Why Forex MLMs are Scam? How to Avoid?

forex mlm scam

Forex MLM is a combination of two different words Forex and MLM. Let us first understand both words separately.

What is Forex?

Forex stands for Foreign Exchange. It is a 24/5 trading option that includes banks, traders, and companies altogether. Forex trading has no centralized marketplace.

Basically, Forex trading is a network of buyers and sellers who exchange one currency over other at the desired price. Currencies all over the world can be traded at any time and from any place.

Forex companies either allow you to trade by paying registration fees or take your money and deal with a guarantee of handing over a part of the profit to you.

What is MLM?

MLM stands for Multi-Level Marketing aka Network Marketing & Direct Selling. It is an alternative way of marketing and distribution.

Oriflame, NU Skin, Young Living, and Melaleuca are a few examples of MLM companies that you may hear of. MLM is legal in most countries, but scams are common in it and MLM has a bad reputation.

MLM concept is often used by product-based companies and now many MLM companies have started including Forex in their plans, which are called Forex MLM.

Like Forex MLM, Crypto MLM also exists where an MLM compensation plan is combined with cryptocurrencies.

What are Forex MLM?

Forex MLM helps to earn referral commissions by bringing more people to the business. People need to do minimum investments to become active investors and can start building downlines.

A combination of Forex and MLM helps people to earn a profit on investments as well as recruitment of new traders (investors).

Forex MLM may include, companies that use the MLM concept and provide,

  • Forex Brokerage
  • Forex Trading Signals & Guide &
  • Other Forex Investment Services

Forex MLM companies see exponential growth in a short span. Every 1 investor brings new investors, those new investors bring more, and so on. This forms a huge growth in a short span.

Hence, Forex MLM quickly gets traders who promote them as distributors.

But after reviewing various companies, we conclude that almost all Forex MLM are scams and they spread faster than a general MLM.

How does Forex MLM Works?

As most Forex MLM are scams, further explanation is about How Forex MLM Scam Works?

Forex MLMs claim to provide guaranteed returns on investment and do the same for a few months, which is part of their tactic.

Forex MLM does money circulation, the investment amount of new traders is paid as commissions to the old traders.

It continues for some time till a huge crowd becomes part and a large amount is collected by the company. Once the target is achieved, such companies stay active but stop withdrawals first and gradually collapse taking peoples’ money.

After the collapse, Forex MLM scams are untraceable as they are neither registered nor authorized.

Here are some red flags and serious evidence of why Forex MLMs are scam?

Why Forex MLMs are Scams?

Not Registered Entity

Most Forex companies’ founders and operators are hidden. Sometimes it becomes impossible to get the data of culprits who manage the company and its website.

Forex MLM poses fake actors as founders and CEOs of the company to show a bright image of the company.

Such companies are never registered which is one of the biggest red flags. Nowadays registering a shell company is also an easy thing for them.

If there is no valid registration and data of the company, these should not be trustable. Cause, when such a company collapses, everyone loses their money and they hardly get tracked, hence authorities can’t help you in it.

Securities Fraud

Most Forex MLM companies are not authorized by the financial regulators of any country or region. Hence, they can’t provide investment-related services and schemes to people.

When such unauthorized companies try to collect public investment, it comes under securities fraud.

If you are planning to join any Forex MLM, make sure the company has a broker license from the financial regulators of your country.

Rob Paul To Pay Peter

Money circulation is base of Forex MLM Scams, either by being an illegal Ponzi Scheme or Pyramid Scheme.

First of all, understand the source of returns or profit any company offers.

  • If a company provides commissions on recruitment, then it’s a Pyramid Scheme.
  • Extraordinary guaranteed return after a certain time is a sign of a Ponzi Scheme.

Legit MLM companies mainly offer commissions on sales of personal and download product sales, where genuine products and services are sold.

Forex companies have stricter laws to flow due to financial activities they conduct, therefore be careful and understand the legality first.

Extraordinary Guaranteed Returns

Forex MLM companies give a guarantee of fixed percentage returns on investment. Instead of suspecting such claims, people get easily trapped under their own greed.

Like other markets, Forex Market can be never perfectly predicted. No one can give a 100% guarantee of returns. If you get one, think well.

Hollow Claims

Empty Vessels Sounds Louder, MLM scams use deceptive ways of promotion.

Misleading claims, impossible promises and faking luxury lifestyles of promoters is a common things in such companies.

Therefore, don’t get stuck in their trap and try to understand the basics first.

How to Prevent Forex MLM Scams?

Any company can claim high returns without any risk and hassle-free commissions but remember not all that glitters is gold.

First and foremost ensure that the company is registered and active for a long time without any withdrawal issues.

If so, make sure you check the below points before concluding whether the company is a fraud or not:

  • Inspect the history of the founders.
  • Make sure that the company is authorized by the financial authority.
  • The company is not doing securities fraud.
  • The compensation plan should not imply a Ponzi or Pyramid scheme.
  • Don’t get attracted to high returns, review the company’s potential first.
  • Don’t falsely believe what promoters say, have your checklist.

Hope this post helped you to understand more about Forex MLM, if you have any queries or suggestions, feel free to comment.

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