempting “trading systems” or “robots” that will make you an overnight millionaire (NOT!), but, once again, today’s marketing is a step above previous versions.

And then we have brokers based in exotic foreign locales that can still offer enormous amounts of leverage, bonus compensation to beat the band, and seem totally legitimate, without even disclosing the management team or their actual location. The old schemes, once spruced up, still work, as do new tricks, i.e., clones, malware, and binary options.

Let’s take a brief look at these scams:

  • Ponzi Schemes: One of the oldest frauds ever perpetrated has been given the moniker of “Ponzi Scheme”, after its famous originator. Sometimes called a High-Yield Investment Program or “HYIP”, the basic story is to offer returns much better than possible in the marketplace. Forex has an added twist – it is complex, so the ruse usually claims to have some expert in the background that is making millions off the market. Early deposits pay early returns, but sooner or later the money runs out. Today’s Ponzi ruse offers more reasonable returns, but still fails.
  • Shady Money Managers: In many regards, these schemes are like Ponzi, but the establishment is not so much a “smash and grab” exercise. They attract victims with slick marketing brochures, detailing wonderful returns, but for some reason, you never experience such success. Your account churns, your balance dwindles to zero, and you walk away, none the wiser. More due diligence and reliable references are required on the front end.
  • Signal-Seller Fraud: Forex trading is complicated, but if you have no desire to hand over your money to a manager, then you can do the next best thing and follow professional signals or let a “robot” do the work. These options can be quite expensive, but rarely deliver the goods. Yes, Big Banks have made billions with their “Black-Box-Robots”, but these are much more sophisticated than anything a salesman might have. Be wary. Test them first. Eventually, even the good ones fail, because they do not adapt to changing market conditions.
  • Offshore Broker Mania: Regulators in the U.S., the U.K., and the EU have come down hard on brokers with new rules and capital requirements, stemming from massive fraud in the binary options arena. Leverage has been severely cut back. Sales promotions have all but been eliminated. As a result, foreign-based forex brokers are making a come back. Before you take the leap, your local regulator may have already chastised the broker for soliciting its citizens with a license. These brokers also tend to be in exotic locales where gambling casinos are prevalent and where the House always wins. The same is true for the forex brokers, too. Casualty rates are in the upper nineties.
  • Clone Wars: The trick here is to lure you to a website that looks like one that you recognize and respect. There may only be one letter off from the correct web address, but every effort has been made to look like the real thing. Contact numbers may be different, but the crook is after your deposit, which will never be seen again. Virtual ruses like these are very convincing and are typically in some remote part of the world, where law enforcement looks the other way. The FCA in the UK has amassed a long list of these “clone-sters”.
  • Malware Tricks: Malware is the most insidious of the new cyber weapons to hit any facet of the financial world, the reason being that you may not even know that you have been targeted for fleecing now or later. Be careful of going to mysterious websites, answering intriguing emails that include attractive links, or responding to tempting ads on social media. Your computer or handheld device will be directed to a server, which will insert the malicious software into the heart of your device. It will report back to its server with keystroke information, anything it can find in your private files, commandeer your computer for use in other nefarious services, or even replace transfer addresses for money payments with crooked ones. Further processing of your data could yield login and passwords for your financial accounts, private keys to cryptocurrency wallets, and more, which can be used then or sold to the highest bidder on the “Dark Web”.
  • Exotic Trading Products: Binary Options have been the scourge of the forex industry, resulting in billions of dollars of consumer losses and a mountain of complaints filed with regulatory agencies across the globe. Regulators, like the SEC, CFTC, FCA, ESMA, and CySEC, have cracked down hard on these shady operators or “bad actors”, as they are referred to, but the programs have relocated to more accommodating locales. You may still be solicited by one of these outfits, but beware. Regulators are beginning to feel ambushed again by Contracts for Difference (CFDs) and especially anything to do with inventive ways to trade cryptocurrencies. The crypto space is primarily unregulated, so you may encounter a “Wild, Wild West” type of environment, similar to retail forex trading in the nineties, when anything went and fraud was rampant. Be cautious.

A word about cyber crime – The threat is real

As much as we and security professionals speak to the threat of cyber crime, it often falls upon deaf ears. A new hacking incident happens every 39 seconds. The probability that you will be approached or targeted is nearly 100%, not to mention multiple attack odds. A crude estimate of total losses due to cyber crime through 2020 is $1 trillion, and the attacks are coming more quickly than law enforcement and security officials can react to reduce the global exposure of this modern crime wave.

In the forex trade, attacks are being directed at brokers, their suppliers, and now you as a customer. Small businesses account for 43% of all cyber attacks, because their defenses are down. Government, retail, and technology are the three main targets of these data breaches, since a great deal of personal information resides there, and it is unprotected. The crooks may already know more about you than you are aware of, and an added boost from malware will close the deal. Social media platforms are the playgrounds of today’s fraudster. Question everything you see before acting upon it.

Concluding Remarks

Fraud never sleeps! Today’s modern electronic world demands that you be ever vigilant at all times, since a personal attack is always a possibility, whether crooks are plying old ruses and schemes, or employing new technology to rob you of your private personal information to enable a future theft down the road. Just remember that you must respond in order for the crook to have his way with you. Be skeptical of any unsolicited advance, whether it comes in the form of an email, an ad on social media, or even advice from a trusted friend. Only you can protect yourself from these crooks, when they try to overtly blindside you.

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