Understanding and Preventing Online Trading Fraud Efficiently

Anyone can become a victim of an online con scheme. Over the years, cybercriminals have adapted and evolved their predatory strategies to make them less detectable and more efficient.

No matter how sophisticated or advanced these schemes become, a keen eye can still spot them. Our article will show you how to avoid online trading fraud and stay safe.

What is Online Trading Fraud?

One widely accepted definition of trading fraud is enticing victims through unsolicited phone calls and convincing them to rush into investing in seemingly attractive deals. By promising passive gains, stable income, and various investment opportunities, fraudulent online schemes tend to arouse the interest of their victims.

Once the target shows even the slightest curiosity, relentless calling, emails, messages, and convincing take place. That doesn’t mean that pushy scam promoters tend to stop when they hear targets are not interested – on the contrary. Pestering victims to invest can go on for days and weeks on end, regardless of the level of interest displayed.

All of these deals and proposals relate to easy investing and quick gain, which is especially alluring for beginner traders and Forex novices. However, none of them ever turn out profitable for the investor.

Common Types of Online Trading Scams

Online trading scams range from fake investment opportunities to big scale frauds related to bogus online trading platforms and Ponzi schemes which can include thousands of people.

With a slight difference in how they’re orchestrated and what is promised to victims, all of these fraudulent campaigns are meant to rob investors. Each and every one of the illicit firms, running unregulated trading portals or pyramid schemes, only exist to bring profit to the perpetrators of the fraud.

After stealing clients’ money, scam agents and masterminds behind such operations tend to disappear without a trace which makes online funds recovery extremely difficult. In order to be able to recognize a fraudulent internet trading site or other forms of unscrupulous financial schemes, let’s dive into the particularities of the most common ones.

Phishing and Identity Theft

Phishing attacks are orchestrated by anonymous individuals who wish to steal sensitive information from others. Data that falls under this category are usernames and passwords, credit card information, bank account details, and all other intel that can lead to robbery.

Suspicious emails contain malicious links that take unsuspecting victims to websites that demand the sharing of such sensitive information for Forex trader scams.

Besides not clicking any flashy ads and dubious links, investors are always advised to double-check what trading platform they share their personal information with. Copies of famous online investment portals are set up for the exact purpose of collecting individual information and identity theft.

Fake Online Trading Platforms

Unlicensed offshore brokerage portals advertise alluring trading conditions, such as user-friendly web traders and increased leverage. These artificial trading environments entice beginners and make them believe trading is easy.

Heavily modified and manipulated trading terminals are used to show constant profit, so Forex newcomers believe they’re constantly earning. That motivates them to invest even larger sums while hoping to eventually withdraw huge profits. The illusion shatters once a client requests a withdrawal and finds out they’ve been subject to constant deceit the entire time.

Ponzi & Pyramid Schemes

This business model is based on enrolling new clients with the help of existing members. Currently robbed victims are led to believe they’ll be receiving attractive rewards and bonuses based on how many people they get to sign up and invest.

The higher the number of new victims brought in, the larger the bonuses promised. Instead of selling genuine products and providing regulated financial services, this type of campaign earns solely from what their victims deposit.

The scheme can go on as long as new members keep being recruited. It doesn’t take long for the authorities to notice such operations, though, so they’re not long-lasting. However, the amount of money stolen can sum up to millions, like in the case of Charles Ponzi, the guy who this investment fraud is named after.

Pump and Dump Scam

Pump and dump revolve around artificially increasing the market price of an asset before flooding the market for one last sale and depreciating it completely before someone can make an online trading fraud complaint.

This can be orchestrated through two different mechanisms, one of which is buying out the asset available in the market completely or releasing the asset for sale in very small quantities. Either way, it is dependent on creating an artificial speculative bubble through what is known as perceived scarcity.

This form of online fraud has become particularly common with various crypto-related assets, as altcoins and liquidity tokens are relatively easy to manipulate. One cannot go wrong with calling the entire NFT market one big pump and dump.

How to Identify Fraudulent Online Trading Platforms?

Con artists are not bound by legal constraints or fund safeties, which usually leads to extremely high leverage. They will make their offer seem lucrative by pitching one get-rich-quick scheme or another. These include promises of a high return on investment, easy money, and passive income.

Many scam businesses will try to create confusion on purpose. Fraudsters do this by posting discrepant or disparate information on their website, or hiding some crucial trading data from the clients. This, in conjunction with a doctored trading platform and pressure sales tactics are the main ripoff mechanisms.

Hidden fees, or poorly defined payout conditions are an instant red flag with any firm. If there is no information on how to withdraw money from a trading account, drop it like it’s hot and never look back.

Protection Measures

Being informed is, without exaggeration, the most important tool in the investment business. It’s important to learn how legitimate companies work and which industry averages you should expect from such a business.

Reading online articles may help, as numerous websites deal with debunking scammers. Before investing, you should always try a demo and see how the offered service matches your strategy.

Many types of companies, like brokers, investment firms, crypto exchanges or such need to be regulated. You should always check their license with the relevant authorities. Firms that don’t require regulation still need to be legally incorporated.

A legitimate business will never contact you first. If somebody’s calling you just to sell you one investment scheme or another they are definitely a swindler.

What to Do If Scammed Online?

If you’re asking yourself: “Can I report a scam to the police?”, the answer is yes. The crime should also be reported to the regional financial regulator.

Gather anything you can on the fraudsters, like bank account numbers or a crypto wallet address, your bank card numbers, mail addresses and so forth. Any recorded interaction like messages or emails will help the law enforcement pinpoint the cybercriminals as well.

Our company can handle the legal aspects of fraud recovery in your stead. Reach out to our representatives to learn more about scam recovery.