From exchanges to MLM swindlers: Why are all of them so enamoured by forex trading?

In the race to make the fastest buck, foreign exchange trading has become all the rage now. But there are a number of pitfalls in currency trades

Over the past few years, a number of investors have become disillusioned because of poor returns from various instruments. This, coupled with regulatory intervention, is making the foreign exchange (forex) market a lucrative option for investors where the value of a currency can rise and fall within milliseconds, thus managing to generate 'real huge earnings', which can be irresistible for anyone.

This trend, however, is not limited to India. Globally everyone - including brokers, banks, exchanges, corporations (and even swindlers) - are turning to forex markets to make a quick buck. According to the Bank for International Settlements, as of April 2010, average daily turnover in global forex markets is estimated at $3.98 trillion, a growth of about 20% over the $3.21 trillion daily volume as of April 2007.

Forex markets facilitate international trade and investment by allowing businesses to convert one currency to another currency, where one party buys a quantity of one currency by releasing a quantity of another currency.

In 1972, the Chicago Mercantile Exchange introduced exchange-traded FX futures contracts. Several developed countries also permit the trading of FX derivative products similar to currency futures and options on currency futures on their exchanges as these countries already have
fully-convertible capital accounts.

In view of prevalent controls on capital accounts, many emerging countries, with the exception of South Africa and India, do not allow FX derivative products on their exchanges.

At present three exchanges, the MCX-SX, the National Stock Exchange (NSE) and the newest entrant United Stock Exchange (USE) offer currency derivatives in India. The Bombay Stock Exchange (BSE), which has a 15% stake in USE, had set up and shut down its own currency-derivatives market in a couple of months. NSE does not charge a transaction fee on currency derivatives, forcing other players to do the same. However, this has led to all of them losing money in a big way. (Read more:   

This was all about the legitimate channels; now let's take a look at the swindlers or scamsters who dupe investors with a promise of huge and quick returns on tiny investments. Again, this is also not just limited to India. Forex frauds are becoming a global problem, where brokers make promises of guaranteed high returns and quick turnarounds (for themselves - not for the 'poor' investor).

Last week, US officials charged two Boston-based currency traders for scamming investors for more than $30 million. In Asia, nine lenders, including Bank of East Asia, have been fined for illegal forex transactions. According to media reports, the investigation has been going on for nine months and involves around 197 cases - totalling more than $7.34 billion.

The US Commodities Futures Trading Commission (CTFC) has seen a marked increase in the amount of forex scams over the past few years as forex trading has become more and more popular. Some recent scammers who have been caught by the CTFC include Lake Shore Asset Management, Lake Dow and Ty Edwards, Ben Ouyang, Emerald Worldwide Holdings Inc, Foreign Fund (First Bank), Equity Financial, Shasta or Tech Traders, IBS/IMC, Kevin J Steele, Nawab Ali Khan Ali, Sun Platinum, Worldwide Commodity Corporation, Graystone Browne Financial, Sterling Trading Group Inc, STG Global Trading or QIX Inc and Universal FX Inc.

Other things that scamsters are offering over the Internet are 'hot tips' and software that can "accurately" predict market movements, for certain fees. While the 'tips' provider does not really offer anything that could help you improve your trading, there is no such thing as miracle software which can predict market movements.

Some of these 'miracle' forex trading software packages are available on the Internet free of cost, for others you may be charged some minimal fees.

A few multi-level marketing (MLM) companies are luring investors with promotional offers over the Internet under the garb of forex trading. One such company, Mauritius-based Maximus Trades Inc, which claims to have been formed by a few bankers and forex dealers in 1996, is operating a chain-marketing model through trading in foreign exchange. (See:

This MLM company amended its website without informing its investors and is now operating under the name of 'Dream Worldwide Inc'. (Read more: According to some comments placed on this article, the company is trying to operate under the name of, but this could not be independently verified.

The first rule of investment is that if you do not understand how the instrument works, don't sink your funds into it. This applies to forex markets the most. Many forex scamsters will claim to offer you a 'hot new' currency trading strategy that has zero financial risk and is designed to outperform the market. But this 'promise' should trigger an alarm bell.

All financial transactions carry certain amount of risk. Some forex MLM schemes, like the one mentioned above, use words like 'guaranteed income'. If an MLM company uses such words, don't even touch it with a barge pole.

1 decade ago
thanks sir for the article.Sir will u please through some light on unipay2u/visarev/unigold etc running in our country.why govt is not taking any action against this mlm companies.
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