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Online trading scams: Do not fall victim

A major stumbling block for South African investors seeking opportunities in online trading is the serious concern about the security and safety of personal funds and data. Rightly so, as stories of online trading scams have been on the rise since the onset of Covid-19.

Prospective trader checklist

Unfortunately, many people that fall victim to trading scams are beginner traders, elderly or those struggling financially,” says Dany Mawas, regional director at Infinox, a global contracts for difference (CFDs) trading broker which recently launched its IX Social mobile app in Africa. Mawas outlines a checklist that will help prospective traders to steer clear of scammers.

Do your research

As a new investor, seeking the ideal broker can be a daunting task. Be careful when searching for the cheapest online trading platform South Africa and look for trusted, verified sources of information. Spend some time on generic internet searches, reading customer reviews and media reports that will give you a better sense of the broker you are dealing with as well as insights from other clients.

Ensure the broker is regulated

Brokers are required to register with a regulator in the countries where they operate. As such, it is vital to ensure that the broker you choose is regulated with an authority. Examples of respected regulatory bodies include South Africa’s Financial Sector Conduct Authority (FSCA) or the United Kingdom’s Financial Conduct Authority (FCA).

Check the broker’s Web site

Another plus of broker regulation is that brokers must be transparent to ensure that traders can make the most informed decisions. One such transparency is making clear, as a percentage level, the number of traders that have lost money with that broker.

It is also important to check that the broker has a physical address listed. Although brokers run their businesses online, including a physical location is an indication of their commitment to their business, their teams, and ultimately to their clients.

Be wary of brokers facilitating overly-easy opening of accounts, deposits, trades, and returns—especially if there is no “paper trail”. Legitimate brokers will ask for certified proof of identity and other essential personal information such as bank account details, proof of address, tax number, and so on.

Be vigilant on social media

A report by TradeForexSA which positions itself as “the number one guide to forex trading in South Africa” suggests that 50% of scams find their victims on social media platforms. The report analysed over 400 responses and indicates that Facebook and Instagram are most popular hunting grounds for scammers and bad brokers, with the largest reported theft coming in at almost R650,000, while victims lost R12,000 on average.

The report finds that 34.2% of the scams originated on Facebook and 19.6% Instagram. 47% of victims were scammed by individuals and almost 20% of victims paid their scammers in Bitcoin. 13% of all broker complaints concerned JP Markets, a platform placed under final liquidation as per the order of the Gauteng High Court after the FSCA filed an urgent application to liquidate the organisation and freeze its bank accounts for not paying out client withdrawals, not posting client’s deposits to their trading accounts, and manipulating data feeds.

Are protective measures in place?

Withdrawal and deposits are one of the most important services of a broker. You should be able to perform these actions simply and safely. Generally, the scammers follow the same patterns of high minimum deposits, and low withdrawal limits.

However, traders should be able to deposit and withdraw funds easily via a client portal. This is served by brokers partnering with trusted payment providers with low fees and fast transactions. Being able to access your funds at any point you choose is vital. It is also important that client funds are segregated from operational funds and other forms of investment. Furthermore, brokers should have an insurance policy in place to protect their clients.

Africa is fast becoming one of the primary destinations for traders of all financial assets, says Infinox’s Dany Mawas. “As such, it is essential for traders to be wary of online trading scams and ensure they remain vigilant and do not fall victim,” he concludes.

Finding recourse

If you find yourself falling into the hands of scammers, one solution may be MyChargeBack.com, a global leader in fund recovery services. Working with over 750 banks worldwide, the company has retrieved millions of dollars for clients in more than 150 countries and opened an office in South Africa last year owing to “… the steady rise in the number of inquiries we receive from consumers there, who have been unable to obtain refunds from merchants, from whom they purchased goods and services that were not provided as agreed,” according to Michael Cohen, MyChargeBack’s Vice President of Operations.  DM


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