How Do Trading Scams Work?
In this article, you will find an explanation of the way online scam companies are operating, the things they will say, the false promises, and of course the pressure.
Online scams can appear as Binary Options, Forex, Crypto, fund recovery, tax refund, etc..
Online scam companies are changing every day and evolve to stay relevant and not get caught.
If you have been the victim of online fraud once you are more likely to be scammed again probably the same company, most likely under a new identity.
Step 1: Great Service!
Once you have put your information into a “Get rich quick” ad you will immediately get a phone call from a conversion agent, this is called an FTD – First Time Deposit.
The agent’s purpose is to make you activate the account and put a minimum of $250 on your so-called “trading account”.
To do that they will ask for 3 things: Age, occupation, and experience. Age- The Company has to know you are over 18.
Occupation – The agent is trying to get an understanding of your income and intelligence.
Experience – They want to know if you have other trading accounts and how familiar you are with the system.
All of this information will be passed on to your future broker. On that first call you can already recognize if the company is a scam the following signs:
Noisey background – the room is full of people and loud music to hype the agents.
Extreme pressure to make the deposit right now.
Other incoming calls – from other companies trying to get to you. (once you gave your card info) Your bank will usually ask for your call / OTP / any verification from your side.
Once the deposit has been made you will hear a big noise – bells and claps congratulating the agent for the deposit.
If you haven’t made a deposit, they will call you every day, a few times a day, usually, you will get calls from more than one company.
Step 2 – Compliance Department
This step is not in every company, but if it’s a legitimate scam company they will have someone calling you and asking you to send your ID/passport, credit card picture showing the last 4 digits of the card, and usually then they will sign you on a contract.
Step 3 -The Broker
You will get a pre-scheduled call from a broker, needless to say, the person over the phone has no idea about the financial market, what he does know is how to check how much money you have to give him, how to have great chemistry and to sell you a dream that he, of course, can help you achieve.
He will present himself as a very successful important and busy broker that has no time for small accounts and your account just happened to land on his desk and he is just looking for the last guy that can fit in his portfolio.
How much you make a year? How much you have in savings? What about your pension? What is your postcode?
Everything you will say will be used against you.
Once the broker will get all the information he needs he will make you a proposal of how much you need to invest to achieve the dream you have that he just got from the “ the way” conversation with you.
He will also explain why it makes perfect sense to put your money in your trading account and not the bank.
“Your bank is trading with your money and gives you 1% a year.
but with me as your broker, we can make up to 80%!”
He will do whatever he can to get all the money in your bank account, savings account, and pension.
If you will say that you don’t have anything and he will make sure it is true, he will most likely leave you alone.
After making sure you can’t take a loan.
you will get other calls from other brokers of the company daily.
Step 4 – Bonus Contract
This stage does not happen in every company,
usually only happening in more sophisticated companies.
If you have made another transaction, the broker will make sure to sign you to a bonus contract that will give you extra funds on your trading account, in the small print it usually states you will have to trade on your capital around 25 times and not lose to get this money out.
It is very unlikely to win this bonus contract on the platform, especially because the back office most likely has a WIN & LOSE button, in one click he can make your account lose or win.
It is all smoke and mirrors because the reality is that your money is sitting in someone’s bank account or crypto wallet and the numbers on your account are only a distraction and have nothing to do with trading.
Step 5 – Withdrawal
The happy day is here and now you want to withdraw some of your hard-earned money, assuming you haven’t given the broker everything you have – if you did, he will burn the account and tell you that you have lost everything.
You click on withdraw and you wait and wait. Sweat slowly creeping out of your pores as reality starts to set in and then,
a call from your ” financial adviser “.
This can go two different directions, depending on if you still have money that he is trying to get from you, or if he has everything already. If you still have money he wants and you have already put a nice amount in, he will maybe let you withdraw but no more than 10%-20% of your “profits”, when in reality he is sending you a small portion of your money back. Clients with a lot of money might be able to withdraw more funds. This is the broker trying to gain trust and respect and it usually works.
If you have made a very strong statement that you are not going to invest anything more or have nothing left you will probably get a second voice, its another broker, usually presented as the manager that will try other ways of getting your money or they will make sure that you have nothing left.
The broker will explain why you can’t get money back, usually its “tied up in trades”.
Once they are sure you have no money left or refuse to put any more money, the account will probably be burned.
To burn an account they will put all your money in trades and most likely control the outcome from the back office, ensuring you lose all of your money.
Step 6 – Margin Call
To burn the account they have to trade, they will put it all on trades, and then you will get the margin call in at this point, telling you: ” we need x amount of money to save your trading account if you don’t put x amount you will lose it all! “
So if you had some money they will take it, and if you don’t want to put any more money they will burn it.
they will do it again and again until the account is burned because you have got nothing left.
In the end,
either you will know you have been scammed,
or if they have done the job in a very professional way, you will not even feel like you have been scammed, you will truly believe that you have lost your money on the financial market.
The next step is usually to get a call or you will try and contact a fund recovery company.
it might be that they have sold the data, and now it’s another scam company calling you to tell you that they have the money you have lost. for more information about fund recovery scams please go to our next blog.
If you find this familiar and you believe you have been scammed, then send your story and we will check all the information so we can guide you through ClaimBack Process.