Forex scams [foreign exchange scams] are trading schemes that are designed to scam you by convincing you that you will make big profits through trading in the foreign exchange markets.
Forex contracts involve the right to buy or sell a certain amount of a foreign currency at a fixed price in U.S. dollars. Profits or losses accrue as the exchange rate of that currency fluctuates on the open market.
The Commodity Futures Trading Commission have said that the average forex scam victim loses about USD 15,000.
Forex is called a 'zero sum' game which means that for one trader to gain, another trader has to lose [excluding broker commissions].
Between 2001 - 2007 approximately 26,000 people lost USD 350 million through forex fraud, with the number of scams increasing each year.
The new or average investor is up against experienced, professional, well
capitalized traders who are full time traders. An inexperienced trader is
unlikely to win against these experienced traders in a 'zero sum' game.
A forex scam is usually aimed at the person who wants to make big money quickly, or is seeking a magic answer to easy riches. Fraudsters are always lying in wait for these people.
The bait is usually ads promising high returns on small investments with little or no risk. The ads may make reference to information the New York Stock Exchange fat cats don't want you to know, or they have 'inside contacts' that will provide you with secret opportunities.
Be cautious of unsolicited phone calls or emails as legitimate dealers don't need to contact you this way, or pressure you into doing business with them.
Be wary of:
The CFTC has issued several reports concerning the offering and trading of foreign currency futures and options contracts. Some of the main points of advice from the advisory are the following:
Additionally, the CFTC warns to be careful of unsolicited phone calls about "can’t miss" investments from offshore salespersons or companies that don’t sound familiar.
To avoid a forex scam:
Commodity Futures Trading Commission
Three LaFayette Centre
1155 21st Street, N.W.
Washington, D.C. 20581
The CFTC’s Division of Enforcement has established a toll-free telephone number to assist members of the public in reporting possible violations of the commodities laws. Call 866-FON-CFTC (866-366-2382).
In addition, if you think that you have been a victim of a forex scam, you can report it through a form on the CFTC's website, or by mail addressed to the Office of Cooperative Enforcement, CFTC, 1155 21st St., NW, Washington, DC 20581.