Global Forex Market Report in the First Half of 2020 VII (Fraud and Anti-fraud)

Source: Fazzaco 2020-08-07

Chapter Four The Other Side of China’s FX — Fraud and Anti-fraud

With prosperity comes chaos.

While China’s FX traders and brokers are on the rise in an expanding market, many investors have their bank account money drained due to evil doing of fake brokers.

Fake brokers are revealed every year, but time and again they stage a comeback with renewed stratagems because of regulation void and lack of protection on the interests and rights of investors.

By January 2020, fx110.com has recorded 2,168 fake brokers, and 82.9% of them have absconded.

After scamming money through sales pitches such as “principal guaranteed” or “high return” or squeezing every last penny from investors, these fake brokers will escape, shutdown the websites, change their mobile phone numbers, or even continue the deception by registering a new website as camouflage. Some investors see through the tricks after consulting fx110.com when investing, but still quite a number of people have been cheated.

Without mechanism to protect investors’ legal rights, the fake brokers can easily continue their low-cost hoax as long as they can find another camouflage.

Other than exposing fake brokers, fx110.com has assisted public security organs in investigation by providing case clues. Many testimonies on China Judgments Online cited statistics from fx110.com, The Beijing News and China National Radio reported fx110.com’s warning against fake brokers, and even the Supreme Court’s official account recommended green hands to consult regulation information on fx110.com. Massive evidence proves that the Chinese government endorses fx110.com.

4.1 The metamorphosis of FX scams

From pirated MT4 to counterfeit websites, from impersonation to fake Apps, FX scams “never die even after they are burnt by wild fires and are brought to life every year by the spring breeze”. However rampant the fake brokers are, fx110.com is still in the front line to fight for the interests of investors, reveal the camouflage of fake brokers, and provide anti-fraud guide.

4.1.1Aggressive Fake Apps

Since 2020, the FX market has witnessed new changes in scams.

fx110.com has constantly received reports about being cheated by fake Apps and suffering great losses from FX traders. These Apps, which are poorly-designed without any authentic information, impersonated almost all the real brokers in the industry, and their tricks have proved effective time and again. They were seemingly to bring a bloodbath to the FX industry!

Authentic brokers impersonated by fake Apps include:

Activtrades, ANC, ATFX, AUSFOREX, AVATrade, BCR, CMC Markets, EncoreFX, EXNESS, FOREX, ForexClub, FXCC, FXCM, FXDD, FXPRO, GKFXPrime, GMI, GO Markets, GTC, Hantec, HYCM, ICM, IC Markets, IG, KVB Kunlun, LCG, NORD FX, One Financial Markets, Royal, Swissquote, Tickmill, XGLOBAL...

For a long time, fake Apps scammed innumerable amounts of money through the same scheme of impersonating compliant brokers, bringing miseries to tens of millions of traders and their families and also disrupting the order of the market.

These fake Apps have standardized their commonly-seen fraud schemes:

Step 1: Lure investors through high return and fake advertising;

Step 2: Sweeten the deal and win investors’ trust;

Step 3: Encourage for heavier investment, create an illusion of bumper profits through backstage manipulation, such as magnifying the profits by ten-fold;

Step 4: Prevent money withdrawal and charge for “formality fees” in all kinds of excuses;

Step 5: Disappear, leaving an empty App without any authentic information.

The fraudsters outsourced the establishment of the App at a cost as low as tens of thousands of yuan, and changed servers frequently to evade regulation. If the server is located outside China, it would impossible to recover the money.

The scammers fill their pockets in a breeze by using the pirated Apps launched on App marketplaces or provided through other channels.

Investors need to keep vigilant and outsmart the scammers from the very beginning. Please do download Apps through official websites or formal marketplaces, and don’t scan unauthorized QR code or click unknown links. Do not invest in any App with unknown sources. Don’t be tempted by high-return products, no matter how rosy the picture may be! Please check whether the broker is compliant or not before investing!

4.1.2 Crafty scammers have more than one hideout

Retail FX is traded online, which is a double-edged sword for traders.

Before 2020, each and every fake broker exposed by fx110.com set a fake website as its basis and had at least one domain name.

In only three steps a domain name can be registered at a very low cost: buy a domain name, outsource it for web page design, and then falsify regulation information. After it comes to light, it would be still easy to shut it down and change to another website.

Since 2012, fx110.com has revealed more than 2,000 fake brokers. To help traders, fx110.com has offered an instruction on checking domain names through webmaster tools, published detailed guide on searching regulation information, and provided information in the following four columns:

Fake Brokers—list over 2000 fake brokers;

Regulation Introduction & Regulation Rating— introduce major regulatory bodies;

Broker Regulation Search—regulation information about each broker

With years of efforts, fx110.com has helped improve Chinese investors’ awareness in telling fake brokers from the real ones by launching an all-out war against the scammers on the official website and mobile terminals such as FxChat App.

4.1.3 Fake MT4 dressed up as true

MT4 is the most popular, stable, and convenient FX trading software.

Its advanced technology and extensive application makes it a standard for almost every FX brokers, quite expectedly forming an misconception for investors that a broker would be compliant as long as it adopted MT4.

In 2011 and 2012 when such a misunderstanding became a consensus, many traders were scammed.

To overawe the fraudsters and protect investors’ fund, fx110.com once released a passage on how to verify the authenticity of MT4 after collecting a huge amount of evidence, which caused great sensation in the industry.

But nothing good lasts forever as the swindlers masked themselves with upgraded schemes, which deprived all anti-counterfeiting measures of their effectiveness.

In response to the situation, fx110.com contacted and cooperated with MetaQuotes, the software provider, to implement countermeasures.

Some scammers, after knowing which way the window blows, started to buy genuine MT4 or adopt pirated one which was so elaborately disguised that ordinary traders were unable to identify.

After several times of discord, the industry reached a consensus: the authenticity of MT4 cannot be used as the criteria for judging the compliance of brokers.

In other words, a broker that uses pirated MT4 must be fake, but a broker that uses genuine MT4 may be fake or compliant.

4.2 Typical scams

When the Ponzi scheme was revealed in 1919, financial and investment scamms sprang up in the tide of telecom and internet development instead of withering away.

In 2017, Malaysia’s FX investment company JJPTR claimed that its trading account had been hacked, wiping out RM500 million of its money in just 2 minutes. In fact it was a Ponzi scheme where the money invested by later investors was given to early investors as interest, and all the money invested was fleeced by JJPTR.

For many years fx110.com has made endeavors in exposing FX scamms such as Switzerland API (exposed in 2013), PTFX (pre-warned in 2016), and Walkert (revealed in 2017).

fx110.com sincerely hopes that all Chinese investors can keep away from Ponzi schemes and unregulated brokers and abandon daydreaming. In many cases, when a fraud case is reported to the public security organ, the fraudsters have already escaped for a long time or they have run out of capital. Most of the scammed money would be either squandered or transferred, which is difficult to recover. The investment market is a vast ocean, and even the strongest law cannot cover the most trivial details. Investors should keep calm when facing “high return” temptation to ensure their fund safety.

4.2.1 Switzerland API escaped with money

In March 2013, fx110.com sounded the first alarm against API in China. Two years later, in January 2015, API escaped with $1.2 billion it fleeced from Chinese investors while leaving a website labeled “under maintenance”.

On March 10, 2014, API was suspected of committing a crime of pyramid scheme due to its misdeeds in raking in money and refusing to return fund as scheduled in the disguise of the so-called “high return” FX trading products. On April 16, 2014, the public security organ published online a warning to investors, reminding them of staying away from the tricks.

On January 7, 2015, API closed all accounts of EA clients in the excuse of hacker intrusion, meaning that clients were heavily indebted to API. Except a few clients that didn’t use EA auto-trading system, all the remaining clients fell into the trap with a loss of at least tens of thousands of dollars each person.

On January 16, 2015, FINMA warned investors that Alpen Asset Management Trust Sàrl and API Premiere Swiss Trust AG were not regulated by the authority.

But why was API so bold? It was partially because China lacks complete laws and also because of the craftiness of fraudster and the greed of investors. Many were blinded by the illusion of high profits and ignored the repeated warnings sent by fx110.com.

4.2.2 The model of PTFX

fx110.com has repeatedly reminded investors of PTFX, the fake broker who are indeed financial pyramid scheme organizations. Unsurprisingly, on March 17 2020, PTFX announced that it would stop its overseas business, which means the scammers are going to abscond.

Why is it fair to say that PTFX is a pyramid scheme? Because its business model suffice to prove that.

Members of PTFX were classified into three levels, i.e. IB, MIB, and PIB. Since PTFX claimed that it had 600,000 members, it can be estimated that each member at MIB level and above was required to enroll at least 30 new members. Members at higher levels tended to have higher profits. Moreover, the fake broker required the newly-recruited traders to invest at least 1000 dollars as membership fees or buy equivalent amount of commodities or services to become qualified members.

Although it was easy to identify, some investors still fell into the pit because of the advertised “high return”(monthly return of 10%-30%, and annual return of 120%-360%) and compensation mechanism for losses. Why are so many investors willingly to be lambs to be slaughtered? The following shows the schemes of the fake broker.

First: Sales pitches of “steady high profits”, announcing it could make sure of a steady monthly return of 10%-30%, and an annual return of 120%-360%. It was a common finesse used in these hoaxes.

Second: One-key profit making. Lowering the investment threshold to the bottom. It claimed that as long as you had funds, you could make profits by copy trading through simply pressing one key.

Third: Loss compensation. Under an unfavorable investment environment where risks were huge in real economy investment, PTFX, knowing that greed had not limits, initiated a loss compensation scheme to lure the investors to swallow the bait.

It can be concluded that PTFX scam was quite a typical pyramid scheme where the mentality vulnerabilities of the public were taken advantage of.

4.2.3 The guise of Walkert

In October 2014, fx110.com sent warnings against Walkert after receiving a question from users asking whether the broker, which entered China in 2014, was under regulation or not. In March 2017, fx110.com again exposed Walkert and IGOFX, which were in fact pyramid scheme organizations. In July 2017, IGOFX fleeced 30 billion yuan out of Chinese investors after closing the positions by making use of the market fluctuations caused by the general election of the UK.

But the fake broker was no good at camouflage. It claimed to be a time-honored British financial company, but its website was registered in 2016. It stated that “it has set a local-licensed subsidiary in Estonia, an EU member state, under the regulation of Republic Of Estonia Ministry Of Financial Supervision Authority (FSA)”, but the regulator was a normal government department similar to China’s industrial and commercial administration.

After talking with some victims, fx110.com found a large proportion of investors were females and senior citizens who had no experience in investment or FX and were cheated when the platform was recommended by their acquaintances. Compared with regulated brokers where money withdrawal was fast with low cost, Walkert charged fees for opening account, withdrawing money, and even saving deposit. As declared by the fake broker, the deposit could only be taken out after a certain period time, otherwise enormous amount of money would be deducted as expenses.

4.2.4 GCG Asia

On March 27, 2019, Indonesia’s police issued an official notice, saying that unlicensed GCG Asia violated against Article 372 of the regulatory rules and characterized it as a fraudulent "money game", or scam project after rounds of investigation. It was a typical Ponzi scheme.

Earlier on February 27, 2017, Dukascopy Group, a Swiss company, warned on its website that it had no relationship or contact with GCG Asia and accused GCG Aisa of luring investors with its brand and trademark in a fraudulent manner.

The deceitful nature of GCG Asia was explicit in the notice issued by Indonesia’s office.

Long before the hoax was found by the police, fx110.com listed GCG Asia as a fake broker on January 25, 2019.

Intelligence

Global Forex Market Report in the First Half of 2020 VII (Fraud and Anti-fraud)

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