With financial markets unpredictable, many consumers are
re-evaluating their investment options. Solicitations to trade foreign
currency contracts, also known as “forex,” are particularly
tempting. Ads for high-return, low-risk investment opportunities in
foreign currency trading are blanketing local newspapers, radio
promotions and attractive Internet sites. Are these offers too good to
Sometimes, they are. While much forex trading is legitimate, the
Commodity Futures Trading Commission (CFTC) reports a sharp rise in
foreign currency trading scams. How does one sort through the offers to
select a reputable operation? The CFTC and the Better Business Bureau
offer the following warning signs of fraud to those who are considering
forex investment opportunities.
* “Too good to be true” claims. Get-rich-quick schemes are actually lose-everything-quick schemes. Be particularly cautious if
you have recently acquired a large sum of cash. Retirees make easy
* Offers that predict or guarantee large profits. Such claims are
false! No person or business has a crystal ball that can predict the
* Offers that promise little or no risk. If the company claims that
written risk disclosure statements are routine formalities imposed by
the government, beware! Do not fall for promises that your investment is
“secure” or that there is a “maximum” that you can
lose per day.
* Pressure to invest funds that you cannot afford to lose. The
currency futures and options markets are volatile; they contain
substantial risks for unsophisticated customers. Reputable companies
will permit you time to evaluate their offer and make an informed
* Unwillingness to provide a performance record. Always obtain the
company’s track record, and verify that data with other sources and
someone whose financial advice you trust. Even the glossiest of
brochures can contain false information.
* High-pressure tactics to send or transfer cash immediately. Phony
currency trading firms have seized upon the Internet as an inexpensive
way to reach potential customers. Many such firms are not located within
the U.S. and do not display any information identifying their location.
Once you transfer your funds offshore, it becomes very difficult or
impossible to recover your investment.
* Reluctance to provide credentials or background information. Do
not deal with anyone who will not give you requested information about
their expertise, experience, and industry registration or relevant
association membership details in writing.
Prior to purchasing any “forex,” check whether the
company is registered with the CFTC (www.cftc.gov) or is a member of the
National Futures Association (www.nfa.org). Other sources of helpful
information include your state securities commission (www.nasaa.org),
Attorney General (www.naag.org) and Better Business Bureau
If in doubt, do not invest! If you can not get solid information
about the company, the salesperson and the investment, why would you
want to risk your money?
BY THE BETTER BUSINESS BUREAU OF ALASKA INC.