2020 Forex Scams Report: Facebook’s Forex Fraud Problem

As widely reported across the media landscape, Forex scammers and bad Forex brokers abound in Uganda.

At FxScouts we have been trying to get an understanding of how these scammers and bad brokers operate in the Ugandan Forex ecosystem. To assist in this process, we ask Ugandan Forex traders who feel that they have been scammed to submit a form detailing their experiences.

Every year, we publish the results of these complaints. With over 400 responses collected, our report for 2020 is here and the results, though not wholly surprising, are still shocking.

Main Findings:

• Over 50% of Forex scams find their victims on social media
• 34.2% on Facebook and 19.6% on Instagram
• Almost 20% of victims paid their scammers in Bitcoin
• Average Loss: R11,986
• Largest Loss: R645,000
• 47% of victims were scammed by individuals
• 13% of all broker complaints were about JP Markets

As is made clear from the chart above, 56.1% of people who reported being defrauded by a scammer or broker were first contacted via social media. Also made clear is that Facebook and Instagram are by far the most popular hunting grounds for scammers and bad brokers.

Again, this is not particularly surprising. Facebook’s problems with content moderation are well-documented and are the subject of intense scrutiny from law-making bodies around the world. While most of this scrutiny is focused on Facebook’s political content, we believe that lawmakers should also consider the financial damage inflicted on its users.

FxScouts’s focus is purely on the Forex trading industry, but we would not be surprised if what we are seeing here is the tip of the iceberg when it comes to financial scams originating on Facebook’s platforms.

This data does highlight the level of trust that Ugandans place in relative strangers they meet on social media. Many of the complaints we receive detail the painful process that these victims go through. A recent complaint from 13^th October is a prime example of the method used by Facebook scammers:

“I came across the Facebook posts of [REDACTED] who appeared to be a legit Forex broker. I then contacted him via Facebook Messenger, and he informed me that I can deposit any amount I have from my account to their trading website [REDACTED].

He promised me that I will receive 500% profit after 7 days of investing. On the day I was supposed to withdraw my profit, I got an email from [REDACTED], informing me that I have to make a deposit of $300 before I can withdraw. I raised this with [REDACTED] and he told me that he also didn’t expect this.

Because I was desperate to get my money back, I deposited $288, with the hope that I will withdraw my profit but was later informed that the company charges commission and I would first have to deposit $450. As a result, I contacted [REDACTED] to inform him of my decision to demand a refund, since this trading company does not appear to be legit. He has since been ignoring my WhatsApp messages. I recently got an internship and I have to pay the money I invested back to the person I borrowed it from.”

Reading through these complaints is a heart-breaking exercise, especially when so little can be done in the majority of cases. While the FSCA does do its best to track down scammers, many of these people use fake names and are often based overseas. The anonymity provided by Facebook – whether through its main platform or on Instagram – offers the perfect cover for many fraudsters and leaves victims with no recourse.

Bad Brokers Are Still Bad

While we receive many reports like that above, we also receive hundreds of reports detailing dubious practices by supposedly legitimate Forex brokers. These mainly focus on withdrawal requests being ignored or delayed and deposits not reflecting to trading accounts.

This is remarkable, considering that one of the main justifications for the FSCA’s recent liquidation of JP Markets and deauthorisation of Oinvest was their poor handling of client funds.

A complaint from 21^st September made against an FSCA-authorised broker illustrates this problem:

“I have requested a withdrawal from the broker, they sent me an email confirmation that it has been approved. However, the money never reached my bank account. I have tried several times to contact them through telephone, email, and WhatsApp.

Eventually they requested my bank statement after a month of contacting them to confirm that the money was really not received. After that I have never heard from them, it’s about to be 3 months now and I text, call almost twice a week to follow up but no one is responding.”

JP Markets attracted more than 13% of all complaints we received against brokers, but other well-known FSCA-regulated brokers also receive many complaints. The FSCA has repeatedly stated that it has several open investigations into licenced Forex brokers, and we would not be surprised to see a few more big names face proceedings soon due to their poor handling of client funds.

Frankly, this kind of behaviour from FSCA-regulated brokers is little more than greed-driven stupidity. The FSCA has made it very clear that it will no longer let Forex brokers ride roughshod over consumer rights law. Given the current climate, brokers that engage in these practices are likely to find themselves out of business and potentially facing criminal proceedings.

Bitcoin Bandits

One finding that did surprise us is the number of scammers who request money from their victims in Bitcoin. The Luno app – a Bitcoin wallet which also allows users to buy, sell and send Bitcoin – is a particularly popular method for fraud. A complaint from 18^th October is echoed by dozens of other people:

“The guy messaged me about how trading works and asked me to install the Luno app. Then I sent Bitcoin to his account so we can start trading. All of a sudden, my profits grew very fast every day. If I want to withdraw the profit the guy said I have to upgrade the software. He said I had to deposit R8000 before I can make a withdrawal.”

It is interesting to see the large number of scammers using Bitcoin; it seems to be the perfect currency for criminals. Like Facebook, it preserves the anonymity of the conmen and leaves no method of recourse for the victim. Once the Bitcoin is transferred there is absolutely nothing the victim can do to get their money back.

It is no wonder that the FSCA’s director of investigations recently stated that “anything to do with crypto is highly suspect”. The FSCA is obviously aware of the increasing number of scams involving Bitcoin – and we hope that Ugandan traders are taking note too.

The amount of money lost to Forex scams and bad brokers is terrifying – and we are only witness to a small portion of it: The largest reported theft was almost R650,000. On average, victims lose almost R12,000.

But it is the smaller thefts that are the most distressing. Many poorer people have lost more than they can afford, and some were already in dire straits before they were swindled. The Covid-19 pandemic has stretched the finances of many Ugandans to breaking point. For some, Forex trading with the last of their savings was a desperate attempt to regain financial stability.

Good Brokers Are Not Hard to Find

It is important that Forex traders (and Forex brokers) are aware of these findings – especially the close relationship between social media and scams.

At FxScouts, we have always warned against signing up with a broker or a “financial advisor” found on social media. Until such time that Facebook’s platforms are better regulated, it is always best for traders to conduct their own research. A little time spent on sites like our own can save Ugandans a lot of money and heartache.

Good Ugandan brokers are not hard to find. We maintain a list of the best Forex brokers in Uganda, and each one is reviewed by our team of experts. We also publish a detailed breakdown of our review process. 

Finally, it is also important to note that most Forex brokers have their client’s best interests at heart.

Good Forex brokers will educate traders that need it, will never pressure clients into handing over money and will have customer support teams that always assist as best as they can. Good Forex brokers know that successful clients and a profitable brokerage go hand-in-hand. Good Forex brokers also look forward to the day when their industry is no longer tainted by scams and avarice.