Can You Actually Get Your Money Back From A Fraudulent Broker?

There is a lot of advice on the internet about how a trader can identify a good broker and avoid a racket, but very little of it teaches someone how to recover their money if they all for such a racket. Indeed, the reason there are so many FX broker review websites and contributors is that there are so many people who have been scammed. Fraud goes on in all financial markets, and not just in FX, so it is important to know how one can get their money back if they feel cheated. Today, we’re going to consider some strategies you may use to get your money back when your broker doesn’t allow it.

How do you know you’ve been defrauded?

This may seem like a stupid question, but it is worth considering. I have been in a situation where I thought my money had been stolen, only to realize later that I had just jumped to that conclusion. In my case, I just lacked patience because the broker (I shall not mention who) had still not replied to any of my correspondence. Fortunately, they did so after a few days and I got my money. Let me just explain my situation so you understand how one may assume fraud where there is none. I had participated in an FX contest and was among the winners, so naturally, I immediately began asking for my withdrawal. After sending several emails to customer support, I got no reply for several days, and just thought the whole thing was a racket. Upon further reading of the Terms and Conditions, I realized that the funds were processed two weeks following the conclusion of the contest, and I had just jumped the gun. (Lessons on self-defense: FX scams)

So, how do you know you’re not going to get your money back and start taking appropriate steps? The first sign is a lack of response from the broker even after repeated requests for a reply. Do not be too quick to judge as I was, but give the company some time to sort out the issue. Many top FX brokers have thousands and probably even hundreds of thousands of clients, which makes it difficult to respond to all messages. There is no standard time to wait here, but if your messages go unanswered after two weeks, you can safely assume there will be none coming. At this point, you can go forward with your complaint and attempt to recover your money. (These are the: Top 10 Most Outrageous FX Market Scammers)

Another sign, and usually the most obvious is the disappearance of the company. Some FX brokerages are just clean scams that are only meant to collect a certain amount of money from their victims before closing up shop and disappearing. If you are in the unlucky position to have fallen for such a clean racket, immediately begin following up on your complaint before time runs out. (You should: Learn How Cryptocurrency Scams Operate And Avoid Them)

Besides these direct scams, some ‘sophisticated’ scammers know it’s better to string you along than to declare their intention outright. These scammers will respond to your messages, often in due time, but they will always have an excuse. Perhaps they will keep telling you that they are still following up on the issue, or come up with some fake reasons why you can’t get your money. Such scams often happen after you make a deposit when lured by some attractive bonus offers. They will then ask you to deposit to enjoy the bonus, only for you to be taken around in circles. To be completely sure that this is indeed what is happening to you, make sure you check the company’s Terms and Conditions page to know the rules of withdrawal. (Revealing FX Bonuses Of Brokers: How To Identify A Real Bonus)

What to do first

Now that you are pretty sure the broker is not going to process your withdrawal, you just have to contact the appropriate FX regulators. There is always a financial regulator in every country responsible for overseeing FX brokers, which is why brokers are supposed to get a license before starting operations. If a broker has a license, it becomes much easier to recover your money because they can pursue legal measures against the company. The top regulators even provide insurance for a broker’s clients, which is why a license is usually expensive from one of these regulators. For example, the FCA provides insurance of up to £50,000 while CySEC could compensate you for up to €20,000. To do this, you only need to submit a record of your transaction history and correspondence and let them take care of the rest. (These are: The 3 Most Trusted Exchange Authorities in The World)

Therefore, it is very easy to get your money back if you contact the broker’s regulator; but only if the broker is regulated. A racket broker also knows this and is not willing to get an expensive license from the top FX regulators. Instead, they could either get a license from an overseas regulator or operate completely without a license. In the first case, it becomes more difficult to get those regulators to prosecute the brokers from overseas, although you could still keep your fingers crossed. If you have lost a significant amount of money and electronic means are not helping, you can always hire a lawyer in the broker’s jurisdiction to go after them in court. However, this is quite expensive unless you feel really bad about the entire encounter. (Looking at the: Growth Of The FX Market In Africa And Other Developing Countries)

When the broker is completely unregulated, now things becomes very difficult to get help from the authorities. Sure, you can still report your complaint to your local regulator, but they cannot do anything directly by law. Perhaps the company can be pursued if they have a physical presence in the company. As an example, some FX brokers operate in the UK with just a registration number from the Companies House, and the authorities could probably get to the broker somehow. In some previous scams, police have even stormed the offices of brokers and arrested the culprits. Consider November 2012, a raid by the FBI in the US that caught 47 fraudsters. These raids are common, and sometimes authorities have managed to recover some of the money. (You should know: How Not To Be Added To The 95% Of Losing Traders)

The chargeback procedure

All the above suggestions require the involvement of institutions in the FX industry, but there is yet another way of going about it – using the help of payment processors. There are numerous ways to fund a trading account with a broker, and these very same means of funding can also be used to get a refund. Let’s look at how you could get a refund from each funding method. (Know: How to trade on the NYSE)

Credit card chargeback

Credit/debit cards make transactions a lot easier to perform because you don’t have to carry a lot of cash around. When used to fund a trading account, doing so using a credit card is a lot faster than using, say, wire transfers. Traders and brokers recognize this, which is why there are so many FX brokers accepting credit cards nowadays. With the ease of transactions, there also comes easier fraud, and credit companies also know this. To protect the money of their clients, top credit card services like Visa and MasterCard implemented a chargeback procedure to recover the money when fraud occurs. The good news is that, if you made a deposit using a credit/debit card, this facility is also available to you. (Here are the: Basics of stock trading)

Since credit card use has become so common around the world, the authorities even stepped in to protect consumers. In the US, the Truth in Lending Act allows users to reverse transactions through credit cards, while the Electronic Fund Transfer Act covers debit card transactions. Laws are different in different countries, but there is usually some form of law that ensures chargebacks. Even the credit companies themselves have this provision to allow the same. These laws were implemented to allow customers to dispute a transaction, but it is also very important if you have been a victim of fraud, such as that committed by a racket broker. One could also take advantage of chargebacks as a way of protesting substandard services or products. (Do you wonder: Should You Invest In CFDs Or Stocks To Make More Money?)

To initiate a chargeback, you will need to contact the issuer of your credit/debit card. Since it is they who perform the transfer of funds, they are responsible for doing the opposite. These companies use an Electronic Data Interchange (EDI) system to share your personal and financial information, which is then used to validate the transfer. Start with a phone call to the number on the back of the credit card to contact the issuer, and this is usually enough. Some issuers, though, may need the complaint to be submitted in the form of a physical letter, but either way, the point is to notify your credit card issuer. (All about Trading stock indices)

Next, you have to provide proof of why you’re requesting the chargeback. If the chargeback request is due to a dispute between you and a seller, copies of emails and other correspondence should suffice. Thereafter, the credit card issuer will contact them to get their side of the story while acting as an intermediary. In the case of a straightforward case of fraud, such as that involving a racket broker, disputes are dealt with quickly because this is the primary function of chargebacks. If your credit card issuer finds it in your favor, you should normally get your money back after they have deducted the amount from the recipient’s account. In the same way, a credit card company gets information about you through EDI, so can they get it for the recipient and get a refund? You will not be charged for the refund either, so you get back all your money. (Every scalper should know the: 10 rules of how to earn money with scalping)

Chargebacks are successful more often than not as experts have shown. The study was done by Consumers’ Checkbook, a non-profit organization that does surveys about vendors and service providers. In 2016, they asked several vendors whether chargebacks work, and they said it does in 90% of cases. Credit card issuers will typically side with the client over the merchant to make the process often successful. Another study by the Federal Reserve of Kansas the same year also found the same results, proving that chargebacks were indeed a very powerful tool for consumers. This is good news for you if you made your deposit using a credit card because that means you can be assured of a refund when a scam broker gets your money. (Even Forex brokers go out of business: Bankruptcy of Forex brokers)

However, the process may not go as smoothly as you may expect, especially when dealing with a fraudulent broker. Many legitimate companies will just accept the chargeback and any additional costs to preserve their business’ reputation. If they have too many chargebacks, credit card companies may refuse to work with them. A scammer does not have the same restrictions, and they will try to fight you. Of course, they would not want to lose the money they worked so hard for and they will give the credit card issuer a reason for the dispute. This is where you will need to have all the necessary evidence to prove that you deserve that chargeback. It will depend on your resilience because the first person to blink loses and you need to push hard not only for yourself but for the whole industry. The money a scammer gets from you will be used to scam others, so really take it as a service to other traders. (Before even asking, just look at some of the: Most common questions Forex traders ask)

Also, keep in mind that this process becomes difficult if you go beyond 120 days from the date of the transaction as this is the given time limit. Beyond this, you may have to bring in the authorities to help. It is also recommended to use the chargeback service as a way of last resort and to try to resolve the issue with the merchant. The studies mentioned above show that chargeback gives you a lot of power, but you should not misuse this power to perform cyber theft. (New rules have rolled out causing: Changes In Forex Regulation Through MiFID II)

Wire transfer reversal

A similar process is also available for deposits made by wire transfer, where the money sent is simply reversed. If your deposit was made by wire transfer, you will contact the broker’s bank for a reversal as it is they who hold the money. Again, you can do this by sending an email or making a phone call to their customer support center. From there the process is the same as sending a chargeback request for a credit card transaction. Provide the evidence to prove that you deserve the reversal and let the bank do the investigations for you. If your case is believable, the bank will perform the reversal, but you may be in for a fight if the broker disputes your claim. Some good evidence you could provide includes any messages sent between you and the broker, whether they are emails or even screenshots of Live Chat conversations. (To protect your future self, know: How to complain against a broker)

You should feel confident in asking for a chargeback because you’re usually not the only one. If a broker is scamming traders, then they have probably received numerous disputes to their bank account. This will work in your favor as the bank will spot the pattern and perhaps even take further measures against them. (Think Twice When Making A Deposit In A Forex Company)

Things may not always work out well for you, and you need to be prepared for some undesirable outcomes. In certain cases, perhaps the broker had already transferred the money elsewhere, withdrawn it or the company was declared bankrupt. In all these cases, the money is out of the reach of the bank, and they cannot conduct the reversal. The broker’s bank can only reverse your money if it is still within their reach and not withdrawn or sent elsewhere. Even if the broker simply withdrew the money, that is enough to make your reversal impossible. The problem is that banks do not insure client funds but they only facilitate the transfer of money. Making the reversal, therefore, would be like asking the bank to pay from its pocket. If they did that, they might as well go out of business. (Some: 5 tips to identify the perfect ICO to invest in)

Alright, we didn’t mention that to discourage you from pursuing a reversal, but to remind you of the need to act fast as soon as you suspect fraud. You may be lucky and find that the scam broker is yet to wrap up their operation and get your reversal early. Especially when you notice there has been a fraudulent transaction, such cases are taken very seriously. (Do you know: What Is The Financial Commission And Can It Be Trusted?)

Another situation that may not end up well for your reversal is if you did the transaction through a third-party eWallet. People tend to trust eWallets because then you don’t have to keep repeating your details which are tiring and also less secure as information could be stolen. If you used such a service to make the wire transfer, then you’re out of luck as that transaction would involve another party.

Third-party eWallets and payment service providers

As we just mentioned, people like to use eWallets for various reasons. Security is the main one, because if the eWallet provider can be trusted, then you wouldn’t have to enter your account details on the broker’s page. If the broker is a terrible scammer, they could use those details to perform even further fraud from your account. Instead, by using an eWallet, the company does the money transfer for you without giving up your personal information. Another reason people like these eWallets is that they have specialized offers for individuals depending on their needs. As an example, some of them will issue debit cards that make withdrawals faster and instant compared to waiting for a wire transfer for days. (GDPR Is Finally Here! All You Need To Know And How It Affects You)

A few examples of such eWallet providers include Payza, Skrill, Neteller, etc. Then there are some payment service providers like PayPal, Western Union, MoneyGram, etc. All these are chosen depending on the client’s personal preference, and forex brokers are partnering with these companies to enable fund deposits. If you deposited with any of these companies, they could provide you with some reprieve in cases of fraud. Of course, it would depend mostly on the company itself and its policies. After reading several of these companies' Terms of Use, you would only get a refund if there was an unauthorized transaction. In other situations, you’re on your own. (Do you know: Who The Best Forex Social Trading Brokers To Work With?)

In short, using these eWallets can be secure and whatnot, but one thing they don’t do is refund money unless it was their fault. And it does make sense since their job is only to facilitate transactions, not to oversee the transactions.

Going through intermediaries

Because financial fraud is so rampant, not only in Forex but also in other industries, some companies have come up to help people regain their money when lost. Say, you lost money to a broker located in Saint Vincent and the Grenadines and yet you live in the UK, instead of traveling there yourself and knocking on the broker’s door, you can hire a company to do it for you at a charge. There are many such companies around the world, and you can use them to help you get a refund or pursue a broker. (Concepts Every Trader Should Understand: Leverage, Margin, And Hedging)

Since this is their job, expect to pay for their services, which means you need to have lost a significant amount of money to go down this path. All the same, now you know all your options when you mistakenly fall for a scammer. And by the way, just because you use an intermediary does not mean you won’t need to provide proof of fraud to justify your claim. The only difference is that these intermediaries are more skillful at getting refunds. As they have been in the industry longer and dealt with plenty of companies, they know the various excuses scammers use and they can cut through it and achieve their purpose. Furthermore, they have time and resources to do the job, unlike you who may be tied up with other businesses.

What are some ways a broker can fight back?

It’s not enough to know how you can get a refund, but to also prepare for what the broker will hit you back with. Many scammers won’t allow you to go after them without a fight, and you need to know what to expect. At the same time, chargebacks have often been abused by some people, and even the authorities sometimes become skeptical in light of all this, you should be prepared for such counter-attacks as:

It’s in the fine print

This is the most common and damning piece of evidence a broker can provide to counter your request for a refund. The truth is that none of us actually goes through the entire Terms and Conditions page but only scrolls quickly to the bottom and clicks on agree. The brokers who intend to take advantage of this, therefore, hide many loopholes in the fine print that allow them some wiggle room out of a contract. The reason why this reason is so powerful is that you would have often already crossed one of the tripwires hidden in the Terms and Conditions. But since you had already entered and agreed to the contract set before you, you are not even covered legally. (Is It Time To Upgrade To MetaTrader 5: Features Of MT5)

To protect yourself from such traps, try to learn as much as you can about a broker’s particular product before you agree to the contract. It is a torturous process, I know, but it will protect you from a lot of pain otherwise. Think of it this way – reading about one product will take you a few minutes, but following up on a case of fraud will take you days or even weeks. Worse still, you may even end up not getting your money back. So you save money by taking the time to read the fine print. (Can A Forex Broker Avoid Sending Trades Directly To The Interbank Market?)

You have already spent the money

By spending money, you inadvertently agree to the conditions set forth by the broker. Let’s say you make a deposit of $1,000 with a broker and make a trade on the Forex charts that either makes or loses you money. Regardless of the profitability of the trade, you may have already agreed to all of the broker’s conditions because you have already begun trading. (Forex Rigging And Manipulation: How The Major Investors Pull It Off)

To avoid this trap, go back to the Terms and Conditions to check if there is a stated lock-in period for funds. In hedge funds, an investor’s money is kept locked in for a year without allowing for withdrawals. A broker may also have included this condition hidden in the fine print so that they can keep the money to themselves and rack up the money. Whenever you see such a situation, run! This is one of the signs of a Ponzi scheme, needing to attract new customers just to pay off the old ones.

Fake evidence

The very worst scam brokers will go even a step further and produce fake records of transactions that they will claim you made. This is a very sneaky move because it now becomes a case of he said, she said. You’re on one side with a record of all your transactions and they are on the other with their own fabricated records. In such a situation, it becomes really difficult for the intermediary to tell who is right. Thankfully, a scam broker will often have a lot of complaints against them, and the intermediary, say, the credit card company, will side with you. If they notice that the broker has received a lot of complaints, then it will be more likely that you are right. To fight against this, you just have to be very serious about your case and push back as hard as you can. (Find out: How Not To Be Added To The 95% Of Losing Traders)

Final Thoughts

As you can now see from all the above, it is indeed possible to recover money that you thought was lost to a scam broker, but it takes work. Most of all, it requires that you have evidence to back up your claim in case the broker decides to fight against you. In many cases, people have recovered their money, especially if it wasn’t a huge amount. But bigger deposits are harder to get back because the scammer will quickly transfer the money elsewhere. Still, it doesn’t hurt to try.

 

In case you want to know more about chargebacks, here is a simple explanation: