A forex scam (also referred to as foreign exchange scam) is a name given to any trading scheme that is used to defraud traders by convincing them that they can expect to gain a high profit by trading in the foreign exchange market. According to Michael Dunn of the U.S. Commodity Futures Trading Commission currency trading has become the fraud du jour as of early 2008. But according to the New York Times "the market has long been plagued by swindlers preying on the gullible". According to The Wall Street Journal "The average individual foreign-exchange-trading victim loses about $15,000, according to CFTC records". It has been said by The North American Securities Administrators Association that "off-exchange forex trading by retail investors is at best extremely risky, and at worst, outright fraud."
In August, 2008 a special task force has been set up by the CFTC in order to deal with growing foreign exchange fraud.
The forex market is a zero-sum game, what it means is that whatever one trader gains, it is lost by another, except that brokerage commissions and other transaction costs are subtracted from the results of all traders, all these things technically make forex a "negative-sum" game.
These scams might include churning of customer accounts in order to generate commissions, selling software that is presumed to be guiding the customer to large profits, improper management of so called "managed accounts", false advertising, Ponzi schemes and outright fraud. These scams are also referred to any retail forex broker by whom it is indicated that trading foreign exchange is a low risk, high profit investment.
