Scam Forex Brokers and Types of Common Forex Scams (2024)

With the arrival of advanced technology and the ubiquity of social media in our lives, forex scams have become increasingly difficult to detect – even for experienced investors and active traders.

Scammers target a wide range of desirable asset classes, such as forex, CFDs, crypto, and stocks. The forex market is an appealing target due to its sheer size and the staggering amount of money being traded. According to the Bank of International Settlements (BIS), turnover in the global over-the-counter forex markets reached $7.5 trillion per day in April 2022.

Forex trading scams have the potential to cause significant financial and emotional harm, and there is often little that can be done once you’ve been victimized by a scam. Early detection is your best defense.

The good news: I have extensive experience with the forex market and forex scams; I’ve been covering the forex industry for over twenty years. I’ve written this series of educational guides to help traders proactively recognize the early warning signs of forex scams and, hopefully, avoid scams altogether.

What are forex trading scams?

Forex trading scams can take many forms, but they all share the same basic purpose: to steal money from unsuspecting forex traders. Forex scams can involve selling products that don’t perform as advertised, impersonating notable forex traders or investors to collect personal information, setting up sham websites that imitate big-name brokers to steal deposits, and a long list of other unethical and (in many cases) illegal methods of robbing traders and investors.

Top three signs you might be dealing with a forex scam

Forex trading scams might masquerade as a broker, an educator selling a trading course, a money manager offering their services, a developer selling software, or even an event organizer. The wide variety of the types of forex scams can be overwhelming, but there is a handful of common signs that can indicate you are dealing with a scam.

Here are my Top 3 warning signs to look out for when identifying scams in the forex market:

1. Unbalanced claims

Scammers will try to promise you the moon. They’ll claim that they can guarantee trading success and assure large profits – all while downplaying any associated risk. This might be the ultimate indication that you are dealing with a scam: Trustworthy brokers do not make unbalanced claims, and will never make profit guarantees.

2. Requests for money

Scammers will often ask you to send them money (or in some cases, cryptocurrencies like bitcoin). These requests are often fueled by an artificial sense of urgency created by high-pressure sales tactics. Reliable, highly regulated brokers will never pressure you into making a deposit until you are ready to do so.

3. Lifestyle pictures or testimonials from “successful” traders

These portrayals often glorify a fantastical “trader’s lifestyle” complete with fancy cars, private jets, yachts, and other stereotypical displays of wealth. Genuine brokers share content focusing on technical and fundamental analysis, market research, and trader education – not on the flashy lifestyles of “successful” traders. Check out my guide to the best free forex trading courses to find free, legitimate forex educational resources.

Types of common forex scams

The best way to protect yourself from forex scams is to detect them early, and then steer clear. If you can recognize the signs of the most common forex scams, then you’ll have a better chance of avoiding them altogether.

In my 20+ years of covering the forex industry, I’ve witnessed a wide range of forex scams and spoken with countless victims. Below, you can find my list of the most common types of forex scams – keep your eyes open for these:

1. Unregulated (or lightly regulated) forex brokers.

These “brokers” are usually regulated offshore in disreputable jurisdictions that often just require a business license and some kind of fee. If your broker lacks legitimate regulation, there is always a chance that it engages in questionable (or outright fraudulent) practices.

Unregulated brokers do not have to report to a governing body, and you often have no recourse for recovering funds if you’ve been targeted by a scam. I would never recommend dealing with an unlicensed (or lightly regulated) forex broker.

In some cases, brokers will simply lie about where they are headquartered, registered, or licensed. For instance, the FCA recently announced that Unicorn FX was operating in the U.K. without proper authorisation. Notice the misspelled words and the unbalanced claims of "higher returns" in the image below:

The Financial and Consumers Services Commission (FCSC) of New Brunswick in Canada also recently posted a warning about a New York-based firm that was targeting Canadian forex traders without the required regulatory license.

2. Binary options.

Widely considered akin to gambling, binary options are essentially an “all-or-nothing” bet on the outcome of an event (such as a timed price movement of an asset). A 2019 survey conducted by the Australian Securities & Investments Commission (ASIC) found that 80% of binary options traders lost their money. A Tier-1 regulatory jurisdiction in the ForexBrokers.com Trust Score rating system, ASIC has since banned binary options until 2031. Here is a great example from the CFTC of a binary options broker scam.

3. Clone firms.

Scammers will sometimes disguise themselves by impersonating real brands (or in some cases, real people). Known as clone firms, these “companies” use spoofed emails, fake websites, and illegitimate phone calls to hoodwink victims into believing they are conducting business with a reputable brand. Legitimate, licensed firms should be easy to contact and have a verifiable, legitimate headquarters address.

4. Social media scams and imposters.

Social media has made it easier than ever to lure unsuspecting traders into financial scams. Forex scams can now lift photos and personal information from the social media accounts of high-profile traders, investors, and businesses, and use them to create imposter accounts on Twitter, Instagram, TikTok, YouTube, Facebook, and all major social media platforms.

I’ve been impersonated countless times across multiple social media platforms. Scammers have used (and continue to use) my name and likeness to get people to send them money or participate in forex scams. Some of these fake accounts even have thousands of followers. In the gallery below, you'll see some examples of scammers pretending to be me, and also falsely claiming to be affiliated with ForexBrokers.com's sister site, investor.com.

5. Scam signal providers.

Usually appearing in forums across the internet, scam trading signals typically make unbalanced claims regarding your potential profits and try to get you to pay a subscription (usually charging per day, week, or month) for access to the signals. That said, not all signal providers are scams – read our guide to the best forex signal providers to check out highly rated, legitimate forex brokers that offer trading signals.

6. Scam fund managers.

A scam fund manager, financial advisor, or commodity trading advisor (CTA) may do a large number of trades (or a few massive ones) with the sole purpose of creating more commissions for themselves – this is a process known as churning. Churning can lead to large losses for you, while your money manager makes off with a hefty commission.

7. Scam copy trading providers.

Scam copy trading providers will simply generate too many signals with the purpose of churning your account and earning commissions at your expense. Genuine social copy trading providers should have a viable trading plan – check out our social copy trading guide to see my picks for the best, most trusted forex brokers for social copy trading.

How do I know if a trader or broker is legit?

What are the most trustworthy brokers?

The most trustworthy forex brokers hold multiple licenses from top-tier regulatory agencies in reputable jurisdictions all over the world. To help everyday forex traders determine whether they can trust their forex broker, we created the Trust Score rating system. Driven by independently collected data, a broker’s Trust Score rating is determined by a number of factors, such as the quality and quantity of held licenses, years of operation, number of banking licenses, corporate structure, and other data-driven variables.

I’ve reviewed dozens of the best forex brokers in the industry; here are my picks for the most trustworthy brokers in 2024:

Do any regulators have a forex broker blacklist?

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