Do you suspect fraud? Please share your experience. Online forex trading has exploded in recent years, with retail trading accounts becoming widely accepted and automated forex trading also becoming increasingly popular. Yet the increasing availability of forex trading learn more about forex trading to the retail market brings the risk of fraud as wily brokers, account managers and just plain scammers look to profit from the ignorance and greed of others who want access to the huge forex market.

Nevertheless, frauds that can cost unsuspecting forex traders substantial amounts of money can crop up even with well established companies doing business in highly regulated places like the United States.

Phillip Bennett was the CEO of Refco, a large forex and commodities brokerage house that was one of the main brokers on the Chicago Mercantile Exchange. Refco — which had over 17, customer accounts — eventually declared bankruptcy.

This resulted in the unsecured customer accounts being considered for reimbursement only after the secured customers in the distribution of whatever funds were left. This sent out a clear warning signal against using forex brokers that comingle funds in this way. Yet another lesson from the Refco fraud was that the company was not based in a major and well regulated country, although it operated out of New York City.

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In this case, the domicile of Refco Capital Markets was in Bermuda, thereby resulting in a lack of proper regulatory oversight into their financial dealings that may well have contributed to their ability to perpetrate and cover up this fraud. Accordingly, when shopping for a retail forex broker to entrust your trading account to, be sure to double check the domicile of the company even if their business address looks reputable.

As a result of the global marketplace provided by the Internet, you can now choose a forex broker based almost anywhere on earth. Nevertheless, selecting a forex broker that is based in your country of residence can provide significant advantages in case a problem occurs.

By the same token, if your forex broker goes bankrupt or out of business, you will usually have improved chances of seeing your funds recovered if you are in the same country as the broker versus if you are instead living elsewhere. See our list of trusted brokers.

In general, when forex brokers have maintained their registration in good standing for some time with major financial regulatory agencies like the NFA, CFTC, FSA, ASIC, or a similar agency in an EU country, that tends to be a good sign that the company is operating legitimately.

Also, such a good regulatory track record may well indicate that some legal recourse could be available via the agency if a problem getting your funds back arises. Nevertheless, even well established and duly regulated companies can get caught up in a forex fraud.

The Refco fraud case, like the Enron fraud case, involved corporate stock fraud that generally involves corporate officers who circulate untrue or deceptive information to bolster the market price of the stock of their company.

They usually do this to be able to sell the stock at an inflated price.

The company then went into bankruptcy once the fraud came to light. Read even more about the Refco forex fraud. Your invested capital is at significant risk. Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors.

The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite.

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