How to avoid being a victim of Forex fraud and commodity fraud
FOREX Advisory from the CFTC
Forex scams - Wikipedia, the free encyclopedia
confidence game played in the context of the foreign exchange market against fairly unsophisticated "retail speculators." The U.S. Commodity Futures Trading Commission (CFTC) which loosely regulates the foreign exchange market in the United States, has noted an increase in the number of these scams recently [1]. Complaints cited by the CFTC since the beginning of 2004 revolve around managed accounts [2][3], false advertising [4]outright fraud [5] [6] [7], and manipulation [8].
CNN [9] quotes an official of the National Futures Association as saying "Retail forex trading has increased dramatically over the past few years. Unfortunately, the amount of forex fraud has also increased dramatically." Between 2001-2006 the U.S. Commodity Futures Trading Commission has prosecuted more than 80 cases involving the defrauding of more than 23,000 customers who lost $300 million mostly in managed accounts. CNN also quoted Godfried De Vidts, President of the Financial Markets Association, a European body, as saying "Banks have a duty to protect their customers and they should make sure customers understand what they are doing. Now if people go online, on non-bank portals, how is this control being done?"
The highly technical nature of forex scams, the OTC nature of the market, and, the fact that foreign exchange trading is fairly unregulated, also makes exchange rate manipulation or price spiking easy for brokers to commence. Also, this practice is easy to cover up, due to the vast amount of factors affecting the actual market rates. Because of this, these practices could be even more widespread among retail forex brokers than commonly known.
Because of the technical factors mentioned above, the traders on the other side of the trade, or even regulatory authorities, will have an almost impossible task in proving that such manipulation has taken place. Partly because there is no central currency market, but rather a number of more or less interconnected marketplaces, provided by brokers and market makers. Thus, the trader is completely at the mercy of his broker and his broker's market making software and procedures.
Quatloos! -- FOREX Scams and Commodities Fraud Gallery
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