BeginnersForexTrade Minim

It’s a SCAM! Identifying shady brokers.

Recently, PTFX, an underground foreign exchange platform in mainland China shuts down abruptly, and more than 1.7 million people were affected, involving more than RMB 100 billion (about RM 58.9 billion) of losses.

There are many way shady brokers can scam or steal investor’s money. Some brokers make it impossible for traders to withdraw funds, others trade against their customer’s orders, charge them egregious spreads and commissions. Of course, there are those who straight-up steal funds, then close up shop or re-brand under a new name.

In 2016, various types of fraud, scams and identity theft lost $16 billion worldwide. This represents an increase of 16 per cent over 2015 and is the highest level of fraud recorded since Javelin Strategy & Research (the company behind the report) started tracking this statistics in 2004.

1. Research before you invest

A definite no-brainer, more so in the year 2020. Research, research, research!

  • Regulations

A credible broker is one that is regulated by legitimate international financial regulator. If a broker has no agencies that regulate it, avoid opening an account with it at all costs.

  • Reputation

Online reviews are everywhere for brokers. Traders can get a general idea about the reputation of a broker by reading reviews. If a brokerage firm has numerous customer complaints, then it is better to look for other brokers instead.

  • Awards & recognition

Reputable brokers will list down their awards & recognition in their website. Do check if the awards are recent (within the last two to three years), and whether they come from recognized and authoritative industry groups.

  • Available payment or withdrawal methods

Most reputable brokers have a variety of payment & withdrawal methods available for their customers. The most trustworthy method would be credit card. If a broker only allows for a few transactions method, be wary.

If self-research is hard to digest, consider consulting a licensed financial adviser.

2. Protect yourself from shady brokers

If you still decide to go for it, tread carefully. Take precautions.

Additionally, before registering with a broker, you can request proof of business registration. When you open an account, make sure you read through all the fine print. Sometimes, when it comes to withdrawing funds, shady brokers use account incentives against the trader.

Sometimes, when it comes to withdrawing funds, shady brokers use account incentives against the trader.

Try opening a mini account with a small balance first, and make trades for a month before attempting a withdrawal. If all is good, then only consider investing more money in.

3. Avoid pyramid schemes at all cost

A pyramid scheme, at it’s core is a simple process; the scammer recruits a number of people on the basis of some form of return on their investment, Reward is usually offered to the first batch of recruits to encourage more people to invest. Then these people, often unknowingly, perpetuates the scam by recruiting more individuals. The cycle then continues to the next stage and so forth.

The problem though is that most trading pyramid schemes are “dressed up” so they don’t necessarily looks like a pyramid scheme. Some market themselves as a trading school, investment club, or a fund managing firm. So, here are a few pointers to identify a trading pyramid scheme:

  • Focus on member recruitment instead of trading.

The biggest giveaway is that traders are not required to be involved in the trading process & instead being encouraged to recruit more members into the group.

  • Offers too-good-to-be-true free funds

Most brokers offer free funds to attract new traders to invest, but when the reward seems too-good-to-be-true, it is a sign of a red flag.

  • Unrealistic returns in a short time

If the body constantly makes outrageous and unsubstantiated claims about trader profits, or give promises of easy profits in a short amount of time. But do bear in mind, a legit firm lure new customers with quality products and not with gimmicks.

  • Compulsory use of specific broker.

Often, the specified broker is run by the same pyramid scheme. When the pyramid scheme falls, the broker will vanish too, together with all the invested money.


As we progress, changes have driven out hooligans and old scams. Be that as it may, always beware of new scams still; greed will always bring more sophisticated scams to this market. Fortunately there ARE a lot of authentic brokers and organizations out there still. So, do your research and due diligence and you will be fine.

Nothing can be worse than hitting 100% on your trading account and realizing the money can’t be withdrawn. Trade smart, thread safe.

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