The Commodity Futures Trading Commission (CFTC) has issued an important advisory for the public regarding foreign exchange (forex) trading. With increasing reports of fraud, particularly involving unregistered offshore dealers, it’s critical that traders understand the risks before investing.
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Why Forex Dealer Registration Matters
Many recent fraud cases involve unregistered forex dealers operating outside U.S. jurisdiction. These fraudulent dealers lure investors through social media and disappear or demand extra fees when withdrawals are requested.
Although registration does not guarantee safety, most scams are run by unregistered entities. Registered dealers must meet strict financial and legal standards to help protect clients.
1. You’re Trading Against the Dealer
Unless you’re trading regulated forex futures or options, you are trading over-the-counter (OTC). This means your trades are against the dealer—not an open market. The dealer profits when you lose or pay more fees, spreads, and commissions.
2. Most Traders Lose Money
Statistics show that two out of three customers lose money trading forex. Factoring in all fees and charges, only about a third of traders at registered firms make profits.
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3. The Dealer Controls the Platform
When you trade via an app or dealer website, you are not on a live exchange. The dealer controls what you see, including prices. Some unregistered dealers even manipulate software to fake results and steal funds.
4. You’re Limited to Dealer Terms
Because trades are internal to the dealer’s system, you can only accept prices and conditions offered by them. You can’t transfer trades elsewhere or exit freely.
5. Your Money Might Not Be Safe
Funds held with unregistered dealers are not protected. If the dealer vanishes or goes bankrupt, your money may be gone. Always read the account agreement thoroughly, including rules on deposits, withdrawals, and associated fees.
6. Margin Trading Can Expose You to Huge Losses
Forex trading is often done on margin—small deposits controlling large trades. This increases risk dramatically. A minor market shift can wipe out your deposit and leave you owing more.
7. Salespeople May Mislead You
Dealers may use influencers or marketers to attract new traders. These people might lack trading experience and earn commissions based on how many people they bring in—not your success.
8. Beware of Social Media Scams
Many scams begin on platforms like Instagram, WhatsApp, or dating apps. Watch for red flags like promises of guaranteed returns, offshore dealers without real offices, or demands to pay in crypto.
How to Protect Yourself
- Verify dealer registration with the National Futures Association (NFA).
- Check the dealer’s complaint or disciplinary history.
- Never trade with firms that require payments in crypto only.
- Avoid offers that sound too good to be true—they probably are.
Before you trade forex, arm yourself with information. Legitimate firms are transparent, regulated, and responsive. If something feels off, it probably is.
Stay alert, stay safe—and never hand over your money without doing your homework.
