Trading and investing are excellent methods to make money, but they also include several hazards. Along with the apparent risk of losing money owing to fluctuations in the market price, there is also a chance that you’d fall for a broker scam. Since the COVID-19 pandemic, trading and investing has attained a significant public interest across several nations, which has also boosted the prevalence of various broker scams.
Unauthorized brokers approach you without your consent and pose as your “investment advisor” or “trader” in these scams. Typically, they demand that you deposit cryptocurrency into the account ushered by them while providing profit-related guarantees. Unfortunately, unregulated broker scams are a widespread problem in this sector, and it seems that as soon as one is revealed or put to an end, another one reappears.
If you have been a target of this broker scam, don’t panic. Instead, search for a reputable firm and get in touch with fund recovery agents, to get your money back from con artists.
Table of Contents
Identifying broker scams
Broker scams can take two different forms, which one should be aware of:
False website sources
The name of a registered investment professional and other publicly available business details are used to establish fake websites. Con artists then call prospective clients and point them toward their counterfeit websites. Their main objective is to appear as a trustworthy website so they can collect personal information or login information from existing or new customers.
Here is a list of some typical blunders
- The syntax needs fixing.
- Misused investment language
- Misspelled words.
Customers should be cautious of websites that use names of authorized and popular brokers and salesperson as their domain name.
Documents that are copies
To influence potential purchasers, an unregistered person assumes the role of a qualified investment counselor. For instance, a con artist might create a fake duplicate of a legitimate broker’s public report and then mail it to the investors while using the name and CRD number of their unlicensed investment business. In addition, the solicitation seeks the victim’s documents and private information.
Most popular types of Broker scams:
We’ll examine the top Broker scams to prevent you from falling for the tricks of financial con artists.
1. Extraordinary High Leverage
Leverage is an excellent idea for trading contracts for difference (CFDs). Leverage, though, is always a double-edged sword. Although there could be substantial profits, improper agreements could lead to even more significant losses. Because of this, some brokers promise investors significant gains while employing extremely high leverage. However, inherent market risks can wipe out a trader’s margin in an unsuccessful transaction.
2. Bonuses and promotions that don’t exist
Brokers that operate without registration or regulation frequently offer excessive prizes and incentives. However, licensed and registered brokers ensure that their bonuses and promotions adhere to the law and don’t “lock” the trader in. Unfortunately, some dishonest brokers use deceptive marketing and terms and conditions to entice investors, which in actuality are unreasonable or impossible to fulfill.
3. Manipulation of prices
Dishonest brokers use this broker scam the most. It is a common ploy used by con artists who pretend to be brokers. Some brokers alter trading algorithms, which is bad for traders. When entry and exit orders fill at prices harmful to the deal, this is called negative slippage. For instance, a buy order may be fulfilled at a considerably higher price, lowering the possible profit from the agreement.
When a broker stops broadcasting accurate pricing before attempting to remove a trader’s stop-loss, this is known as stop-hunting. In essence, price manipulation will result in the loss of investor wagers.
Guidelines for avoiding Broker scams
It is a significant financial investment and several people are involved when purchasing long-term assets, like a home. Therefore, you should be aware that it’s illegal to offer incorrect or erroneous information when applying for a house loan because the procedure frequently provides both the justification and the chance for mortgage fraud.
If someone during the mortgage process advises you to lie, they might not have your best appeals at heart, and you might find yourself in a lot of trouble.
Here are some suggestions to avoid broker scams
1. Study the terms very carefully
Avoid “no money down” loans and other ploys that encourage purchasers to make unaffordable house purchases. Such loans have, at best, very unfavorable terms and interest rates.
2. Do your research
Find out how much the comparable properties have sold for, particularly those of the same size and price group. Additionally, it would be good to research about the most current tax assessments for local properties. Then, make sure the details on the document and the total payment match.
3. Acquire recommendations
Make sure you understand who you are dealing with before purchasing, financing, selling, or refinancing a home. Verify the brokers’ and companies’ local and state licenses by asking for recommendations and references.
4. Never sign a blank piece of paper
A blank document or a document with blank lines cannot be signed for any legal reason. Therefore, ensure you have read and have comprehended any paperwork before signing it.
5. Consult a professional
Again, ensure you are conducting the necessary investigation to confirm that you are working with a duly licensed expert, with a proven track record. It may involve consulting with a real estate lawyer, if required.
6. Do not believe their promises
Do not give your consent for instances where they request you to temporarily sign a house deed. You may lose your home permanently if you do this; even if it is presented to you as a plan to avoid foreclosure.
Be wary of unsolicited proposals that ask for a fee upfront and promise to help you pay off or lower your mortgage debt, especially if you already own a property and are experiencing financial troubles. Accepting these offers could lead you into a steeper hole; besides, these are not any reputable services.
Summary
- Broker scams are getting more common as public interest in trading and investing increases.
- Price manipulation is the most common ruse.
- Unfavorable slippage happens when entry and exit orders are filled at expenses harmful to the trade.
- On the other hand, lucrative transactions can bring in a lot of money.
- Dishonest brokers may use deceptive advertising and inflated terms and conditions to entice customers.
Also read: Should You Invest in Bitcoin or Gold?
