A broker is a person or a firm that helps buyers and sellers to set a deal with each other, and in return, they demand a commission. We call them scammers when brokers defraud people, to garner money or charge them unlawfully. There are different types of Broker scams, which occurs when a fictitious broker or brokerage firm mimics a legitimate broker or website by imitating their name, license, and registration numbers in order to fool people. It is also considered a broker scam when a broker promises their client something and does not fulfill their promise.
Strategies owned by the brokers involve,
- Imitating legitimate websites,
- Registration numbers and regulatory bodies,
- Replicating license numbers and other documents of honest brokers,
- Making unlawful profits,
- Hidden fees and service charges,
- Freezing customers’ accounts,
- Demanding inessential identification to delay clients’ withdrawal
Imitating legitimate websites:
To fool people, fictitious brokerage firms establish websites that look identical to existing legitimate websites. Not only do they imitate their domain name, but they also copy their license and registration number. They impersonate legitimate websites so that they can trick the existing clients of the brokers and garner money from them. They also target imprudent newbie dealers who do not research before making a deal.
Registration numbers and regulatory bodies:
Many states require brokers to have a license as proof of their legitimacy. Brokers obtain the license for having required experience, or it is provided to them after going through particular training or passing a test. The regulatory bodies that grant the brokers’ license are also accountable for the brokers’ wrongdoings. An illegitimate broker does not prefer possessing a license as it can be hard for them to perpetrate mischief. It is advisable to ask for their registration numbers and regulatory bodies before you decide to deal with them. Look for their name and registration number on the website of the regulatory body that they have mentioned.
Replicating License number and other documents of honest brokers:
As a knowledgeable buyer or seller looks for license and registration numbers, ingenious scammers copy these license and registration numbers of the legitimate license holder to trick dealers into believing that the scammers are honest brokers. Not only do they do that, but they also mimic their documents to garner their clients’ trust. So be wary of these brokers as they are intended to run away with your hard-earned money.
Making unlawful profits:
People who are intended to buy or sell something, resort to brokers who help them to make the deal in exchange for a percentage of the money involved in a successful purchase or sale. Brokers even charge for consultations and negotiations. A broker scam occurs when a broker makes an illicit profit from their clients. It is not only the illegitimate brokers who charge their clients unlawfully but some legitimate brokers also charge their clients a fortune. However, this is an illegal thing to do, and these brokers need to be avoided.
Hidden fees and service charges:
Fictitious brokers demand a certain portion of money involved in the deal before the trade’s execution and demand a different amount after the deal has been executed. They make a profit by demonstrating the amount as taxes and service charges, which remain concealed until the deals get finalized and executed.
Freezing customers’ accounts:
Sometimes brokers demand money upfront. To work with these brokers, the clients need to make a security deposit, which they can supposedly withdraw after the execution of the deal. However, fraudulent and acquisitive brokerage firms suspend the accounts of their clients so that they cannot withdraw the money. They keep freezing the account until clients give up, and eventually, the brokers disappear with the money.
Demanding inessential identification to delay clients’ withdrawal:
Many brokers exploit clients’ deposits for extra benefits. Brokers who use these tactics want to prevent their customers from withdrawing their money. Therefore, when their clients want to withdraw their money, they demand unnecessary documents and identification to withhold their withdrawal. Sometimes they charge extra to let them withdraw. One must avoid these brokers as they carry out these unlawful acts.
How to save yourself from broker scams?
As mentioned in this article, scammers are finding new ways every day to trick people, not only through websites or in-person contacts but also through emails, messages, and calls. They lure people into working with them by utilizing various strategies and then tricking them for their own profit. They even resort to telemarketers to help fool a mass. It is important for traders who seek help from brokers while making deals, to learn about popular broker scams so that they can take measures accordingly.
Here are some of the things that one needs to take critically,
- Lack of information and contact details
- Incomprehensible investment procedures
- Patience is the way out
- Grammatical errors and spelling mistakes
- Vulnerability of online platforms
Lack of information and contact details:
When the website of the broker that you have opted for lacks information and contact details, know that there is a high chance that the brokerage firm is fictitious. Scammers who are intended to run away with your money will naturally be cautious about providing their contact details. They do not take any chances of getting tracked down if the person they victimized seeks help from legal authorities. Unlike scammers, legitimate brokers make sure that their clients can contact them for every minor inconvenience.
Incomprehensible investment procedures:
Ingenious brokers target rookie traders and investors and deliberately make the investment procedure hard to understand. They do this so that they can trick the investors, leaving them helpless about the money they lost in forgery. The company policies they provide to their clients are full of loopholes that imprudent investors are unable to catch at first and thus cannot take further legal action on losing money.
Patience is the way out:
Patience is a trait that can save you from many scammers who operate with evil intentions. Investors and traders need to take time to research before resorting to brokers. Go through independent investigations, find their license numbers, and look for them in the regulatory bodies’ websites.
Grammatical errors and spelling mistakes:
Grammatical errors and spelling mistakes are common on websites that represent fictitious brokerage firms. Scammers who aim to steal their clients’ money spend more time deducing how to do their job smoothly. Unlike legitimate companies, they seldom care about publishing error-free content.
Vulnerability of online platforms:
The popularity of online communication platforms has made the field more vulnerable to scammers. Scammers who are deducing new ways to defraud investors and traders are widely spread on these platforms as they can scam people in bulk here.
Skeptical approach towards brokerage firms:
However, a zero-trust approach towards brokerage firms and other related third-party organizations can save victims from the fraud practices run by the scammers. Investors and traders should always verify brokers’ legitimacy before they trust them with their money.
After taking all these precautions, if you still get scammed by fictitious brokers, know that many fund recovery websites are available out there on the internet to extend a helping hand to victims who have lost funds in forgery. One can easily find them online and resort to them for help.