In recent years, forex trading and investment have become increasingly popular around the world. However, the forex market is complex and risky, which also provides an opportunity for scammers. Many so-called ‘forex gurus’ establish investment companies, advertise high returns, but eventually run away with investors’ money. This article reviews forex guru investment companies, summarizes the characteristics of forex scams, and provides suggestions on how to identify fraudulent forex investment companies.
Forex investment scams often promise unrealistic returns
A common tactic used by fraudulent forex companies is to promise investors very high returns, like 20%, 50%, or even 100% per month. However, these returns are unrealistic and unsustainable for forex trading. Legitimate forex managers may be able to generate 10% to 15% annual returns through disciplined trading and risk management. If a company promises returns exceeding 1% to 2% per month, investors should be very cautious.
Forex scammers target countries with poor regulation
Countries with large populations and weak financial regulation are prime targets for forex scammers. For example, Malaysia has unclear policies around retail forex trading. Fraudsters can easily register offshore companies, promise high returns to Malaysian investors, and disappear with their money. China also has many victims due to limited forex regulation and investors’ lack of risk awareness. Investors should be careful when approached by overseas forex companies.
Check for proper licensing and registration
Before investing, check whether the company has obtained proper licenses from financial regulators. For example, in Malaysia, the central bank requires companies to have a license for operating a money service business. Unlicensed entities are likely scams. Besides licenses, also check company registration documents to ensure they are operating legally.
Withdraw profits regularly
Even if a company appears legitimate at first, it could turn fraudulent later. Investors should withdraw profits regularly instead of leaving everything in the investment company. Only invest an amount you are willing to lose. Withdrawing profits reduces potential losses due to company fraud or mismanagement.
Be wary of multi-level marketing structures
Some shady forex companies are structured as Ponzi or pyramid schemes rather than genuine investment businesses. They require investors to recruit more members in order to receive returns. Walk away from such multi-level marketing structures, as their main revenue comes from membership fees rather than actual investing.
Obtain audited financial statements
Reputable investment companies should have their accounts audited annually by an independent auditing firm. The audited financial statements can help investors understand the company’s financial health and trading results. If a forex company is unable or unwilling to provide audited statements, investors should think twice about investing.
In conclusion, investors need to be wary of potential scams when evaluating forex investment companies. Warning signs include unrealistic promised returns, lack of proper licenses, opaque operations, pyramid scheme structures, and inability to provide audited financial statements. Checking these factors can help investors make better decisions and avoid losing money in forex scams.