Broker Scam

What is a Broker Scam?

Broker scams, simply put, are impersonation scams, and they keep updating with new variants every day. It can be cyber-related incidents, including swindlers creating fake websites taking actual industry professionals’ names and professional details with no connection to these imposter sites.

Impersonation is among the oldest scams but at the same time; they are also tricky to spot unless you are sure of what you are looking for.

How to Identify a Broker Scam?

Here we list for you the two patterns to be aware of and tips to know whether broker scam is legit,

Imposter Websites

The scam is carried out by setting up imposter websites with a registered investment professional’s name and publicly available professional details. The scammers then call and direct potential victims to the imposter websites.
Often their goal is to mimic a legit website to obtain the personal information or login credentials of existing or potential clients.

To make these imposter websites, you should look for typical mistakes such as poor grammar, spelling errors, or misuse of investor terminologies. In addition, the investors should be wary of websites using the name of the registered representative as the domain name for the website.

Imposter Documents

The other broker imposter scheme involves an unregistered individual impersonating a registered investment professional to entice potential investors. For example, a scammer creates a fake version of a public report of a legitimate broker (an experienced broker with a clean regulatory record).

The manipulated report is then emailed to you using a registered investment professional’s name and CRD number but with an unregistered company as a broker-dealer.

The solicitation asks for some documentation and a request for the personal information of the investor.

Scams to beware of when choosing a Broker

To avoid falling for these investment scammers, let’s look at five scams you should look out for when choosing a broker.

Excessive or hidden charges

Brokers often take hold of your money by charging you through increased spreads, fees, and commissions. Certain unethical brokers charge more than typical brokers. Misinterpreting information on spreads, commissions, and fees can lead to swindling as, at first glance, they seem to match the standard pricing of leading competitors.

They hide the actual pricing information from you. And while an experienced trader can make out the scam, beginners are likely to fall for it for a prolonged period.

Stop-Loss Hunting

Market manipulation is quite hard to prove and yet goes on to be among the most profitable scams fraud brokers use to grab their clients’ money. The broker has access to the clients’ trading information and can set up certain market moves that automatically force traders to close their positions by hitting stop-loss orders. This causes short-term volatility in the market and leaves many traders in the red.

Read reviews of the broker before going all-in. Then, do rigorous research for more information about your broker.

Market manipulators are individuals who influence the market with their actions. Likewise, bogus investment companies practice moves and strategies that are likely to favor them over their clients.

Signal Sellers

Brokers often offer trading ideas to encourage you to make trades. Although it is a valid manner to add to your trading repertoire, some brokers go ahead and provide trading signals. And although not all signal sellers are scammers, it is always good to approach such offers with healthy skepticism.

Additionally, signal sellers also direct traders with indicators that can bring the best outcome. However, some sly ones sell signals that can only get them money instead of their end consumers.

Robo Advisors

Robo advisors are similar to signal sellers, and many claims they have programmed an algorithm and autopilot that can beat the market consistently. They make things as simple as possible so that anyone, even with no knowledge of the markets, can take part and invest in scams.

The fraudulent brokerage firms with an automated trading system often promise accuracy and big rewards. But the results are always disappointing.

Overly Exaggerated Or Guaranteed Returns

Schemes often offer a guaranteed return on investments which is “too good to turn down.” However, take these offers with skepticism as they often find the broker will simply vanish with the investor’s capital.

Broker Fails

It refers to the group of brokers who use trading losses as cover stories to their blunders.

Unregistered & Unregulated Trading Business

There are plenty of offshore trading businesses or brokers that run their practices without any certifications.

Pyramid & Ponzi Scheme

Two investment rackets that carry massive marketing campaigns to attract and deceive investors.

Boiler Room

It introduces a broker that executes from a temporary location. A type of sham that makes cold calls and interacts across social media sites using fake identities. These activities take place inside an enclosed space known as boiler rooms. Further, brokers disguise their identity by moving from location to location with distinct names.

Pump & Dump

A scheme that the brokers put in place to make big money. To be more elaborate, the broker starts by pumping money into a low-priced asset. Further, they convince the investors into funding it. Then, as the asset sees a price hike, the broker nonchalantly dumps (sells) their funds, making the asset fall again.

Bad Brokers

Here’s a category that includes the worst of its kind. Bad brokers use a similar set of tricks to deceive investors. First, they propose irresistible investment plans and eventually complicate the withdrawal.

How to Avoid Broker Scam?

Working things out in a financial market can in itself be a complex task. Furthermore, spotting scams can feel like shouldering one with more responsibilities. However, being aware is instead a continuous process that requires effort.

To make things easier, we’ve listed a few red flags that investors can keep an eye on;

• Brokers exhibit their client’s lavish lifestyle with expensive cars, designer clothes, and gigantic houses, all from their profits.
• Making claims that Brokers transferred your money to the wrong account at the time of withdrawal.
• Investment companies are constantly urging more money in the form of deposits.
• Charges excessive or hidden fees that are exposed after your funding.
• Putting traders through the pressure of making rapid decisions.
• Gives you the ghost treatment after you’ve put your wealth at stake.
• Massive and guaranteed returns.
• Testimonials that are too fancy to be true.
• Assuring zero risks or losses.
• Sidestepping questions regarding withdrawal.
• Complicated withdrawal procedure.
• Suspends account after deposit.
• Runs an unregulated or unlicensed business.
• Blocks your account access after you’ve invested.
• Business operations shut down abruptly.

What To Do If You Have Been Scammed By A Broker Scam?

The red flags mentioned above give a brief idea of the common approaches that fraudulent brokers use. However, learning the right actions to take is a whole other chapter. For instance, these indicators can stop about 40% of the traders from falling for a scam. But the rest, 60%, who fall for it still seek ways to escape the trap.

That’s why Crypto Victim Desk provides solutions that help recover money lost to scammers. As a fund recovery agency, our core values focus on protecting our clients and their funds. Therefore, we follow legal procedures and ensure that we build a strong case with a thorough investigation.

With $19k recovered to date, Crypto Victim Desk helps recover money from distinct scammers. To name a few, we’ve aided victims through the Fmtrader scam, Cryptocurrency frauds, USI-tech scam, broker scam, and plenty of other digital scams. So reach out to us now and avail of our free consultation!