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How to spot an offshore Forex trading fraud

How to spot an offshore Forex trading fraud

In this article, I am using a live case study to illustrate how to spot a basic offshore forex trading fraud. We focus on InvaFX (or InvaForex) which is ostensibly an offshore brokerage based in and regulated in Mauritius. It even claims to have won some awards!

InvaFX says it is a fully regulated and award-winning subsidiary of Invast Securities in Australia. In reality Invast Securities rebranded sometime ago. I checked in with the Australian office of 26 Degrees as Invast Securities is now called and they had no knowledge of an office in Mauritius.

While InvaFX claims to be regulated in Mauritius I also conducted a search of registered financial firms on the island and the broker does not turn up in that.

Sadly, quite a few traders are already depositing money with InvaFX. They are unlikely to see it again.

Deposits using crypto? Red flag!

Another warning sign is the fact that InvaFX is asking traders to deposit funds using cryptocurrency and does not actually seem to have any kind of active account with a reputable banking institution. Customer service enquiries are routinely being conducted on WhatsApp and the broker’s support email is bouncing.

Not only that, but InvaFX is also asking traders to top up their accounts with yet more cryptocurrency in order to meet fabricated tax obligations before it will let them redeem. InvaFX representatives cite tax obligations to the European Banking Authority which does not in fact have any tax gathering powers and certainly no jurisdiction in Mauritius. 

Rather than refunding clients InvaFX are pushing their luck further by asking clients to deposit yet more money in order to meet these so-called tax obligations.

In effect InvaFX in Mauritius seems to be a completely fabricated front operation for a fraud. 

While offshore brokers may be attractive to traders who are seeking higher levels of leverage you must proceed with extreme caution because there is very little comeback in cases where firms are totally unregulated or exist in a very lightly regulated jurisdiction like Mauritius, the Seychelles or some of the Caribbean islands.

Three safety checks

If you still feel the urge to open a trading account with an offshore broker, don’t open it using cryptocurrency. Make sure that the broker is using an account with a reputable banking institution. 

Secondly, if the offshore broker claims to be a subsidiary of an international brokerage firm check in with head office, ideally in an onshore jurisdiction to make sure that this business actually exists.

Thirdly, check that the broker is actually being regulated in the jurisdiction where it claims to operate. Sadly the levels of regulation in some of these tiny island nations leave a lot to be desired, but still, check to make sure.

Don’t make a deposit with any offshore broker until you have at the very minimum carried out the checks that I have listed above. 

Please also be aware that if you run into any issues with an offshore broker, you will have limited recourse with your home regulator, particularly if that broker is not regulated in your home country or with any other Tier One regulatory agency. Be especially wary of any brokers with no onshore parentage or ownership whatsoever.

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This article does not constitute investment advice.  Do your own research or consult a professional advisor.

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