Ponzi schemes are a fraudulent investment scams operation where the operator, an individual or organization, pays returns to its investors from new capital paid to the operators by new investors, rather than from profit earned by the operator.
What is the lesson for forex traders? There are several things that could be said.
The first lesson is fairly basic—if it sounds too good to be true, it probably is. This is easy enough to see with investment funds, but the same can happen in the forex market. Since the advent of online trading, there have been many instances of “brokerages” or forex opportunities that were little nothing more than scams. Whether a brokerage, some type of forex opportunity, or even a robot, look at the promised returns to see if they are realistic.
A second lesson also emerged from the Madoff fiasco: regulatory agencies are never an absolute guarantee. Just because a brokerage or investment fund falls under the SEC is no assurance that your money will be safe or even that the investment is legitimate at all. Remember that being under a regulatory agency is a far cry from FDIC insurance. In 2003, Madoff thought he was finished when the SEC investigated his fund. Instead, he was shocked that they didn’t even ask to look at his records. If the agencies that were supposed to regulate funds like Madoff’s failed once, they can and will fail again.
Simply put, no investor in any sector is ever free from the responsibility to exercise simple, common sense.
Be careful. Use your head. Don’t get greedy, or you could end up losing an awful lot of money.