Crypto Scam And Fraud 0 897

The Crypto market is a highly volatile and profitable market that can help traders build a steady income stream. Unlike the stock market, there is no central exchange and the foreign currencies are traded globally 24 hours a day for five days a week. The globalization also creates a loophole using which illegitimate crypto brokers can cheat the traders out of their money. The crypto fraud is committed when crypto brokers promise their clients huge profits using their trading scheme. Due to the inherent nature of the market, crypto trading is called as a zero sum game. In this market, a trader can win money when another one loses it. The crypto brokers charge commissions and transaction charges which make crypto trading, a negative sum game. To make the crypto brokers accountable in order to reduce scams, the Commodity Futures Trading Commission (CFTC) and National Futures Association (NFA) has imposed numerous regulations.

Understanding crypto fraud

Apart from the banks, various parties are involved in the foreign exchange market. The non-bank crypto industry continues to grow with more big players joining the market. In recent times, the CFTC has noted numerous unscrupulous activities committed by the non-bank parties. The CFTC has rigorous regulations for licensing and registration requirements, but the crypto brokers are allowed to launch their brokerage firm without complying with the regulations. Traders lose several millions of money due to crypto fraud.

However, not all losses incurred by traders are the fault of the brokerage firm. The market is highly volatile and many times traders continue to trade foreign currencies without a proper trading strategy. Losses are completely natural and it is possible to wipe out your entire investment with a single trade. The scammers, on the other hand, lure the traders promising huge returns and essentially cheating the traders out of their money.

Different types of crypto scams are employed by unethical crypto brokers who want nothing more than to make money off the traders. Many scammers churn customer accounts to generate commissions. Some crypto brokers claim that their software is the best in the market that can deliver huge profits with minimal losses. Traders must understand that every trade is risky and the software can’t change your trading strategy. Money management companies undertake improper and illicit activities to handle managed crypto accounts. False advertising lures investors and then the money management company uses the invested money to commit fraudulent activities. Some crypto brokers even advertise that the crypto market is a low risk and high-profit investment. The potential for huge profit is undeniable, but the risk is directly proportional to the profit potential.

Most Popular Crypto Scams

Traders should understand the different types of popular crypto scams so that you can make a better decision while choosing your crypto broker. If you can see the red flags in the advertisement, you can cautiously avoid dangerous brokers.

Signal sellers

crypto traders and investors are looking for easy ways to beat the crypto market and gain profit. Learning crypto trading takes time and it is not for someone looking to get rich quick. crypto firms target such investors and these firms claim to be the best signal sellers in the market. The brokerage firm promises to provide a system that identifies favorable trading times for buying and selling currency pairs. The system administrators state that their system is capable of predicting the market movement with a high accuracy. Sometimes, the firms provide signals manually or automatically. They charge a recurring fee for their signal services. Most of these signal sellers are potential frauds. Economists agree that it is impossible to predict the market movement using the signals. However, some experts say that spiked interest from investors can create market booms and pave way for trading and investment opportunities. It is best to use a demo account with the signal service to determine whether it is right for you.

Fraudulent Money Managers

crypto investors have a huge sum of money to invest, but they don’t have the time to execute trades on their own. The money management firms offer to execute crypto trades on behalf of the investors if the investors provide access to their funds. This can be a viable option for investors because the money management companies claim to employ the highly skilled crypto traders with lots of trading experience. While it is a good investment opportunity, investors should be extremely careful in choosing the money managers. Essentially, you allow them to have unlimited access to your investment fund and the trader has uncontrolled ability to do whatever he wants. Before allowing a crypto trader to use your money to execute trades, you should thoroughly investigate the history of the trader.

Unfair Crypto Brokers

Traders should always research about the crypto brokers before creating an account. Most of the crypto brokers promise huge returns, but they have a wider spread. The manipulation of bid/ask spreads will result in profit for the crypto broker. When this spread is greater, traders will lose a lot of money on high volume trades. The normal range is two to three point spreads, but some brokers offer seven pips and more. The CFTC has imposed regulations on the spread, but many crypto brokers operate out of offshore companies that are not regulated by the CFTC.

Avoid Losing Money To Crypto Scams

You can’t be too careful while choosing your crypto broker. Unless you are cautious, you will end up losing your investment. If the advertisement is too good to be true, it should raise a red flag. Many money management firms offer a false 100% return promise on the investment. Never trust a low-risk investment strategy that claims to make you rich instantly. You should spend some time on Google to research more about the brokerage firms you are interested in. Many review websites publish honest reviews about the crypto companies to educate the traders. Always check the registration and license information of the crypto broker. Ensure that the broker is licensed by an authoritative crypto regulator such as CFTC, NFA, FSA, etc. It is better to avoid companies with offshore addresses because these firms most definitely follow unregulated trading practices. Also, you should spend a lot of time with your demo account using all the services before starting to trade with real cash.

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