The Forex Pyramid Scheme: A Swindler Looted Billions in Asia

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With a daily trading volume of $6.6 trillion, the currency market has always been a target for scammers. For years, investors have lost thousands of dollars. Pyramid schemes are the most common currency scam. It's tough to discern if such schemes are authentic or a scam because they work like MML firms providing larger rewards. Those with limited information are more likely to be targeted. This article discusses the pyramid scheme and how to prevent it.

A Pyramid Scheme

Phishing schemes recruit new members seeking for an investment opportunity. Promoters attract clients, who in turn attract new investors, and so forth. With each level comes more clients, therefore the system is dubbed a “pyramid”. The strategy needs a large investor base to sustain it and pay out earnings to the early investors.

What is a Pyramid Scheme？

In a normal pyramid scheme, scammers promise big earnings, and they deliver. But they don't invest. Instead, they borrow from new consumers to pay off old obligations, including early investors' “ground floor” earnings. The setup fails to generate enough fresh money to keep it afloat.

In Malaysia, a pyramid scam stole RM126.9m.

Guardian Capital Group (GCG) was claimed to have confiscated RM126.9 million from investors in 2022. the mastermind “Datuk” was arrested by the Malaysian Police. The syndicate had been operating since 2018, and the mastermind used the title “Seri” for commercial purposes. Brokers, financial managers, search agents, and account holders were also arrested.

AML investigations verified Guardian Capital Group (GCG) Indonesia's owners were based in Malaysia and allegedly scammed people all over the world. Syndicate victims lost millions of dollars in China, Thailand, Indonesia, and other Asian countries.

Further research revealed that preparators used to entice local investors with weekly returns of 12-14%. By allowing investors to watch their earnings online, the suspects ensured that none of the monies were redeemable. After receiving substantial money, the syndicate ceased operations and broke off all links with investors. Initially, 23 instances involving RM2.94 million were investigated.

How to avoid pyramid schemes？

How to prevent pyramid schemes:

Examine the firm's rules.

Regulated entities are likely to be safer and more transparent. Ask for the prospective company's registration number and check it on the regulatory authority's website.

Security

It's also vital to verify the firm's security measures. Assure the organization uses strong security technologies like SSL encryption and two-step verification.

Reputation

Investing in reputable firms is generally safe. So examining a company's reputation can help you avoid pyramid schemes. If you want to know if it's worth signing up, read online evaluations from existing customers on third-party rating websites (like TrustPilot, Reddit, Quora, etc.).

In Brief

Most countries prohibit pyramid schemes. If you are scammed by such companies, you can sue the scammers, but you may not get your money back. Never forget that a millionaire investor does not happen overnight. So stay away from companies that make false promises.