Broker scams: Find who is the Imposter?



Undoubtedly, with the development of digitalization, a remarkable shift has occurred. It has provided us with basic amenities and several ways to earn money. It has served employment in many countries, and many have become successful investors. Some brokers have also come into the picture. Forex is one well-known platform where investment occurs worldwide, and people earn well.

However, a coin has two sides. There are both pros and cons. There is always an imposter who is watching you. This blog showcase a cumulative understanding of broker scams and many other factors through which they dupe people. We will also share some tips for observing the red flags and ways to avoid them.

Who is a broker?

The simplest way to understand a broker; is to play a role that abridges the relationship between an investor and the investment market. There are two types of brokers one is authorized, and the other one is unauthorized. Although, we can’t say which one is responsible for ethical activities, as many licensed brokers are involved in unethical practices in the investment market.

Who is a ghost broker?

A ghost broker is a fake person who is insanely well at communication. He acts as a genuine human and convince people to purchase several kinds of insurances as per their need—all of these jobs are done on social media platforms and through word of mouth.

Who are investors?

Investors are the ones who make investments in the market. In the current scenario, the popular investment areas are cryptocurrency, forex, and the share market, which will never grow old. An investor’s brain is similar to a businessman’s as their primary goal is to gain high profit and buy and sell commodities (shares, coins, and digital currency).

Types of Investment scams

An imposter tries to trap many big fishes whose day-in and day-out job is to work on mining and investing. However, investors need to know that investment is more than buying and selling. Risks surround them; hence, they must play smart in the market. In previous years, many well-known and popular investors have been swindled easily. To avoid such dire times, we must be alert of con artists.

Bad broker

Many corrupt unauthorized brokers are wandering in the market and are involved in outrageous activities such as duping investors and the general public. They are duping people with the reasons like-

  • Involved in unfair trade practices. They insist their investor to invest in a particular stream when the market is favorable to them. A broker’s income is based on commission and networking with its clients. Although, they tried to take shortcuts and conned people with whom they did business.
  • They charge types of trading commissions and other fees. Some newbies investors are unaware and uneducated results in paying asked amount.
  • Brokers also charge hidden fees for their skeptical and valueless services.
  • The broker freezes the owner’s trading account when the market is favorable to the imposter. They do it with the mindset of hiring broker to perform the further processes.
  • In case the investor wants his funds back. These bad brokers will obstruct them by asking for unnecessary details, such as excessive forms of identification, charging withdrawal fees, and after a long hold, brokers return the investor’s money.

Boiler room scam

A boiler room is operated by a team of bad brokers who shifts their locations from one place to another. According to some researchers, in the UK alone, around a  £200 million is conned annually. This figure is from 2011. However, people are started acting smarter in this information-savvy world.



These criminals construct makeshift offices and try to trap investors with terribly risky and bogus schemes. To gain the reliability and trust of their potential victims, they create a small website to enhance the authenticity of the place.

The main goal of the boiler room is to convince investors to send them money. They will ask investors not to worry, and they will make worthless acquisitions on their behalf. They will gain commission out of it, and in many cases, they put all the money in their pocket.

Once done, the imposters move office from one place to another before the victim gets to know that they have been scammed.

Unregistered and offshore security scams

Broker scams are gaining popularity as scammers are duping people every now and then. As per company laws and the jurisdiction of various countries, offering or selling securities is unethical if the company has not fulfilled its formalities to get listed. In case the offering is not registered, it will be counted as a private activity or unregistered offering; that is an unethical practice. Company laws do not entertain all these activities. Although unregistered offerings also perform to guard investors.

But everything that is happening in the market sounds perfect; on the other hand, scammers try to chase the interest of investors, known as investment fraud. Investors appreciate these unauthorized offerings but should not get overwhelmed by scammer’s tricks and strategies.

They must and should research about it, and most importantly, investors should analyze if these offerings are performed by professionals or not. Otherwise, it will become a gameplay of a victim and culprit.

Pump and dump schemes

It is a manageable and tricky form of scam, but scammers earn handsomely out of this scheme. Pump and dump schemes follow two steps:

  • Fraudsters purchase huge value shares from a company before an investor. They act as brokers who try to convince investors to buy particular shares and let the price go higher. Investors do the same as asked. Once the value gets, a high broker scam is performed. Unauthorized brokers dump the investor, steal money, and the share price sharply lower.
  • Here, brokers insist more significant investors purchase shares in high volume with the hope of value getting high. They expect hype. At last, they get dumped, which is devastating.

Pyramid Schemes

It is the most prevalent scheme used by brokers. For example, some brokers used to hire some people in exchange for expected investment returns. To spread word of mouth, the first investor gets a handsome amount of money, so it evolves the trust in the process. For example: If the broker has promised his recruiters to provide a certain amount of commission, he accomplishes it as promised.

A pyramid scheme is a structural-based scheme. In this, the so-called brokers have a core team of 6 who then recruits six more people. In this way, if they reach 13 levels, they have accumulated the whole population.

Although the theory varies from the practical, as a result, various multi-level marketing companies indulge in pyramid schemes, but they all are dressed up. They have no outward appearance.



Ponzi scheme

It is an upgraded version of a pyramid scheme named after Charles Ponzi, an Italian swindler who traveled to the USA and stole around $ 20 million in the 1920s. Unlike pyramid schemes, they will recruit people, but the thin line is here they recruit scammers to be a part of the team. It changed the whole scenario and counted as an effective scheme to perform broker scams.

Red flags of unregulated broker scams

  • Suspicious cold calls, social media, direct messages, and SMS.
  • You sense a feeling of force and push to invest in particular stock or share.
  • They will claim about their authenticity and legitimacy. However, reliable companies have yet to reach out to any investors.
  • They have spread around with the names of investment advisors, brokers, or account managers.
  • Delight their victims with promotional offers
  • They will ask you to fulfill the account’s needs by sharing tax, fee, and commission to get back their hard-earned fund.
  • They will contact you via Remote Access Software so they will not easily get trapped.
  • If you ask about how they receive their contact details, they will be blank or sound illogical.

Tips to safeguard yourself

The simplest way to safeguard this is to become educated in this field. You should be aware of the too-good-to-be-true promising attitude.

  • Do not come under peer pressure. Always stick to popular and well-known agencies.
  • Research on Google by putting the company’s name + “scam” for the company’s legitimacy.
  • Check reviews and ratings or any complaints about not recovering the funds.
  • Please take all the knowledge of the company and try to manipulate them. In this way, you can pass their trap.
  • What is yours will be yours, so don’t feel pressured.
  • Be cautious and reach out to us on Financial Fund Recovery in case you experience the place of a victim or get threatened by scammers.

Conclusion

This blog has been constructed to build an understanding of the investment world that you can be a part of. It is about the timing, the cautious actions, and the knowledge. Being a victim is a tough place, and being duped is the toughest but be a learner always so that you can easily avoid these scammers and have a sound investment practice.

Mark Funk
Mark Funk is an experienced information security specialist who works with enterprises to mature and improve their enterprise security programs. Previously, he worked as a security news reporter.