The German watchdog BaFin has declared that it is broadening the scope of its inquiry into Shenanigans Consulting Ltd. The official operator of several broker frauds, including Stam Capital Invest, Red Finance, and Altima Trade, is this offshore corporation, which is registered in St. Vincent & The Grenadines. It’s unlikely that the BaFin investigations will yield any results. Regulators should be handling these broker and boiler room scams; law enforcement should handle them instead.
BaFin (The Authority who Exposed Shenanigans Consulting Ltd)
Germany’s integrated financial regulatory body is called the Federal Financial Supervisory Authority, or BaFin for short. Within European Banking Supervision, it has served as Germany’s national responsible authority since 2014. Under the Federal Ministry of Finance’s oversight, it is an autonomous federal organisation with its main offices located in Bonn and Frankfurt. Approximately 2,700 banks, 800 financial services companies, and more than 700 insurance ventures are under the supervision of BaFin.
Brief Story
We alerted you in March 2022 about Shenanigans Consulting Ltd, a St. Vincent and the Grenadines-based company that was involved in the Altima Trade broker fraud.
Shenanigans Consulting
What is a Forex Scam
Forex is the world’s largest financial market, with over $6 trillion traded every day worldwide. There are always a ton of opportunities to make money in the Forex market because of this astounding number and the power of leverage, but there are also a lot of hazards involved. The Forex market has been democratised by technology, and entry barriers in the retail space are essentially nonexistent. Because anyone may start trading forex instantly, even though it needs a considerable deal of knowledge, ability, and experience, vulnerable people are drawn to the opportunity without fully understanding the associated danger.
Because Forex is such a huge goldmine, dishonest companies try to entice gullible clients by promising them great profits all the time. They present Forex trading as being quick and simple, with the potential for reward. For as long as there is a profitable Forex market, there will be Forex scams. Therefore, it is wise for investors to be able to recognize and steer clear of Forex scams in all of their manifestations.
Kinds of Forex Frauds
Forex scams can take many different shapes; some are more overt, while others are more covert. Both brokers and other non-broker sources may provide them. The fact that so many of the features and services that are offered these days are genuine is one of the largest obstacles to spotting scammers. Nevertheless, dishonest con artists take advantage of what are typically legitimate offers by employing trojan horse-style strategies. Here are a few of the most popular genuine services that con artists frequently take advantage of:
Fraudulent Forex Mutual Funds (PAMMs)
The classic hedge fund model serves as the model for the Percentage Allocation Management Module (PAMM), which is a real product that offers investors an excellent option to participate in managed funds. However, before making an investment, it’s crucial to conduct thorough due diligence. Here are some crucial elements and warning signs to be aware of:
Fund Managers with the necessary qualifications
Ascertain the experience and qualifications of the fund managers. Although their fund managers are not qualified experts, many scam funds will pretend to be.
Overinflated Returns
In order to entice investors, scammers frequently make extravagant claims about past returns and present figures that far outpace industry averages. Don’t just invest without verifying these claims; do your research beforehand.
Overly High Management Charges
costs are commonplace in the investment world; nevertheless, before making an investment, carefully read the “fine print” to learn about the costs, how to withdraw from the fund if you so choose, and any penalties associated with an early withdrawal.
Scams involving Forex Brokers
The unsettling aspect of Forex scams is that certain Forex brokers are also capable of committing them. The following list includes a few of the most well-known scams:
Price-fixing
trick brokers most frequently perpetrate this trick. Certain brokers take advantage of traders by manipulating their trading systems. One way to do this is to fill entry and exit orders at prices that are not favourable to the trade. An example of this would be a buy order, which is completed at a considerably higher price, limiting the potential profits on the trade, if any.
Exceptionally High Leverage
In CFD trading, leverage is a fantastic concept. However, leverage is never completely harmless. Profits from profitable transactions can be substantial, but losses from losing trades can also increase. Certain brokers entice investors with exceptionally high leverage ratios of up to 2000:1, promising substantial gains; yet, the inherent hazards of the market can wipe away the majority of a Forex trader’s margin with only one unsuccessful deal.
Unclassified Customer Bank Accounts
Scam brokers frequently use the same bank account to handle both their own operating funds and the monies of their clients. This implies that they will be more inclined to look for ways to increase operations using customer money when funds are running low on their accounts. This is an extremely bad business practice, and in the event that the broker cannot meet their financial obligations, your funds will be tied up with theirs and could even be claimed by their creditors.
False Promotions and Bonuses
Brokers, even the reputable ones, frequently provide bonuses and promotions. Brokers that hold licences and are subject to regulation must make sure that their incentives and bonuses adhere to legal requirements and do not “lock” in traders. On the other hand, some unscrupulous brokers entice investors with deceptive marketing and extremely difficult or impossible terms and conditions. This implies that before having the opportunity to take their profits out, their investors will nearly always lose their trading cash. It’s probably not real if it sounds too wonderful to be true.
Scams involving Personal Data
You will have to provide certain private and confidential information, and in some cases, payment information like credit card details, when you sign up with a brokerage firm. Your data must be kept private and never shared or sold to a third party. A reputable and licensed broker must take the appropriate security precautions to guarantee this. Scam brokers might not take the required safety measures, or worse, they might sell your information to a third party. These third parties can begin contacting you with offers you haven’t accepted or sending you unsolicited emails. Investors who are innocent may suffer losses as a result of identity theft and the selling of personal information.
Wind Up- How to Spot Broker Fraud
Compared to other scams, broker scams are more devious and cunning. What should be a commercial partner could turn out to be your deadliest opponent. Therefore, being able to recognize them and steer clear of them entirely is essential. As an example, consider ASIC, FSCA, FSA, FFAJ, and a few more. It is required of regulated brokers to keep customer funds in separate bank accounts from their working capital accounts. In order to make sure they consistently provide clients with transparent trading services, companies are also randomly inspected by the platform.
Regulators also make sure that brokers aren’t employing questionable marketing strategies or making baseless claims. Additionally, investors have some recourse with a third-party organization whose primary duty is to safeguard investors in the event of a dispute. In addition to regulation, investors should examine internet evaluations from reliable sources to learn about the experiences of actual traders. Along with carefully examining complaints, a lot of review websites also look at safety and security-related matters, like KYC guidelines and website encryption requirements.
