When you’re looking for a futures exchange, be on the lookout for warning signs that the company may be a scam. These signs include high-pressure sales tactics, false testimonials, and unregulated practices. These are just a few of the many red flags to look for.
Warning signs of scam futures exchanges
If you’re considering investing in futures or options, you should watch for warning signs of scams. For example, a trading platform that doesn’t meet your liquidity expectations or brokers that won’t let you withdraw money may be a scam. If you find yourself receiving emails from these types of sites, you may want to be cautious.
Scammers will contact you via phone, social media, email, or text message to try to convince you to invest. They will often pretend to be someone you know and make enticing promises about high returns. In addition, they will pose as a real stock broker or investment firm and set up a fake account for you. They will then contact you to sell you your investment.
When it comes to buying and selling futures and options on unregulated futures exchanges, investors should always be vigilant. There are many scammers out there who will copy and pass off fraudulent whitepapers to lure unsuspecting investors. You should be sure to check out every scam website before you invest any money.
High-pressure sales tactics
Many of these scammers use high-pressure sales tactics. The purpose of these techniques is to get the customer to buy something by convincing him or her. These salesmen often use emotional appeals to push the buyer to make a decision. However, if the salesman’s motivation is purely financial, such techniques can backfire.
Low-pressure sales techniques are a good way to mask these sales tactics. The salesman is not less eager to sell, but they try to create a favorable environment for the prospect to make a decision.
False testimonials are used to ruin legitimate businesses and bolster the reputation of scammers. In the world of online reviews, businesses may fabricate and post fake testimonials to harm competitors. These false reviews are illegal, but rarely prosecuted. Most fake review mills operate outside of the United States.
Spoofing is an illegal practice that allows traders to manipulate prices and cause the prices of their securities to fluctuate. It has led to more than $1 billion in fines and sanctions from the CFTC and the U.S. Department of Justice, which has targeted these practices. In one recent case, a former employee of J.P. Morgan was found guilty of spoofing.
The Dodd-Frank Wall Street Reform and Consumer Protection Act explicitly prohibits spoofing. Spoofing occurs when a person modifies or cancels an order prior to its execution. According to the CFTC, spoofing must be done “with scienter.” A legitimate cancellation or modification of an order does not qualify as spoofing.
The Justice Department has launched a new initiative aimed at enforcing anti-market manipulation laws in the futures and options markets. This initiative targets market manipulation in different asset classes, including commodities. If successful, this initiative could lead to hefty fines and jail time for traders and brokers. It also aims to identify potential misconduct across various institutions.
Market manipulation involves rigging quotes or prices to make them look like there is more demand than there actually is. The manipulation of stock prices can cause prices to rise or fall dramatically. These methods are especially common for microcap stocks.