In the world of forex trading, there are a wide variety of scams that target inexperienced investors and trick them out of their money. One such scam is called a forex pyramid scheme.
If you’re interested in trading forex, it’s important to know what to look out for to keep yourself — and your money — safe from forex scammers.
What Qualifies as a Pyramid Scheme?
In general terms, a pyramid scheme is a form of investment scam in which each person involved recruits paying participants into the scheme, with the people at each level of the “pyramid” making more money than those below them.
The person who starts a pyramid scheme sits at the top of the pyramid, getting paid by everyone else who joins the program, while everyone underneath them continues to recruit more and more participants, growing the pyramid and the amount of money involved.
Participants of pyramid schemes are usually tricked into paying in order to join a program that will allow them to make money through some form of legitimate business, but really they are just getting money from the people under them that get recruited. A pyramid scheme is also known as a multi-level marketing scheme.
Read more in our Pyramid Scheme Guide
Is Forex Considered a Pyramid Scheme?
Forex trading itself is a legitimate way to make money by buying and selling international currencies on a 100% legal market, so it is not a pyramid scheme. However, wherever there is a lot of money involved, there are scammers looking to take advantage of vulnerable investors.
Forex pyramid schemes do exist, and target inexperienced, often young, investors who are looking for exciting ways to start trading and make a lot of money fast.
Forex pyramid schemes typically offer forex-related products and services, such as training courses and videos, in exchange for money from program participants. The scammers then push all the participants to recruit new paying members and provide small monetary rewards or other incentives for doing so.
So, in short, is forex a pyramid scheme? No. BUT, forex trading can be used to manipulate enthusiastic new investors into joining a pyramid or multi-level marketing scheme.
3 Important Red Flags To Look For:
1. Too-good-to-be-true guarantees of huge returns
With any type of investment scam, the biggest red flag is someone promising you a huge return on your investment. Forex pyramid scammers preach about “living the dream” and how forex trading can give you complete financial freedom and enough money to do anything or go anywhere you want to.
These types of promises and guarantees are simply not true. Any type of trading and investing takes a lot of time and commitment to get good at, and there is no such thing as a magic formula to “get rich quick.”
2. Required purchases of products
Another bright red flag that’s a sure sign of a forex pyramid scheme is when you have to purchase some kind of product to join a program. You might be pressured into paying for access to training videos and courses, or for some type of information from other traders.
In reality, when you purchase products to join a “forex trading program,” the person who recruited you into the program gets some kind of reward, as does the person who recruited them, and so on and so forth all the way up the pyramid.
3. A focus on recruiting instead of trading
When you get involved with a forex pyramid scheme, you might do some trading, but the amount of money you make from it will be small, if you make anything at all.
Instead, other people in the scheme will push you to recruit new members in order to get paid, or perhaps receive access to even more exclusive training materials and trading information that will help you become an expert trader.
In the end, you’ll find yourself more worried about getting commissions from getting people to join the program and then encouraging them to recruit even more people than you are about making actual trades and earning real money from your efforts.
So, whenever someone offers to “teach you about forex” or “show you how to make a lot of money by trading,” be very wary of their true motivations. If you spot any of these red flags, turn and walk away. You can still definitely make legitimate money on your own by forex trading!
Example of how a real forex pyramid scheme works, step by step:
Someone who starts a forex pyramid scheme typically reaches out to you, an unsuspecting victim, via social media and starts claiming they can teach you how to make large amounts of money fast by trading forex, so you can start “living your best life.”
Once you agree to join their trading program, you are required to send them money in order for access to training courses and materials that will help you get started trading forex. You might make small investments, but you aren’t making any significant amount of money.
The person who recruited you starts offering you commissions and other incentives if you recruit more people into the program, so you do, and the people above you make even more money, while you’re still not seeing any significant returns on your forex investments.
You aren’t making those huge amounts of money you were promised, so you pay for more products and services to help you become a “better trader,” and you continue to recruit more people into the program for the rewards it provides — you are now part of a forex pyramid scheme and the cycle continues, with you never becoming an expert at trading forex.
Does this sound familiar? If you think you’ve been a victim of a forex pyramid scheme, contact the fund recovery specialist at Payback LTD today for help getting your money back. Our team of compassionate professionals has extensive experience getting money back from forex scams and will do everything in their power to recover your funds.