From Ponzi scheme to binary options, these new cases have accumulated around £75 million losses from the victims. Here's the full story and what we can learn from them.
As the largest trading hub in the world, the UK offers an abundance of opportunities for ordinary traders as well as professional investors who are looking to maximize profits in financial markets. Unfortunately, this also makes them a target for fraudsters and other criminal actors.
In 2023, the number of forex and crypto scam reports hit a new high of 42,148 cases as revealed by the FCA. This ranges from simple cases such as account takeovers and password breaches, to severe cases that can cost people millions of pounds. Nevertheless, they all have the same goal, which is to steal money from unsuspecting individuals or companies.
In this article, we explore the biggest fraud cases from the UK in the last 10 years:
- Capital World Markets Investment Scam — a Ponzi scheme selling unrealistically high profits.
- Infinox Forex Broker Scam — Fake investment from an affiliate marketer
- The BMG Binary Options Scam — High-risk investment on a fraud platform.
Capital World Markets Investment Scam (2023)
Anthony Constantinou is the former director of Capital World Markets (CWM), a finance company based in London, who was imprisoned in June 2023 for conducting an investment fraud worth around £70 million. At Southwark Crown Court, he was found guilty of seven cases of fraud through false representation, scam trading, and money laundering.
Here's how the trading fraud started.
Constantinou ran CWM between late 2013 and March 2015. The fraud itself involved an investment scheme called "Managed Accounts", where he told investors that they would get returns of 5% per month or 60% ROI per year for investing in "allegedly risk-free transactions on the forex markets". He also promised extra returns for those who introduced new customers to CWM.
In the early stage of the scam, investors were told to invest a minimum amount of £50,000 which later increased to £100,000. The company claimed that they could offer such high ROI due to "special access to preferential prices". They also made several sponsorship deals to make them look legit and successful.
Through this scheme, the company managed to collect tens of millions of pounds from 250 innocent victims. The money was supposed to be invested in the forex markets, but in reality, this investment never happened. Instead, investors were paid back using their own and others' invested capital, while the rest of the money went to the former director's pocket.
What Constantinou did here is an example of a Ponzi scheme. This involves luring individuals to invest in a fake company or investment and it is usually followed by the promise of big profits with little or no risk.
What to Learn from This?
One way to avoid this is to do your research and make cautious investment decisions.
Don't invest in an unauthorized individual or company that offers high, unrealistic promises with little or no risk.
Constantinou, for instance, created an illusion of safety by saying that only 10% of the capital was actually at risk, while the remaining 90% was held in a segregated account in Germany. He even claimed to put matching funds from CWM and his capital as additional safeguards. Both of these claims were false and only made to lure new investors.
Never put money into an investment that sounds too good to be true. It's best to be skeptical and always check the facts before investing.
Infinox Forex Broker Scam (2019)
Inflinox Capital is an FCA-approved brokerage firm, yet it is still faced with allegations of running a scheme that made people lose an accumulated amount of £3.8 million back in 2019. Due to its uniqueness, the case has been made into a documentary called Scam Land: Money, Mayhem, and Maseratis.
The Infinox scam case started with an Instagram influencer and self-proclaimed UK trader named Gurvin Singh Dyal.
Through his Instagram account, Gurvin has regularly shown his luxurious lifestyle to his hundreds of thousands of followers. He even went viral for handing out cash on Plymouth High Street. He claimed that the money was gained from his successful forex trading activities. Check out the full story below.
Gurvin offered copy trading services through his own company called GS3 Trades. He's also the CEO of the Academy 2 Earn platform where he offered various courses for online earnings such as affiliate marketing and dropshipping. He promoted the idea that trading is very accessible and can be a new easy way of making money.
As an affiliate marketer, Gurvin assured that the GS43 Trades was completely safe because all investments were made through an FCA-regulated firm called Infinox. However, the Infinox broker that he promoted was apparently an offshore broker based in the Bahamas. This is not the same as the Infinox Capital, which operates under British laws.
In the Bahamas, traders are allowed to take 16x higher risks than what is allowed in the UK to make more profits. Using high leverage, Infinox was able to continue the trade even when the loss reached more than 50%. This is what made the loss so big. If the company was operated under the FCA regulations, they would have to close the trade immediately.
What Can We Learn?
Long story short, the fraud had lured investors into believing that their money was protected by FCA regulations, only to realize that their investment was made through an offshore broker with no UK protection.
This is why it's highly advisable for any trader to only trade with trusted, regulated brokers.
If you're a UK-based trader, always check the validity of a broker's FCA license carefully.
Don't easily believe any claims that a broker is regulated by the FCA without verifying it on the regulator's official registry page.
The BMG Binary Options Scam (2016-2023)
In the last decade, many UK-based traders have fallen victim to binary options scams and lost millions of pounds. While other countries have banned this business for a long time, the UK's FCA only started banning the sale of binary options to retail customers in 2019.
One of the most famous binary frauds is the Bespoke Markets Group (BMG) case which has caused the loss worth £1.2 million from around 120 UK investors. In April 2023, several individuals were convicted of the conspiracy, namely Cameron Vickers, Raheel Mirza, Opeyemi Solaja, and Reuben Akpojaro.
Click here to find out more about the case.
Between 2016 and 2020, the fraudsters made cold calls to retail customers, offering them 'an opportunity' to invest with BMG. They claimed to offer legit binary options trading, when in reality the money was shared among them to fund their lavish lifestyle.
To encourage their victims to invest even more, they offered to match investments with their own money and refund losses in the first 3-6 months. On top of that, BMG also created a quite sophisticated platform that seemed to show the funds being traded. Sadly, it was all just a simulation. None of the trades really happened.
As mentioned before, now the FCA has banned all sales of binary options for UK traders. The regulatory body estimates that the ban could save retail customers up to £17 million per year. Therefore, if you come across a firm offering binary option services in the UK, it is definitely unregulated and is likely to be a scam.
How Do We Learn from This Case?
First of all, it is very unlikely for a reputable brokerage firm to make cold calls to clients.
In this case, the BMG was never regulated by the FCA, so they made the calls without any authorization. That being said, if you receive an amazing investment opportunity out of the blue, it is definitely a red flag.
We should also note that they offered binary options, which are a high-risk and 'all-or-nothing' type of investment. According to the FCA, more than 80% of binary traders have lost their money. This is why the product is now banned from retail traders in the UK.
Tips on How to Avoid Trading Frauds in UK
To protect your funds from funds, it's important to know the signs of possible scams and what to avoid in the UK forex markets. Here is the complete list.
| ⚠️Beware of unregulated brokers | Most traders already know that trading with unregulated brokers is risky, but in reality, avoiding them is not that easy. As shown in the above cases, you may unknowingly use offshore broker services. Therefore, always check the domain of the website that you use to register. Make sure that it's based in the UK, and is regulated by the FCA. |
| 📞Ignore cold calls | It is very unlikely for a legitimate broker to make cold calls out of the blue. Typically, this type of call is used to make unrealistic claims about investment opportunities or potential profits followed by immediate high returns with little or zero risk. Aside from phone calls, some unauthorized firms may also send you an email, suggesting that an account has been opened under your name. When it comes to this, better hang up and delete the messages |
| 👨💻Identify fake account managers | Be careful of account managers who offer to access your account and trade on your behalf. These people are typically affiliated with certain brokers and even work for them. They might encourage you to trade way beyond your risk tolerance, which then could ruin your entire portfolio. |
| 🤑Avoid "get rich quick" marketing | Fraudsters might suggest that making money online is easy and can be done by anyone, even complete beginners. This is a big red flag that must be avoided at all costs. Remember that forex trading is not a shortcut to success. In fact, forex trading is a risky investment that can make you lose money rather easily. There is no such thing as a holy grail that will only give you profit with no risk. |
The Bottom Line
Understanding how trading frauds work in different cases is necessary for any trader. This can help you realize the risks and what type of scams you might encounter in forex markets. It is the first step to protect your funds and investments from fraudsters and other criminals.
To further prevent forex trading scams in the UK, the FCA has improved their strategy by issuing more public warnings about unregulated companies and individuals attempting to promote fraudulent investment opportunities. The regulatory body believes that the warning list is a crucial preventative measure to help traders verify whether the investment is conducted by an authorized firm.
It is highly suggested for UK traders to do their research and use the warning list provided by the FCA to check the broker's safety before investing any money.
5 Comments
Mar 27 2024
Hey, thanks for this article! I'm actually not a UK trader myself but I find the FCA warning list very useful to narrow down my options. I've read many trading fraud cases lately and all of them were so horrible. I think it's obvious that no one wants to lose money to these people, regardless of the amount. My question is why many traders are still willing to trade with offshore brokers, considering all the risks? Aren't they afraid of losing their investments? Someone please enlighten me on this… thank you
Mar 29 2024
This is a very interesting topic. While offshore brokers are considered risky, they offer some things that you won't find in regulated brokers. I believe most people trade with offshore brokers for the low cost and high flexibility. You see, these brokers don't operate under certain laws, so they are able to provide more flexibility in terms of leverage, trading conditions, and account requirements. For instance, some brokers simply don't require clients to complete the KYC procedure to create an account. Depending on the jurisdiction, you might also get tax advantages by trading with these brokers.
It is worth noting though that all of those benefits mean nothing when there's no safety. What's the point of getting high leverage if you can't withdraw your funds, right? This is why, trading with offshore brokers is still not recommended. Keep in mind that you will get no protection when it comes to funds safety and resolving disputes.
Mar 28 2024
Yikes, these frauds are getting scarier each day. They never stop targeting innocent people and the worst part is that it happens not only in the UK but all around the world. One of my friends got scammed once and lost around a thousand pounds. She said it was deeply traumatizing for her and her family.
As someone who just started trading in 2024, I must say this information is making me nervous. Any tips on how to keep my funds extra safe? Also, is it necessary to diversify my wealth and trade in several different brokers? Thanks for your help.
Mar 29 2024
You are right. Scammers and frauds are getting more and more creative these days, especially with the presence of AI and stuff. Don't worry too much though because brokers also keep strengthening their security measures. As long as you're trading with a legit broker, I think you'll be fine.
As for your second question, well, there are pros and cons of each option. Trading with only one broker can simplify your strategy and reduce your costs since you only need to manage one or several accounts in one place. You can also build a strong relationship with your broker and perhaps earn exclusive perks by being a loyal customer. However, this method can expose you to risks and limitations. If you choose the wrong broker, you might face serious problems.
On the other hand, trading with multiple brokers can give you the benefit of diversification. You can compare several brokers and get a wide variety of services that might increase your trading skills. However, this will complicate the process and definitely more costly.
That being said, it's best to consider your personal preferences and needs. Ask yourself questions like what are your trading goals, how much is your risk tolerance, and more. This can help you make informed decisions.
Mar 31 2024
I would suggest you to keep moving your money around to avoid unnecessary problems. Do not put too much money in your account for a long time. Try to withdraw once in a while to ensure that you still have full control over your capital. Also, based on my experience, you should never ever share your email or password to anyone else. Remember that your phone, email, or social media can be hacked. The best way is to keep your password somewhere safe and only you have access to it.