FOREX SCAM

People who Scam in forex are thought to be the wild west guys in trading scheme used to defraud individual traders by convincing them that they can expect to gain a high profit by trading in the foreign exchange market. Currency trading "has become the fraud du jour," according to Michael Dunn of the U.S. Commodity Futures Trading Commission.But "the market has long been plagued by swindlers preying on the gullible," according to the New York Times. "The average individual foreign-exchange-trading victim loses about $15,000, according to CFTC records" according to The Wall Street Journal. The North American Securities Administrators Association says that "off-exchange forex trading by retail investors is at best extremely risky, and at worst, outright fraud."
Due to lax regulation in many countries, and the lack of knowledge many people possess about it, there are scams aplenty.

The forex market is a zero-sum game, meaning that whatever one trader gains, another loses, except that brokerage commissions and other transaction costs are subtracted from the results of all traders, technically making forex a "negative-sum" game.

These scams might include churning of customer accounts for the purpose of generating commissions, selling software that is supposed to guide the customer to large profits,improperly managed "managed accounts", false advertising,Ponzi schemes and outright fraud.It also refers to any retail forex broker who indicates that trading foreign exchange is a low risk, high profit investment.

The U.S. Commodity Futures Trading Commission (CFTC), which loosely regulates the foreign exchange market in the United States, has noted an increase in the amount of unscrupulous activity in the non-bank foreign exchange industry.

An official of the National Futures Association was quoted as saying, "Retail forex trading has increased dramatically over the past few years. Unfortunately, the amount of forex fraud has also increased dramatically..." Between 2001 and 2006 the U.S. Commodity Futures Trading Commission has prosecuted more than 80 cases involving the defrauding of more than 23,000 customers who lost $350 million. From 2001 to 2007, about 26,000 people lost $460 million in forex frauds.CNN quoted Godfried De Vidts, President of the Financial Markets Association, a European body, as saying, "Banks have a duty to protect their customers and they should make sure customers understand what they are doing. Now if people go online, on non-bank portals, how is this control being done?"

What is Zero Sum game?

In game theory, zero-sum describes a situation in which a participant's gain or loss is exactly balanced by the losses or gains of the other participant(s). It is so named because when the total gains of the participants are added up, and the total losses are subtracted, they will sum to zero. Go is an example of a zero-sum game: it is impossible for both players to win. Zero-sum can be thought of more generally as constant sum where the benefits and losses to all players sum to the same value. Cutting a cake is zero- or constant-sum because taking a larger piece reduces the amount of cake available for others. In contrast, non-zero-sum describes a situation in which the interacting parties' aggregate gains and losses is either less than or more than zero. The sum of a negative and a negative always equal a negative.

How to avoid forex fraud

Most Forex fraud and commodity fraud is committed by either firms located in
South Florida (Boca Raton was voted by CNBC the telemarketing fraud capital of the world in 2000), Southern California or outside the United States. Russia is currently a major source of investment fraud. Never make a check or bank wire payable to ANYONE other that a FCM registered with the NFA. In the majority of cases Forex fraud is perpetrated by firms located in the United States and the principals and brokers of the firm and were at one time registered with the National Futures Association (800) 621-3570 and have had their licenses revoked.

There is a lot of fraud from boiler rooms that are telling there clients to make the check payable to a offshore FCM or in many cases a Bahamas FCM. THERE ARE NO BAHAMIAN FCM's that I am aware of PERIOD, with the exception of major World Banks. The Bahamas are the country of choice for fraud and to steal your money because the Bahamas are a half hour from South Florida (Miami, Fort Lauderdale and West Palm Beach) and one and one half hours by private boat. 100% of the money you invest in Forex in the Bahamas will be stolen and will NEVER be placed into ANY trade. If you have been victimized in this manner of fraud or contacted to invest in Forex in the Bahamas call the FBI in Miami at 305-944-9101.

Please keep in mind that most of the law enforcement agencies and regulatory agencies are fully aware of who is perpetrating investment and Forex fraud and where they are located. Due to the great burden and lack of funding placed on Law Enforcement and the Regulatory Agencies action is only taken when there is pressure from the public. Only by contacting EVERYONE that you can will get results. The paperwork you signed when opening your account means nothing in a Court of Law when there is fraud involved on the part of the broker.

In recent years there has been a sharp rise in commodity, foreign currency - Forex trading fraud and scams. Consumers should be alert to investment fraud, scams and companies that sell Forex currencies and commodity brokers based on sales pitches claiming that customers can make a lot of money with little risk. Sales solicitations appearing in newspapers, telemarketing, radio or television promotions, or attractive Internet websites, touting high-return, low-risk investment opportunities in foreign currency trading more often than not are fraud or a scam. If it sounds to good to be true it probably is.

The United States Commodity Futures Trading Commission (CFTC) is the federal agency that regulates the trading of Forex currency, commodity futures and options contracts in the United States and takes action against firms suspected of illegally or fraudulently selling Forex currency, commodity futures and options. The CFTC has jurisdiction to investigate and prosecute Forex currency fraud and scams and commodity fraud and scams occurring in its registered Forex and commodity firms and their affiliates. Off-exchange trading of Forex, foreign currency futures and options contracts with retail customers by a counterparty that is not a regulated financial entity as set forth in the CFMA is unlawful and may be a fraud or scam.

Although Forex and commodity dealers who are regulated by NFA must disclose their charges to retail customers, there are no rules about how a dealer charges a customer for the services the dealer provides or that limit how much the dealer can charge. Before opening a Forex, currency trading or commodity account, you should check with several dealers and compare their charges as well as their services. Some firms charge a per trade commission, while other firms charge a mark-up by widening the spread between the bid and ask prices they give their customers. Some Forex and currency firms may charge both a commission and a mark-up. In my opinion any firm selling Forex, commodities or foreign currency charging more than $50 is either a scam or fraud.

Some Forex and currency dealers guarantee that you will not lose more than you invest, which includes both the initial deposit and any subsequent deposits to keep the position open. There are two significant differences between buying off-exchange Forex currency options and buying options on futures contracts. First, when you exercise an option on an exchange-traded futures contract, you receive the underlying exchange-traded futures contract. When you exercise an off-exchange Forex currency option, you will probably receive either a cash payment or a position in the underlying currency. Second, NFA’s options brochure only discusses American-style options, which can be exercised at any time before they expire. Many Forex currency options are European-style options, which can be exercised only on or near the expiration date. You should understand which type of option you are purchasing.

Retail off-exchange Forex currency trades are not guaranteed by a clearing organization and are the most sustainable to fraud and scams. Furthermore, funds that you have deposited to trade Forex currency contracts are not insured and do not receive a priority in bankruptcy. Even customer funds deposited by a dealer in an FDIC-insured bank account are not protected if the dealer goes bankrupt. There is no central marketplace unlike regulated futures exchanges in the retail off-exchange. Forex currency market there is no central marketplace with many buyers and sellers. The Forex currency dealer determines the execution price, so you are relying on the dealer’s integrity for a fair price. This is one of the major areas where fraud and scams occur in Forex an currency trading.

The Commodity Exchange Act (CEA) allows the sale of OTC Forex currency futures and options to retail customers if, and only if, the counterparty (the person on the other side of the transaction) is a regulated entity. These regulated entities include the following: financial institutions, such as banks and savings associations registered broker-dealers and certain of their affiliates, registered futures commission merchants (FCM's) and certain of their affiliates, certain insurance companies and their regulated affiliates, financial holding companies, and investment bank holding companies.

Under the CEA, the CFTC has the authority to shut down any unregulated entity that acts as a counterparty to Forex currency futures or options transactions with retail customers. The CFTC also has the authority to take action against registered FCMs and their affiliates for violating the anti-fraud and anti-manipulation provisions of the CEA in connection with OTC Forex currency transactions involving retail customers. The CFTC cannot adopt rules to regulate Forex without additional Congressional authorization.

NFA has rules to protect customers from fraud and scams in the retail off-exchange Forex currency market. Firms that introduce customers to Forex currency dealers do not have to be regulated entities. NFA’s rules provide, among other things, that a Forex currency dealer FCM must take responsibility for the activities of unregulated entities that solicit retail customers including and fraud or scams perpetrated by the introducing broker and the brokers of the firm that introduced the account. Additionally, NFA’s rules require Forex currency dealer FCMs to supervise their employees and agents and any affiliates that act as counterparties to retail Forex transactions to ensure the public is protected from fraud and scams by its introducing brokers. NFA’s Forex rules do not apply to all FCMs and their affiliates, however. Therefore, you should ask the dealer if NFA regulates its Forex currency activities.

You should ask the dealer how it is regulated and check with the dealer’s regulator about the dealer’s registration status and background to ensure they have not had any complaints of fraud or scams. You should also ask the dealer if its regulator has adopted rules to regulate its retail Forex currency activities.

Unlike Forex currency dealers, firms and individuals that solicit retail accounts for Forex currency dealers and manage those accounts do not have to be regulated or affiliated with a regulated firm. Therefore, you should find out if the person’s Forex activities are regulated and by whom. If the person is not regulated, you may be exposed to additional risks of fraud.

Just as you wouldn’t consider buying a house or a car without carefully reading and understanding the terms of the contract, neither should you establish a Forex currency account without first reading and understanding the Account Agreement and all other documents supplied by your dealer.

Both the CFTC and NFA offer programs that may be available for resolving monetary disputes involving your Forex currency account. Information about NFA’s arbitration program is available by calling NFA at 800-621-3570. The CFTC offers a reparation program for resolving disputes. If you want information about filing a CFTC reparations complaint, contact the CFTC's Office of Proceedings at 202-418-5250

Don't become a victim of Forex fraud commodity fraud or other types of investment fraud or scams.

Massive Fraud

Societe Generale Uncovers Massive Fraud(PARIS)

In what appears to be the largest trading fraud ever carried out by a single person, a young trader at French bank Societe Generale is accused of making unauthorized bets on stock markets that cost the bank nearly $7.2 billion but may not have netted him a cent.
It would place the young trader, identified as 31-year-old Jerome Kerviel, atop the pantheon of rogue traders for a scheme from which bank executives said he apparently did not make a
personal profit.

Societe Generale Chief Executive Daniel Bouton said Kerviel's motivations were "totally irrational" but gave no further clues to his motive.

The bank, France's second-largest, said Thursday it had learned of the fraud last weekend. And the timing could not have been worse: The bank was forced to sell Kerviel's contracts just as stock markets were plunging worldwide. It took the bank three days to unload them.

Societe Generale said the losses amounted to 4.9 billion euros, or about $7.18 billion - one of history's biggest banking frauds. It led to immediate calls for tighter regulation.

The fraud also raised comparisons to Nick Leeson, the trader who bankrupted British bank Barings in 1995 after he lost 860 million pounds - then worth $1.38 billion - on Asian futures markets, wiping out the bank's cash reserves.

Leeson himself told the British Broadcasting Corp. on Thursday that he was not shocked
such a fraud had happened again, but "the thing that really shocked me was the size of it."

Bouton insisted Societe Generale is still financially sound. But the bank said it would need to raise about $8 billion in new capital, partly by selling shares in a rights offer underwritten by JPMorgan Chase & Co. and Morgan Stanley.

The company said it expects to post a net profit of 600 million to 800 million euros
($874 million to $1.16 billion) for all of 2007 - even after the fraud and another
2.05 billion euros ($2.99 billion) lost in the subprime mortgage crisis.

Moody's Investors Service late Thursday downgraded Societe Generale's bank financial
strength rating to "B-" from "B" and assigned a "negative" outlook to the rating, which means the rating could be cut later. Moody's also downgraded the bank's long-term debt and
ratings to "Aa2" from "Aa1" but kept those ratings' outlooks "stable."

The downgrade was primarily driven by the fraud losses but also follows Societe Generale's announcement of the credit-related write-downs, Moody's said.

Kerviel, employed by the bank since 2000, had worked his way up from a supporting role in an office that monitors trades to a job on the more glamorous futures desk, where he invested the bank's own money by hedging on European equity market indices - making bets on the
future performance of the markets.

Described as a "brilliant" student by one of his former university teachers, he shocked executives with the complexity and scale of his trades. Bouton called the fraud "extraordinarily sophisticated."

Kerviel was involved in what the bank calls "plain vanilla," or the more basic forms of hedging, with limited authority. He took home a salary and bonus of less than 100,000 euros, or about $145,700 - relatively modest in the financial world.

The bank said he went far beyond his role - taking "massive fraudulent directional positions" in various futures contracts, betting at the start of this year that stock markets would rise.

He apparently escaped detection by using knowledge of the bank's control systems gleaned in his earlier monitoring job. Most of his positions went unnoticed by colleagues and superiors as Kerviel covered his tracks with what the bank described as a "scheme of elaborate fictitious transactions."

He got caught when markets dropped, exposing him in contracts where he had bet on a rise.
Jean-Pierre Mustier, chief executive of the bank's corporate and investment banking, said he is convinced Kerviel acted alone. Three union officials representing Societe Generale employees
said managers at the bank told them Kerviel was having "family problems."

Analysts were stunned that such a huge fraud could have occurred more than a decade after the one at Barings. It shows banks "are still under the threat that an employee with a good understanding of the risk management processes can (get around) them to hide his losses," said Axel Pierron, a senior analyst with Celent.

Societe Generale said Kerviel had admitted to the fraud and had been dismissed along with some of his bosses. Bouton offered to resign, but the board rejected his offer.

The bank also filed a legal complaint Thursday accusing Kerviel of fraudulent falsification of banking records, use of such records and computer fraud.

Elisabeth Meyer, Kerviel's lawyer, said on French television network BFM that her client "is not fleeing" and is "available for judicial authorities," but did not specify where he was.
The lawyer said Kerviel had been suspended on Sunday, and was awaiting formal written notification of the suspension.

The Bank of France, the country's central bank, said it was immediately informed of the fraud and was investigating. Its governor, Christian Noyer, said the trader had an abnormal knowledge of Societe Generale's trading systems, and measures would have to be taken to
prevent this happening again.

Traders are usually kept to tight spending limits, told "you may trade this much and no more," said Robert Kolb, a professor of finance at Loyola University Chicago. Those controls apparently failed in this case.

Kolb said he expected "a lot of soul searching" in the industry, and predicted that one upshot might be new measures to prevent people who have previously monitored traders later becoming traders themselves.

"It shows that we are in a very troubled period for banks, and I think that it's in such troubled periods that difficult things happen," said Gilles Glicenstein, president of asset management at France's largest bank, BNP Paribas.

Societe Generale's shares, which have lost nearly half their value over the past six months, were suspended in Paris on Thursday morning, then dropped 4.1 percent to close at 75.81 euros ($111.16) after they resumed trading.

Founded in 1864 after a decree signed by Napoleon III, Societe Generale employs 120,000 people in 77 countries.