Investment fraud is an entangled part of the financial world. It’s the kind of nuisance one would want to brush away from, but truth be told, these scams come unspoken and uninvited. For a trader misled into a fraud, it can be a gut-wrenching experience. While the financial loss is the tip of the iceberg, one can’t imagine the gush of guilt and the overwhelming feeling that follows the victim after being scammed.
A broker scam is merely a strand of the woven expanse of investment frauds. It does not mean that broker scams are limited to one type of scam. As vast and diverse as the financial markets are, fraudulent brokers are known to be exploring within and beyond them.
Let’s understand some ways how deceptive brokers grow and emerge through varied markets;
Forex Brokerage Scams
Plenty of fraudulent forex brokers operate without being registered with the authorities or licensed. Hence, traders are encouraged to look out for the broker’s dealer number, registration with authority, and license. Unfortunately, if you’re dealing with a registered broker, it does not necessarily mean that they have genuine or good intentions for you. A significant indicator of a forex brokerage scam is that the operator pretends to be an expert in the industry for ages, regardless of their actual qualification. They may even showcase fake testimonials or profits accrued to their clients.
Let us admit that cryptocurrency is the new buzz word and it’s been at it for a while now. Some brokerage service providers work their way with the market buzz. They promote a luxurious life built with crypto trading and extend extraordinary packages. But remember that anything that seems ‘out of the blue,’ ‘too good to be real,’ or ‘extraordinary’ can cost you more than it can give out. And when you see such red flags, don’t turn a blind eye to them.
The broker may even manipulate you into investing in a fake ICO (Initial Coin offering). When we say extraordinary offers, it implies that the broker may extend free cryptocurrencies as a giveaway or through mining. If the giveaway requires you to pay a deposit in cryptocurrency, then it is likely to be a shady affair.
A renowned crypto scam that brokers run is the pump-and-dump scheme. In this scheme, the string-puller starts spreading fake news that can create a fuss in the market and resultantly hike the price rates. Then, once the crypto pricing hits an all-time high, the broker sells off their holdings while making considerable returns. Contrarily, traders investing through the broker are misled or advised to hold onto their coins till the market slumps and their means are met.
Bot services act as an influential factor for the traders who fall for a broker scam. Many trading platforms ensure to boost and advance your trades with a bot advisor. These automated advisors are known to be programmed to make accurate market predictions. Contrarily, the market might be far beyond predictable. And to depend on a computerized system to grasp all the market movements can be a ridiculous move to make. Hence, we’d recommend that you run your analysis even after consulting a trading bot.
Stock Broker Scam
Like other markets, the stock market finds many illicit brokers functioning without a permit. Every trader’s primary responsibility is to verify the broker and their legal standing before trusting them with your funds. But, it can get difficult to distinguish a fraudulent broker when they try to act on your merit.
Often, finding pushy brokers could be a signal that you are being manipulated. For instance, a broker is generally known to bridge the gap between the trader and the market by placing buy and sell orders. Simultaneously, they also help analyze the market, read charts, facilitate different tools, and render valuable advice. However, what an honest broker would not do is go out of their way to urge you to make an investment or take on a decision that you aren’t prepared for.
That is where you draw your line—understanding when the broker is merely advising or slamming an investment onto you. Of course, each broker executes with a different. While one might choose to play mind games or promote all the good aspects of a trade, the others may even go as far as emotionally tricking or blackmailing a trader.
Hence, the next time you collide with a pushy broker trying to sell his business or advice, you know you are still the boss and are not compelled to give in to their walk.
Broker scams are hard to eradicate from the financial system, but they aren’t unavoidable. Here are some points you can keep in mind as you approach the market or initiate an investment;
- There is no such thing as guaranteed profits.
- It’s best to push your pushy broker away.
- Don’t share your financial and personal details
- Bot advice cannot be as accurate as they claim to be.
- Always check a broker’s license and reputation within the market to understand their credibility.
On the other hand, if you have fallen for a similar scam, we recommend you step up against the broker. Report the bogus firm or individual to the appropriate authority and sign up for recovery services to get your money back.