OF FOREX TRADING PLATFORMS
The Financial Services Board (FSB) is becoming increasingly concerned about the rise in forex platforms being advertised to South Africans, and Caroline da Silva, deputy executive officer for financial advisory and intermediary services at the FSB, says the board will investigate these further.
These platforms are unregulated and based offshore, creating the perfect opportunity for more scams. They use concepts that most people do not understand when it comes to forex trading. People are easily fooled into believing they are a legitimate business which can make them a lot of money.
This week the FSB issued a warning against Financika, which provides a forex trading platform and advisory services, stating that the company is not authorised to render financial services in South Africa and does not represent an authorised financial services provider.
The company’s head office is based in the Republic of Vanuatu which is a small island in the Pacific Ocean. It is completely unregulated with no chance of recourse if you lose your money. Although they use a Cape Town telephone number this is re-directed to an overseas call. City Press called the company regarding the investor warning and was told to send an email. We never received a reply.
A reader wrote to City Press claiming that he had lost more than R200 000 in just three weeks through a similar forex trading platform.
“They are professional scammers, with the first trades you will make profit, on their advice of course, and they encourage you to deposit more money with guaranteed profits. Once your account reaches more than $30 000 [R386 000] they ask you to open a position that they know will go against you and will liquidate your account. When the margins are very thin they ask you to deposit additional funds to rescue your account.
“That is how they defraud your money in a legitimate way. Judging by the comments so far, their modus operandi is the same: deposit more money until your account gets liquidated. You don’t get out of this scam alive, you lose all your life savings.”
This is an excellent description of how many of these rogue forex platforms operate. Charles Savage, CEO of South African-based alternative investment broker GT247, says the lure of huge overnight profits always brings Ponzi schemes to the fore.
“The fronting of these schemes as ‘forex trading businesses’ seems to be the flavour of the day so clients need to be supervigilant. It is an old business practice just finding new life in ‘forex’.”
Savage says it is important to know that it is illegal to use a credit card to fund an offshore investment account of any kind and, as such, no South African should be doing this. Secondly, any institution not registered and therefore regulated by the FSB should also raise a consumer’s due diligence requirements.
“It is not to say that there are not reputable intuitions offshore that are not locally regulated. However, are those firms then regulated anywhere else? Online searches and verification checks with the company’s regulators should be a bare minimum before opening any offshore account,” says Savage.
– Maya Fisher-French