Trading Scams

Data from Action Fraud shows that UK traders lose more than £200 million each year to investment and trading scams, with the number only rising as more people begin trading online. Although intraday trading and long-term investing can create exciting opportunities, there are, unfortunately, some scams and fraudulent activities prevalent in the market. Even if you think you are well-versed in what a potential con looks like, you may be caught out.

This 2024 guide looks at some of the latest trading rackets. We also share tips for identifying, avoiding and reporting investing scams. Use our list of UK-regulated brokers below to get started with a credible trading platform.

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What Is A Trading Scam?

Trading scams often advertise “too-good-to-be-true investment opportunities” as a way of convincing you to part with your money. This can come in many forms and may not be glaringly obvious at first sight. Some clever fraudsters integrate trading scams into services such as acting as a signal provider, educator or auto-bot service. Nonetheless, a typical sign of a trading scam is exaggerated claims of a significant return on investment.

Whether you are investing in commodities, cryptos, binary options, or forex, trading scams are a significant risk. Unfortunately, it is also a global problem. So whether you are trading in the UK or abroad, use this review to learn how to protect your personal information and your money.

Where Are Investing Scams Prevalent?

Social Media

Online investing scams are not limited just to forex brokers. The growth in social media popularity has shifted interest towards using these platforms to target individuals. Fraudsters typically promise substantial financial returns using imagery of luxury items, such as cars or boats to “demonstrate their success”. Alternatively, fake quotes from celebrity endorsements are used to entice people.

These ads then link to professional-looking websites, where consumers are often persuaded to invest money through a managed profile in which an individual or company trades on your behalf, or makes investments directly through their platform. Retail traders often report receiving information about successful investments initially, suggesting some often re-invest more funds.

The National Fraud Intelligence Bureau stated that £63m was lost by investment fraud victims in 2021 who associated their losses with social media. Almost 30% of these individuals were aged between 19 and 25.

Online Search Engines

Prospective traders are also targeted by unauthorized brokers offering forex, commodity futures, binary options or stock trading with a promise of guaranteed returns. Many of these unregulated or dishonest firms will rank highly on popular search engines, such as Google, for searches related to investment opportunities.

Investing scams can be difficult to determine at first look, particularly when using registration numbers and seemingly top-tier regulatory oversight from the FCA, for example.

Telephone

Another way you may experience trading scams is via the phone. Although you may think investment scams are only really a risk via trading platforms or on brokerage sites, some fall into the trap via the conventional phone line.

Companies may call and offer high-risk investments with significant returns or shares in an organization with strong ESG values. Never give financial or personal information out to anyone who cold calls you on the telephone. Be cautious and, if in doubt, hang up.

Email

Even if you are using the services of a reputable broker or financial institution, some fraudsters may prey on your personal information to request further details via email. For example, if someone claiming to be a representative from IG or NinjaTrader contacts you requiring further details or providing enticing opportunities from an unbranded email account, report and block them immediately.

Scammers may also use email to attempt to steal your account details or passwords.

Types Of Scams

Forex Trading Scams

Investing in forex is particularly risky in terms of scams and fraudulent activities. Technology advancements mean there are limited barriers to entering the online market as a retail investor.

Trading scams are prominent in the forex scene, whether they be through brokers, services or tools. It can often be difficult to determine if a service is legitimate, particularly when sourcing a new company to invest with. Internet trading scams open up a whole world of risk. Our experts found and pulled together some common forex money trading scams:

• Trading Signal Scams: A successful forex trading strategy often involves the use of signals and technical analysis tools. Traders can make well-considered investments using the ideas generated by trading signals. However, there are some con offers to look out for, particularly from third-party sources. Warning signs include unrealistic accuracy claims, such as ‘100% accurate signals generated’, or offering free signals to individuals that sign up to a specific broker. It is worth checking previous successes using historical data.
• Price Manipulation: Some brokerage firms may influence their pricing to the detriment of their investors. This can include implementing slippage, meaning entry and exit orders are executed at prices that are unfavourable to clients.
• Robot Trading Scams: Automated trading systems based on algorithms are also a common example of a financial scam. The investing software uses pre-defined rules to enter and exit positions. There are, however, a few ways fraudsters can use these to trick you out of your money. Some may offer cloned software or simply useless or untested systems. Robots are often publicized as knowing all the “trade secrets”, though this is often not the case
• Managed Accounts: You would not hand over your hard-earned money to a stranger, so why invest your funds with a “pro” investor without doing some proper research? Forex-managed accounts can be a great hands-off approach to investing, removing the amount of time required to research the market and make complex decisions. We recommend you establish that the fund managers are qualified and experienced as false funds will often claim that their pro investors have a strong track record of performance and financial qualifications, without it being the case. Do your research before handing over your money.

Insider Trading Scams

Although not directly related to short-term trading, insider investment scams are another fraudulent activity to be aware of, particularly as they can cause significant volatility in share prices. Insider trading scams incorporate the illegal use of private information available only to internal shareholders (not the public) to make a profit.

One of the biggest insider trading scams came to fruition in 2006 in the case of Enron, an electronic trading website focused on commodities. The company declared bankruptcy after hiding the financial losses of its investing business and other operations of the company using MTM accounting. Essentially, any unprofitable activities were transferred to an off-the-books organisation, meaning annual financial statements were in seemingly good shape.

To stabilise these losses, the company declared bankruptcy, with the share price slumping to just $0.26 from a high of $90.75. In the four years leading up to Enron’s bankruptcy in December 2001, shareholders lost equity in the region of $74 billion.

Jeffrey Skilling, the former Enron CEO, was convicted on almost 20 counts of fraudulent activity, including insider trading. He received a fine of $45 million and a 24-year jail term.

Cryptocurrency Scams

According to the Federal Trade Commission, more than 45,000 international retail traders reported losing over $1 billion in crypto to online trading scams, with an average reported loss of $2,600 per person between 2021 and 2022. As there are no financial institutions or centralised authorities overseeing transactions or intercepting fraud, cryptocurrency is a major player when it comes to trading scams.

Many online traders report these scams originating on social media channels, including via ads, messages, or posts. False promises of easy money, paired with people’s limited crypto understanding and experience, unfortunately, work to a scammer’s advantage.

Below, we lay out two of the most prevalent cryptocurrency trading scams:

• Investment Scams: A claim that an “investor” can quickly and easily generate significant financial returns for retail traders. Some individuals even note that these believable websites also permit access to a portfolio performance report, though these are, in fact, fake. Typically, when a withdrawal is requested, the scammers also apply unrealistic fees, so money is never returned.
• Romance Scams: So-called “expert traders” woo retail investors with their dazzling success stories. The sophisticated scammers make promises of similar wealth generation via tutorials, educational content and resources for a fee. However, these so-called learning materials are not real and money is often sent directly to the scammer with no content provided.

Remember, no one will ever require you to purchase digital currency. Whether it be to resolve an issue, protect your bank account or stop internet history leaks. Similarly, if a new love interest on an online dating site, such as Tinder, wants to show you how to trade in cryptocurrency or requests Bitcoin, it is most likely a scam.

Training & Education Scams

There are a lot of scammers selling investment education material and courses. Day and binary trading training scams often involve so-called forex educators making money by getting individuals to subscribe to their educational platforms. These may be prevalent on social media channels, including Facebook, Twitter, or Instagram, often using enticing imagery like gold bars, luxury yachts or expensive products. These fraud schemes will typically request funds for access to a one-on-one mentor or exclusive training tools, promising to help you get rich quick.

A Federal Trade Commission (FTC) lawsuit is currently live against a company named Online Trading Academy. The organisation is accused of taking more than $370 million for online training programs designed to teach retail investors how to ’invest like the pros on Wall Street’. The service allows users to purchase individual education courses, with the company even offering finance schemes and loans to fund the costs. Some courses are as expensive as $50,000. The FTC alleges that the company does not have enough information to substantiate its earnings scams and claims, using false statements via YouTube videos, TV and social media channels.

Scam Stories

GS3 Trades

A viral video of a young man named Gurvin Singh Dyal giving out cash is where this began. The Instagram influencer had racked up an impressive 125,000 followers, many of these young individuals. Gurvin portrayed his wealth with images of expensive jewellery and fast cars, indicating these came from his success with forex trading.

Gurvin introduced investment courses via his company GS3 Trades. He would essentially invest on the behalf of individuals to replicate some of his so-called successes. The company was advertised as being regulated by the UK’s top-tier financial watchdog, the Financial Conduct Authority (FCA), with all positions seemingly being executed by Infinox, based in London.

Investors that sent funds to these courses were able to view their forex trading ‘successes’ and many added more funds when they could see their portfolios growing. The promises of easy withdrawals were quickly taken away and investors were told via WhatsApp that any attempts to request money back would cause all positions to close and money to be automatically lost.

The company was never regulated by the FCA and total losses for traders were reported to reach almost £4 million. Infinox Capital was registered in the Bahamas, so clients were not protected by any UK regulations.

Get Rich Quick

Instagram forex and Bitcoin trading scams are also common schemes to look out for. The scammers often direct message individuals with the promise of high returns and “real” success stories. The scammers would then start sharing fake messages and screenshots on social media, where they would show that, thanks to an amazing Bitcoin mining strategy, they had managed to make significant earnings in just a few days. Here is where the snowball effect starts.

Once the perpetrators receive payment, they hold their victims’ payments hostage and blackmail them into filming a video endorsing the scam by promising their funds will be returned. The scam networking platform then aims to take over the identity of users through their social media accounts and targets friends and family with the same promises. The scammers use the videos to target individuals who know the original victim personally.

Milton Group

Celebrity impersonations and features are often used to sway individuals to invest. A group of more than 100 ‘investors’ based in Ukraine operated a call-centre-based scam that promised enticing opportunities to make significant profits. The fraudsters used well-known global celebrities, such as Hugh Jackman and Gordan Ramsay, as their story-telling leads.

The supposed investments in forex, Bitcoin, and commodities were fake. Once signed up, individuals were shown fake accounts demonstrating successes in a bid for customers to invest even more. Customers were also persuaded to install software on their computers and phones that gave fraudsters access to their bank details. Some reported additional funds were requested to return the money, however, withdrawals were never received.

The scam operation, which began in 2020, is reported to have made a staggering $70 million from those that fell, into the trap, including citizens in the UK, Australia and New Zealand.

How To Avoid Trading Scams

Bear in mind that only trading scams and confidence schemes will promise huge profits or substantial returns on investment with very little effort or time. No trade is ever guaranteed to make money, let alone big money. Moreover, when we use trading platforms, we find that reaching a high level of success requires dedication, hard work and time. If it were easy, everyone would do it and be driving supercars everywhere.

UK Regulation

It does not take much for a broker or financial educator to add a line on their website stating they are regulated or overseen by a top-tier body, such as the FCA. However, scammers often use this fake regulation to their advantage, promising investors the safeguarding resources of a well-regarded financial institution.

Before signing up for any brokerage, always check their licensing and regulation status via the official watchdog website. You can search by company name or registration number and check the incorporation date in the registry. If there is no sign of the company, steer clear.

Unrealistic Returns

As much as it is exciting to be offered guaranteed profits or thousands of pounds in return for a small investment, ask yourself, does this sound legit? Whether you are day trading forex, CFDs, oil, the stock market or binary options, no investment is completely risk-free. Any firm promising a get-rich-quick opportunity is likely to be an investment con.

Customer Reviews

Before signing up for a brokerage account, it is worth spending some time on popular customer review sites like ours or trading forums. Traders are quick to post if they have been the victim of fraud, experienced withdrawal problems or seen dishonesty from companies.

Filter by the most recent posts to ensure you review the latest information and, as with all customer review sites, take some comments with a pinch of salt. Investors may be quick to blame a brokerage for losing their funds, even if it was a genuine error that did not play out their way.

Success History

Many trading scams involve educational platforms and trading software innovations. Be sure to query past success stories, performance and reputable feedback. If proof of success is evaded, they are likely a scam. You should get a preview of the resources on offer before parting with your money in the hopes of being trained into a well-rounded investor.

What To Do If You Think You Have Been Scammed

Despite the list of online trading scam stories and ways to protect yourself from foreign exchange fraud, many traders still find themselves at the hands of misleading individuals and firms. So, what to do if a company scams you?

Report Online Trading Scams

If you suspect you have been scammed or were at risk of being scammed, reporting the event to the national trading standards authority team in your country of residency is vital. This may help you but it will also protect other investors from falling into the same trap.

UK residents can phone the Financial Conduct Authority via their toll-free number. Alternatively, there are many online organisations, such as the Trading Standards Friends Against Scams UK or the National Trading Scams team that offer free alerts and advice on how to get help if you are impacted.

Evidence

Whether you have been caught out by trading courses or program scams, online forex scams or binary options lies on Instagram, you should come armed with evidence when reporting. This could include screen grabs of communications, completed documents or account statements. This will help the teams investigating to build a case and hopefully pinpoint the perpetrators.

Contact Your Bank

If you have provided your bank account details to a broker, financial institution or individual that you think might be hoping to take your money, contact your bank immediately. You may have a chance to block a payment before it is processed or at least block or freeze your account so no more money can be taken.

If the bank or payment provider does not reply in time or they are unable to help, reach out to the investment protection scheme to make a complaint. Examples include the Financial Ombudsman in the UK or the Financial dispute resolution network (FIN-NET) within EEA countries.

Do Not Make Any More Payments

Once a scammer has gained your details, including your email address or phone number, you are likely to experience more requests for money. Sometimes these online trading fraudsters will also pose as resolution agents, offering to reduce large transactions for a small fee or promising to delete personal information from a database with the agreement of more funding. Unfortunately, some fall into the trap and often provide even more money in the hopes of reducing the impact of the initial fraud. Hangfire with any ‘resolution deals’. Do not trust any emails, letters or telephone calls suggesting they can offer you support.

Bottom Line On Trading Scams

Trading and investing scams are a dangerous reality in the world of financial speculation. While there are ways to protect yourself and limit your risk of having your money stolen, you should always stay vigilant. While brokerage websites and training academies are some of the more popular media for trading scams, you can also get caught out via third-party cash apps, copy trading services or technical indicators for MT4 and MT5. Social media channels like Instagram, Telegram and WhatsApp are also common methods for fraudsters to reach retail investors.

To avoid trading scams, sign up with one of the best brokers for UK traders.

Additional Resources

• More about trading scams on the FCA website.

FAQ