In 1999, the infamous Jordan Belfort pled guilty to fraud after he was accused of scamming investors by selling them worthless blue-chip stocks. His story was dramatically brought to life in the movie “The Wolf of Wall Street,” which debuted in 2013. This story illustrated the scams run by seemingly successful traders, and I’m sure it was meant as a warning to the general public.
However, since then, coupled with the popularity of social media in recent years, several individuals adopted Jordan Belfort’s tactics and brought them to the forex market. Surprisingly, these individuals found a horde of gullible individuals through whom they made a fortune with this forex scam. In 2019, the FCA published a report that estimated over 27 million euro was lost to these fraudsters over the just concluded financial year, with each victim averaging a loss of over 14,600 euro.
The forex Instagram scam
Nowadays, if you do a simple scroll on the Instagram Explore page, you will not miss a picture of an attractive young person posing with luxurious sports cars or mansions or any other ridiculously expensive item. These individuals will almost always be in their early 20s, and they all claim to have made their fortune trading the currency market. They will claim to only work a few hours a day, or even a few minutes, but they earn millions from the venture.
Other than flaunting their success, they will tell you that anyone can achieve what they have. They’ll promise to show you how to make that kind of money, with no prior knowledge of the markets needed. How true is this? Can you really achieve success in the forex market using their methods, or are they out to defraud you? And if they are frauds, how do they make their money?
How these Instagram scams work
Usually, these scammers will appear on your feed via a promoted message. This is the first red flag. Promoted messages are usually paid advertisements. So why would a successful trader be so interested in helping you, a total stranger, make money that they pay for it?
Further, they’ll not offer any training – which would make sense of the paying for the promoted post. They promise that you need no prior trading experience. They’ll simply copy every trade they make to your account so that you enjoy the same returns they do. However, if this were true, what’s in it for them?
The truth of the matter is, these scammers hardly do any trading if any. They just sell a fake luxurious lifestyle to pique your interest so that you follow them. After all, who doesn’t want to make a quick buck? After you follow them, they’ll immediately slide into your DM, promising to make you rich, all from a small investment of say 250 euro.
How do these scammers make money?
As aforementioned, these scammers do not actually do any trading. After luring you in with their yachts and private jets, you’ll most likely think to yourself that it wouldn’t hurt to send the 250 euro. After all, no guts, no glory, right?
Well, in essence, these scammers are just affiliates of a just as fraudulent forex broker. So, once you’re ready to invest, they’ll have you deposit your funds with this broker they’re affiliated with. In return, they are given fat commissions for every new trader they lure in.
The broker may be just as fraudulent, such that they’ll show your account-making losses until your balance is cleared out, all the while refusing to let you withdraw your funds. Other brokers will have some semblance of legitimacy, but they’ll have you making trades whose odds are massively stacked against you. This way, you’re much more likely to lose money than earn a profit.
The most common scam these brokers engage in is binary options. These options allow you to predict the direction of price movement, whether up or down, and by how much. Such scams were so widespread that in 2017, Israel banned the sale of binary options. To date, binary options are heavily regulated in the US and UK.
The long con
There are some scammers who have managed to defraud investors of thousands of dollars. How do they pull it off? This is where the Jordan Belfort strategy comes in.
These brokers will showcase your portfolio on a bogus platform, which will show you steadily making profits. In truth, this is just a ruse to get you to invest more and more of your money over time. Such a scam was orchestrated by a UK Instagram fraudster by the name Gurvin Singh. In a statement by Jonathan Reuben, one of Singh’s victims, he started out by depositing 1,000 euro after being lured in by Singh’s flashy lifestyle. Over time, he deposited more and more as he saw his account balance grow.
However, a few months later, he saw his balance start to plummet, which is when he got suspicious. On contacting Singh, he was told that the losses were due to the Brexit effect. When he tried to withdraw his cash and call it quits, Singh was nowhere to be found. Jonathan ended up losing 17,000 euro in that scam.
Forex scammers have run amok on Instagram and other social media platforms. What they have in common is that they’ll all showcase flashy, luxurious lifestyles and claim that their wealth came from trading forex. What’s more, they’ll offer to show you their ways which often involve no training. They’ll convince you to invest with the brokers they’re affiliated to, promising to copy their trades onto your account while you sit back and watch your account grow.
However, as soon as you invest in them, they’ll show you making steady losses until your balance clears out, or they’ll show a series of profits in the early months to lure you into investing more with them. Over time, they’ll choose an opportune moment and disappear with all your capital.