Companies promise good chances of profit: trading bets on trading prices. More likely is the total loss than a lucrative profit, of which numerous victims report and ask: What to do, are online platforms reputable?
We already talked about the yet mostly dubious scams regarding cryptocurrencies. In 2021, European regulators warned about the activities under the name of the brand „Solid Invest“ – a company for Forex and CFD trading. Are there perhaps also scam schemes where even experienced „traders“ have to look twice to expose a scam?
Valentin Schulte: Yes, there are, even if they are usually not clearly identifiable as such. Let’s take the example of „Solid Invest“. Solid Invest is a company that offers large but also small investors the possibility to trade with Forex and CFD.
A short intermediate question: Can you give our readers a brief overview of what „Forex“ and „CFD“ trades are all about?
Valentin Schulte: „Forex“ trading is a market, also known as the currency or foreign exchange market. It describes the trading of foreign exchange. This has two main advantages: First, market participants trade with each other through banks and brokers. That is, it is not a present market. Secondly, investors can make profits in this market even when other markets are at a low and prices tend to fall rather than rise. Just in today’s time an attractive market, as one can imagine. The speculation is that the value of one currency compared to another currency will rise or fall. The difference between the value of one currency compared to another at and after the investment is the respective profit or loss margin. Less taxes and brokerage costs, of course.
What is the situation with CFD trading?
Valentin Schulte: CFD trades are based on a similar principle. Investors speculate on the difference of an underlying asset at and after the investment. The normal case is that an investor invests money in a stock or similar and speculates that it will increase in value. In CFD trading, it is also possible to speculate on losses of a price. One bets, if one wants in such a way, on the course development of a basic value. Both trading transactions promise enormous profits even with a small stake, but the risks of loss are also high.
In this case, the bet is on the price development of cryptocurrencies. So far so good, but where is the serious-looking scam now?
Valentin Schulte: Nothing is 100 percent confirmed, it’s just that reports are coming in more and more frequently of winnings not being paid out due to technical problems. There have also been experiences where winnings payouts have been denied. In addition, there are supposedly reputable companies that specialize in the recovery of lost winnings. It is also very suspicious that victims of such losses are often contacted by companies of this kind. Guarantees are then promised that those affected will certainly get their investments back. In order to receive this service however, the already loss registering investor must seize again into the purse. Investors should be particularly careful with warranty promises, because it can never give a 100 per cent warranty with such business. It can be spoken here already of a consequence or double fraud.
Why is it that these funds are rarely returned? I mean, they are state-licensed companies that are subject to certain regulations.
Valentin Schulte: There can be many reasons for that. One of the most common is especially with small investors who have already lost money and hiring a lawyer or similar firms costs further money. This then usually no longer pays off for the investor concerned. Another reason is that these online trading sites are mostly located abroad and therefore other legal regulations apply.
Companies for Forex business are becoming more and more numerous, some even have a state permit, yet breaches of duty on the part of the companies cannot be ruled out, especially if these companies are located in other countries. If a broker is not regulated or is regulated by an entity outside your jurisdiction, affected individuals have no legal recourse in the event their funds are compromised. In case of theft, complaints can only be filed if that broker is licensed by the regulatory body in their jurisdiction. Thus, a state license is also not a guarantee of safe trades. It would be desirable that the regulatory gaps in numerous areas of the capital market should be regulated more strictly, or the risks should be further disclosed.
How do I protect myself from these scams?
Valentin Schulte: The first thing to do is to obtain comprehensive information about the provider. BaFin (Federal Financial Supervisory Authority) advises to make a query in the company database of the financial supervisory authority. If the company or trading platform is not listed there, investors should refrain from investing. In addition, do not make money transactions on the phone, be suspicious as soon as high profits are promised and the regular look under the heading „Warnings of the supervisory authorities“ names horse and rider, where caution is advised.
Anyone who decides to engage in online trading must first take a close look at these companies. If suspicious activities stand out during the research, the fingers should be left alone. Extreme caution should be exercised especially when „betting“ on cryptocurrencies. Cryptospace is a very unregulated market. Market manipulation is not uncommon here. Small investors in particular are on the short end of the stick when funds are not paid out. The most important point to always keep in mind when it comes to investments: don’t invest money you need.
Law student at the Viadrina (L.L.B)
About the author:
Jean-Pascal is a law student at Viadrina (L.L.B) and blogger for ABOWI UAB since 2022. Jean-Pascal is future-oriented in terms of what blockchain technology will still bring. Digitization is creating new ways for profitability and efficiency in all sectors, which we are addressing in our communication and discussion. You can reach us at abowi.com.
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