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Scam Forex Brokers and how to spot one

The upside of forex is it’s the largest and most liquid market in the world and there are no barriers to entry to trade online if you’re a beginner trader. The downside is the forex market is extremely vulnerable to scams because there is no regulated centralised exchange and unscrupulous brokers can easily deceive inexperienced novice traders.

Choose your quick section of our Scam Forex brokers below.

Our Overview of what to look out for with Scam Forex Brokers:

Don’t let beautifully-designed websites, promises of huge profits and welcome bonuses fool you. You need a thorough understanding of how the forex market works before you start trading with real money and you need to know what dodgy tricks charlatan brokers are pulling so you can spot a scam when you come across one.

Forex scam alert

Too many people hear the bells and whistles of forex trading and don’t listen to the warnings. Particularly after the annus horribilis year of Covid-19, there has been a surge of new investors looking at the forex market as a way to overcome economic challenges and financial uncertainty.

There are countless posts in the media warning beginner traders of unscrupulous brokers who are swindling people out of their hard-earned cash. They are unregulated and operating illegally but largely getting away with it because most are fly-by-night scam forex brokers.

According to security experts like KnowBe4, forex trading scams have emerged as the most lucrative for criminals in recent years. Criminals target unsuspecting beginner traders via direct messages on social media and also use search engine poisoning, meaning their scam sites will pop up when people search for investments online.

These scam online traders use fake names, identities and websites or impersonate existing legal companies to lure victims to part with their money. Before you know it, they’ve stolen your money, disappeared into thin air and you have zero recourse to get your money back.

3 types of scam forex brokers

There are three types of scam forex brokers who are blacklisted by regulation authorities.

Fly-by-night brokers

This is the most common type of scam forex broker. It could be an individual or a group of people who create a website with often only a landing page. It’s usually a very professional-looking site and looks legitimate.

They usually offer fake PAMM accounts. This type of account allows forex traders to earn money without having to trade; basically, an experienced PAMM Fund Manager trades the forex market on your behalf.

Fly-by-night scam forex traders by collecting deposits and then closing the site and disappearing. They either fake bankruptcy or they just disappear like ghosts in the night. You have no recourse because they are not regulated by a financial authority and you have absolutely no way of getting your money back.

Forex bucket shops

Forex bucket shops are slightly more sophisticated in that the scammers are well prepared and more professional. They create a full-fledged trading platform that, by all accounts, functions as a legit site. What they then do is carry out functioning trading activities but with malicious intent. The term for this is bucketing transactions, hence the name forex bucket shops.

Bucketing is an unethical business practice in which a broker effectively steals from their client through dodgy trading activity. This involves lying to their clients about the terms on which a trade was executed in order to profit from the difference between the actual and reported execution prices. They also illegally generate profits from clients’ trades using frequent price misquotes or re-quotes and delays in order executions.

These forex scam artists don’t play on the world interbank market. Instead, they trade with other traders who are registered only on their fraudulent site. They create impossible trading conditions so that the trading site remains in the black and their clients constantly lose money.

Pyramid schemes

The forex market has long been accused of being one big pyramid scheme and rightly so, when you have scam forex brokers pulling the wool over the eyes of inexperienced forex traders. This type of scam is rife in the financial markets and isn’t unique to the forex market.

What happens is an individual or fake brokerage does nothing more than collect deposits from traders. Typically, they don’t even bother to fake trading activity on the interbank market. They make empty promises they have not intention of keeping and basically con unsuspecting forex newbies out of their hard-earned money. 

How to spot a scam forex broker

Right out the blocks, you should only trade with a forex brokerage that is licensed and regulated by one or more top-tier authorities. You can check their regulation status is legit on the official website of these authorities.

Over and above doing your homework before trading with a live account with a forex broker, you can watch out for glaring warning signs that give you a clue this forex broker is a fraud.

Scam forex brokers promise high profits

If the profit they promise you sounds too good to be true, there’s a good chance it’s a scam. No legitimate forex broker can guarantee high profits on trades.

Scam forex brokers downplay the risks

“It’s all good and everybody is getting rick quickly.”

If this is what they’re selling you, run a mile.

Over-the-counter forex markets is notoriously risky because it doesn’t have daily price limits, the market is highly volatile and you trade on leverage. The low margin requirements can result in heavy financial losses, even on small price fluctuations. This makes forex trading an extremely risky activity and you should never trade currencies with money you cannot afford to lose.

Scam forex brokers aren’t regulated

It’s a dead give-away that a broker is possibly a fraud if they are not licensed and regulated by a formal authority. By law, legitimate forex brokers must be regulated by an authorised body to be allowed to operate in a jurisdiction.

Even if the brokers says it’s regulated, you need to check out their regulation status on the website of the regulator. Sometimes, they may have been regulated but they’ve been stripped of their membership for some dubious reason.

Information on regulation status is open information and you can check the validity of the license in a matter of minutes.

Scam forex brokers are ruthless

Scam forex brokers will contact you via direct message and pester you to sign up and “make a payment immediately”. It’s rare that legitimate forex brokers will use cold calling where they contact you by directly by telephone or email. Legit brokers don’t hard sell as a general rule

Scam forex brokers don’t offer the popular trading platforms

You’re smelling a rat if a forex broker only supports trading platforms that are unknown or not well known. The vast majority of legit forex brokers offer MetaTrader 4 (MT4) at a minimum and usually other reputable trading platforms such as MetaTrader 5 (MT5), Libertex, Quik and ROX.

Some of the major global forex brokers offer a proprietary trading platform (one they developed themselves) but it’s usually an alternative to MetaTrader 4 and 5 on their site. These days, global forex brokers don’t have to create their own trading platforms because the MetaTrader platforms offer everything a trader needs to buy and sell currencies on the forex market.

Scam forex brokers offer suspicious accounts

A sure sign you’re dealing with a scammer is if they only focus on PAMM accounts or binary options.

A legit broker would not use PAMM accounts as their primary source of income because they do not guarantee high income; particularly as fund managers are not immune to making bad trading decisions.

Binary options let traders profit from price fluctuations in multiple global markets. They’re seen as a form of gambling and are so prone to fraud, they’ve been banned by regulators in many jurisdictions.

Scam forex brokers use fake rating polls

Forex fraudsters will advertise ratings that are glowing but totally fake, usually because they’ve been created by the scammers themselves. Give no credit to any ratings poll that is not published by a reputable and legitimate broker review site. Also visit forex trading forums and see whether there are any complaints about a brokerage and if there are, contact the people who posted the comments and ask for more details.

Scam forex brokers don’t have a SSL certificate

Pay attention to whether a forex broker has a SSL certificate on their site. Legitimate trading platforms like MT4 and MT5 provide an option of extended authentication using SSL certificates. This increases the safety of your funds and trading activities. It means that when you are on a website that is SSL certified, there is a very low likelihood you’ll get malware or spyware that transfers your data to third parties.

Top 3 tips to avoid forex scammers

Only use a regulated broker

It’s highly recommended you only use a forex broker that is licensed and regulated by one or more top-tier authorities, preferably in a jurisdiction where you are living and trading. Traders who choose to invest with an unregulated trader and have problems with them have very little recourse and may suffer from significant financial losses.

You are protected from mistreatment and fraud when they choose a properly regulated broker and this is vital in any circumstance if or when things go wrong. You can also benefit from financial compensation in the event that the brokerage goes out of business and you also have peace of mind that the broker must comply with all the rules and regulations stipulated by the regulatory authority.

Check for complaints about withdrawals

Forex traders and investors who use a licensed and regulated broker rarely, if ever, have withdrawal problems. It might take longer than expected because of banking regulations but traders should have no problems getting their money out of their accounts when they want to.

Visit online broker review sites and make sure there are no complaints about not being able to withdraw funds from a particular broker. It’s a massive warning sign that you are dealing with an forex fraud if they are not processing withdrawals in a timely manner.

Bear in mind, the requirements to do withdrawals are more complicated and it does take longer to withdraw funds from a forex account than it does to deposit money into it.

Trade with a demo or mini account

Trading with a demo account or even a mini account is the best way to test the waters of an unknown forex broker. You can check the legitimacy of their operations, put their customer service to the test and also test how easy it is to withdraw your funds.

If you’re a beginner trader, the best thing you can do is use fake money on a demo account before trading with your hard-earned money on a live account. If you’re a more experienced trader, first open a mini account with a small balance and make trades for a month and then attempt a withdrawal. That should give you enough time to check out whether the broker is legit or a scammer.


Forex is a complex instruments and trading forex involves a high risk of losing money rapidly due to leverage. You need to understand how forex trading works and decide whether you can afford to take the risk of losing money on trade orders that do not go your way.

Forex Trading Africa annually reviews brokers regarded as the best in the world and provides information on the tools, market analysis and service they offer. We aim to provide important information for you to base your decisions on when choosing the right forex broker for your needs.

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