By definition, a pyramid scheme represents a risky ‘get-rich-quick’ business model that recruits members via a promise of payments or services for enrolling others into the scheme rather than supplying investments or the sale of products. If there are any businesses based on marketing and promotion, a pyramid scheme can exist.
Is forex trading a pyramid scheme?
Forex trading is not a pyramid scheme. Forex trading is the regular activity as stocks or commodity trading, a legal business whose primary purpose is trading, buying, and selling assets and not pyramid share marketing to enroll others in forex business. However, a pyramid scheme can exist if scammy sites promote forex products using multilevel marketing. Traders can avoid the forex pyramid scheme if they use regulated brokers and learn to recognize scam ads.
So is forex a scheme? Forex is not an intriguing business; it is a legitimate trading method, like stocks trading or commodity trading. Large banks trade forex as same as retail traders too.
However, some people try to use a pyramid scheme in the trading business.
So, how to spot a pyramid scheme?
Unfortunately, many people tend to make vague and bogus rumors about forex. In fact, some people may even say that forex trading is a pyramid scheme. But, in reality, it’s not the right thing! Forex trading doesn’t follow the pyramid scheme ever. The best part is that forex trading gives you complete control so that you can hit the buy or sell button as per your individual decision. You have the full privilege to close out the desired trade as per your preference. As a trader, you can do a comprehensive analysis of the available forex signals and choose the most profitable position that can help you earn revenues.
Forex pyramid scheme can exist!
Having said the aforementioned positive aspects, you are also needed to note some of the damaging schemes about forex trading that may scam you! For example, you may find several advertisements that may assure you a quick fortune in forex trading. But, please do not ever become prey to such fake advertisements and promises! Please note that there are no easy shortcuts to making a quick fortune in forex trading. Thus, please be aware of such false assurances. For example, some websites or apps may offer you that you can easily earn forex trading profits without doing absolutely anything. Although such claims may tend to sound quite nice and comfortable, these are nothing but scams. Please avoid such forex scams offers diligently. Or else, they may ultimately ruin your total profits.
Finance regulator bodies recognize companies that use multilevel marketing to create pyramid investment schemes. A forex pyramid scheme exists only when companies promote forex and forex trading using multilevel marketing or create pyramid investment schemes.
Example of a forex pyramid scheme
The Global Trading scammers claimed they took advantage of price differences on various cryptocurrency exchanges to profit from arbitrage – only buying cheaply and selling at higher prices. Really, they just took investors’ money.
John D. Black and his affiliated entities Financial Tree, Financial Solution Group, and New Money Advisors and his associates Christopher Mancuso and Joseph Tufo set up. They ran a fraudulent trading business in June 2015.
GNTFX Owner made the forex pyramid scheme.GNTFX cold-called potential clients and convinced them to invest in the company. The victims were told their cash would be used to trade in Forex markets, and they showed victims’ fake accounts grew from $4,000 to over $26,000 in less than a year.
Working for many hours daily to make money leaves a person with very little time to lead a good lifestyle. Hence, most people are interested in developing a passive income source, where they will make money without spending their time working. Multi-level marketing (MLM) schemes are prevalent since they promise a passive income source for the person to recruit others. While MLM marketing is famous for selling different products, increasingly Forex companies are using MLM marketing to attract new forex traders, who will use their forex products and services.
The MLM marketing scheme has a pyramid shape, with the initial recruiter gets commissions for all the forex products purchased by the traders he recruited. So in this pyramid scheme, the forex traders who joined initially will be making the most money from the affiliate commissions, while those who joined later will often make a loss. Though the person recruiting will lure people into investing, making promises that forex will give the trader financial freedom, the reality is different. Hence it is necessary to understand how the pyramid schemes for forex are working.
Recruiting victims using a pyramid scheme
The recruiter, who is also a Forex trader, will try to convince gullible persons to make large trading in foreign exchange (Forex). The recruiter is not telling lies since many skilled traders take advantage of the significant volatility in the forex market and profit. However, it is not easy, so many forex traders prefer to recruit others, including friends and relatives. Since the forex traders meet only a limited number of people, they may also try to recruit others using social media. People who the recruiter is convincing should be aware that he was also recruited.
Platinum 150 forex Pyramid Scheme
Last several years, few companies promoted the affiliate multi-level marketing program levels such as Platinum 150 forex, Platinum 600 forex, Platinum 1000 forex. People in the pyramid scheme called “networkers,” and they “have the possibility to build up a network and earn passive money”. However, this forex-related affiliate program uses multi-level marketing. If you are an affiliate, you need to know that it is legal only to have 1 level of sub-affiliates. Please, avoid MLM Pyramid Scheme programs.
Purchase forex products using MLM
Traders joining a forex MLM company have to purchase one or more forex products like training videos, modules, and experienced traders’ trading signals. These traders are often misled that purchasing more products will increase the possibility of successful trading. The real reason why new forex traders are persuaded to purchase more forex products is that their recruiter will get paid a commission for the trader’s purchase. The recruiter will also get a commission when the trader he has recruited will recruit someone else. This is when the conflict of interest in the system will start since people joined to trade in forex, not marketing the scheme. In some forex companies, members are assigned a rank based on the number of recruited people.
Forex losses and MLM
Statistical and research data indicates that only 5-10% of the forex traders are making a profit. Discouraged by their losses, approximately 80% of the forex traders stop forex trading within a few years. Yet, most of the forex MLM companies and their recruiters often do not inform the forex traders they are recruiting about the risks involved and how it is difficult to profit.
Preferring to recruit instead of forex trading
After making losses trading forex repeatedly, the forex trader realizes that the recruited members have made him a more significant profit than trading. Thus, the trader will spend more resources recruiting new forex traders, who will recruit others, forming a pyramid, improve the ranking, and make more money from commissions.
Forex products and MLM
The forex MLM firm will encourage traders to purchase more forex products to improve their forex trading, attract recruits or gift those who are also recruited. Many traders who have a large down the line are making some profit, so the company will try to convince them to spend more. They will also hold conferences, seminars, where the top recruiters for the forex company will share their success stories. Other forex traders will also be encouraged to participate in these conferences and seminars, which promise to help them make more money.
How to avoid the forex pyramid scheme?
Forex trading can be profitable only when you have learned to use the right strategy and risk 1% to 3% of your portfolio per time. Even if you are using brokers, you must do some research and perform a short demo first with the broker (by making a small deposit and withdrawal) to ensure that it’s reliable and trustworthy. Without this, it will be an absolute risk if you randomly select a broker and rely on it.
Many people on the internet may claim to sell you forex signals, indicators, software, and systems. Before selecting the right one, please do thorough research and search for the available reviews to make a costly mistake. It’s better if there is a free trial option or a money-back guarantee. If such options are not available, please do your own research and not purchase/opt for anything without proper analysis.
Is forex Ponzi scheme?
Forex is a legal business, and it is not a Ponzi scheme because a Ponzi scheme refers to fraud that investors pay profits to earlier investors with funds from more recent investors. However, the Ponzi scheme and scam unregulated forex brokers have similarities in that both are based on High guaranteed returns with little or no risk and Unregistered investments.