Investment fraud in online trading: the dream of a quick buck

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The dream of fast money drives numerous investors into financial ruin. The focus is on dubious online trading platforms that advertise their services supposedly from other European countries via Internet and social media.

Scammers lure their customers into the trap of dubious investment products and high profit promises. Those highly speculative investments usually end in a total financial loss for the fraud victims.

It is estimated by Europol that this is a Europe-wide fraud phenomenon. According to the German Federal Criminal Police Office (BKA), total losses from fraud and embezzlement connected with capital investments amounted to more than 429 million euros in 2020.


  • CFD (contracts for difference) & Forex (foreign exchange) trading are not suitable for beginners.
  • There is a very high risk of loss when trading online.
  •  Binary options trading is prohibited for private investors since 2018.
  • Do not believe in promises of success on high profits without risk of loss.
  • Get informed comprehensively about the trading platform.
  • Is the trading provider a company licensed by the Federal Financial Supervisory Authority (BaFin) or in another EU country?
  • Victims of the scam should report the incident to the respective European supervisory authority and file a criminal complaint with the police.

Attention: Fraudsters pretend to be a supervisory authority and rip off investors

Recently, fraudsters have been passing as supposed supervisory authorities, arbitrators or lawyers and raising investors hope in fake letters of getting their money back.

But beware: investors risk facing even more losses.

What is CFD trading?

CFD trading is a highly speculative financial product that is only suitable for experienced and well-informed investors.

The term CFD stands for Contracts for Difference and describes trading on rising (long) or falling (short) prices of shares, indices, commodities, currencies or interest rate products.

The profit or loss results from the difference between the entry and exit price (buying and selling price) of the basic value.

In CFD trading, other than in the classic purchase of shares and securities, users do not acquire any company shares, but merely participate in the price development of a specific basic value.

CFDs thus belong to the group of derivatives among the most complex investment products on the financial market.

What does Forex trading mean?

Forex stands for "Foreign Exchange Market" (FX for short).

With a daily trading volume of over 6.5 trillion dollars, the Forex market is the world's largest financial market where traders (dealers) trade currencies.

Forex trading can be thought of as a currency exchange on vacation abroad.

For example, when a vacationer from Germany travels to Denmark, the amount of Danish krone received is calculated based on the current exchange rate.

When the vacationer returns from his trip, he can exchange the Danish krone back into euros. If the exchange rate is lower, he loses money. If the exchange rate is higher, he profits from the exchange.

When trading with foreign exchange and cryptocurrencies, there is a very high risk of loss. Accordingly, a certain expertise and experience is required. Trading beginners should therefore steer clear of this investment product.

What are cryptocurrencies?

Cryptocurrency is a digital currency that can be legally exchanged and traded. However, cryptocurrencies are not regulated by regulators or banks.

When trading digital currency, investors speculate on price movements on the market. Settlement takes place via a CFD trading platform or on the stock exchange.

The trading takes place completely anonymously and pseudonymously, so that pyramid schemes or other investment fraud models can hide behind this investment opportunity.

    What kind of cryptocurrencies do exist?

    In addition to the best-known cryptocurrency, Bitcoin, there are other digital payment methods. These include

    • Bitcoin Cash
    • Cardano
    • Dash
    • Doge
    • EOS
    • Ethereum
    • Litecoin
    • Monero

    How does binary options trading work?

    Online binary options trading is a purely speculative business with a very high risk of loss.

    Binary options trading has been prohibited for private investors since 2018.

    Investors speculate in this investment on a price rise or fall. True to the motto: Cash or Nothing (profit or loss). The principle is easily understandable even for amateurs, which is precisely why binary options are so dangerous.

    The problem is that the value of binary options does not result from supply and demand, but the provider sets the price himself. Therefore, this can hardly be traced or verified by the consumer.

    Dubious trading providers: Investment fraud on the Internet

    In recent months, we have received an increasing number of cases of fraud in connection with investments on unlicensed online trading platforms in other EU countries.

    The fraudsters have increasingly focused on investment opportunities in financial contracts for difference (CFDs), binary options on stocks, indices, commodities and currencies (forex trading), and cryptocurrencies. The rip-off scam is always the same.

    Usually, the problems start with the first supposed profit. Those who do not make the jump in time often face financial disaster.

    Europol, the European Securities and Markets Authority (ESMA), the German Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht - BaFin), as well as the German Federal Criminal Police Office (BKA) and the state criminal police offices warn about highly speculative financial transactions.

    Always the same scam: supposed online broker does not pay out money

    As soon as customers have registered on the supposed trading platform, they are contacted by a "broker" or call center employee. The aim is to convince the investor to make increasingly large investments in the long term in order to achieve the greatest possible profits.

    Once the consumer has paid in his capital, the first profit developments are displayed in the customer account after a short amount of time. This is intended to convince the investor of the financial product and lead him or her to make further investments.

    What the customer does not know, however, is that the platform operators can use fraud software to simulate fictitious account movements and profits.

    In fact, no trading takes place at all. Instead, the scammers transfer the deposited funds to foreign accounts. Investors do not notice this at first.

    Those who finally want to have their alleged winnings paid out are stalled by the "brokers" and asked to pay supposedly accruing taxes and processing fees. The stalling tactics serve the sole purpose of obtaining even more money.

    Finally, the contact breaks off completely at some point. The paid-in capital is gone.

    In case of investment fraud: report to BaFin and police

    If you have fallen victim to the scam, you should report the financial fraud to BaFin and file a criminal complaint with the police.

    How can investors recognize dubious online brokers?

    It is difficult to recognize fraudulent websites at first glance. Therefore, potential investors should get informed exactly about the trading provider. Our checklist will give you tips on what to look out for and how to protect yourself from scammers.

    Checklist: How to recognize fraudulent trading providers and protect yourself

    • Does the web page have a complete imprint? Who is my contact person? Where is the company headquartered?
    • Inform yourself comprehensively about the trading provider and the product (search engines, forums, online card services).
    • Is the trading provider a company licensed by BaFin or in another EU country?
    • Be suspicious of promises of high profits without risk of loss.
    • Do not accept unsolicited advice in connection with investment opportunities (telephone advertising, e-mails).
    • Do not give anyone access to your terminal equipment via remote maintenance software.
    • Beware of identity theft: Do not send copies of your identification documents. The request to do so is very frequent with these scams.

    Funded by the European Union. Views and opinions expressed are however those of the author(s) only and do not necessarily reflect those of the European Union or the European Innovation Council and Small and Medium-sized Enterprises Executive Agency (EISMEA). Neither the European Union nor the granting authority can be held responsible for them.