Within the past few months, I have spoken with numerous potential clients who lost money in various foreign currency exchange (or "forex") trading scams. According to the Commodity Futures Trading Commission ("CFTC"), which regulates futures and options markets in the U.S., there has been a sharp increase in forex trading scams in recent years. Unfortunately for most investors in these scams, there is little hope for recovering their losses. Forex scammers operate outside of registered firms, in off-exchange markets, and typically overseas, making it difficult to collect any judgment against them.
Many investors I've talked to have been lured into forex trading through online message boards, where scammers post about their alleged trading acumen to gain credibility with unsuspecting investors. Others find websites that purportedly offer access to online trading platforms and moneymaking strategies. One person I spoke with directed me to a New Zealand-based website that offers investors a $5,000 "bonus" with a minimum $1,000 investment, making it appear that investors can begin "trading" with $6,000 right away. The website accepts deposits via PayPal or credit card. Needless to say, the person I spoke with wishes they had their $1,000 back.
Forex trading is uniquely risky and highly unsuitable for most investors. If you're talking to someone who's promoting forex trading as a good option for you, be very weary and protect yourself by taking the following steps:
Contact the CFTC at www.cftc.gov to check the company's registration status, business background, and disciplinary history. If the company is not registered with the CFTC, then don't do business with them, period.
