Tips to avoid getting scammed in Forex

Props to Spsantos for the idea.

I see lots of newcomers on this site discussing different brokers. Occasionally, I will see someone saying "so and so ripped me off". And too often, the brokers mentioned are really questionable.

I don't want to get off on a rant here but if you're going to entrust money to a broker, know who you're dealing with. My methods for that are not foolproof but most of the time, they will help you separate scam artists or potential scam artists from the legit brokers.

-How did you hear about them?

Did somebody come here, posted 5 times and 3 out of 5 posts where about how great his broker was before he got banned? It's rarely an overenthusiastic newcomer and often someone paid by the broker to post drivel in the hope of drumming up business.

-Domain name

forexhappy.com? ifxorgasm.com? forexsuperduperprofessional.com? weguaranteeyouwontlosemoneyinforex.com? All of those are outrageously cheezy domain names which I have made up. The picture I'm trying to paint is that if the name sounds cheezy, I would even say "scammy", I would question it. I would even question it if it was a SERIOUS sounding name like "wedontfuckaroundFX.com". But whether it sounds cheezy or not. Take the domain name and move on to the next step.

-Whois records

I can't stress that enough. Check the WHOIS records. It's free, quick, simple and can save you from getting scammed.

My favorite spot to check whois records is Name Intelligence's Whois Source. Take the domain name and put it at the end of http://whois.sc/. So for instance, if I would want to look up Oanda.com, I would type http://whois.sc/oanda.com.

You'll see information such as the website title, the META description, etc. That's not what we're after. Scroll down the page a bit and you'll see something that begins with Whois Record. You will see the Registrant's address and much much more. But we'll get back to that in a minute.

Whois Record

Registrant:
OANDA Corp.
140 Broadway
New York, NY 10005
US


Check out the actual site you're investigating. Is the address matching? If they claim to be on Wall Street, why is the Whois record showing a registrant's address in Lagos? Would be suspicious if it happened right?

Domain Name: OANDA.COM

Administrative Contact:
Florian, Chris http://source.domaintools.com/email....5D=transparent
Oanda Corp
30 St. Patrick Street Suite 300
Toronto On M5T 3A3
CA
416 586 0328 fax: 416 593 0185


Administrative contact. Does the person on the administrative contact have anything on the web? Google the contact name but do it using quotes. Maybe you'll see things such as negative threads about that person/broker on different forums and maybe they are not Forex related. Maybe a BBB report will come up as a search result. There could be a billion things that comes up that would make you say "this isn't right". You can also use variations in the Google search such as "Joe Blow" + "Forex", "Joe Blow" +"City name". Maybe something nasty will come up, maybe you'll find out that he's a member of the Chamber of Commerce's baseball team, that he's a Saggitarius and likes to play Chess. The more you find out, the better. Remember, know who you're dealing with. You may have to call and yell at him over your account someday



Run a Google search on the phone number. Are the results coming up looking good? For legit brokers, I'll normally see the broker's site as the first result. If it's bad, I see a home phone listing. I once saw a phone number linked with a garage's listing. The guy running the site was a mechanic and the phone number was his parent's. What gave that guy the impression he could be a Forex broker is beyong me but that's why you have to cover yourself. I wish I was joking about that mechanic story by the way.



Google the email address too. It's interesting what comes up sometimes.


Technical Contact...


Same as the Admin contact. Sometimes the name is the same, sometimes it's not. Just google it if it's different.


Record expires on 03-Aug-2011.
Record created on 04-Aug-1996.
Database last updated on 25-Feb-2009 04:39:03 EST.


Using this example, it shows that the record was created in 1996. This to me is an indicator that they have been around for long enough that they are stable. In fact, that's the first thing I look at before looking at something else.


Post here if you have questions on my methodology and I will answer them to the best of my abilities. I won't do the research for you but will be glad to tell you what I know so you can do it yourself.

Wow, this is woderful....my VI (Vibes Index) on you change positive in an instant.. I must congratulate you and ask you that you keep up this good job. (easy on the whip you are wielding - hahaha)

Yours Respectfully,

Good advice.

There exist "anonymity services" for domain names that allow you to use a 3rd party address for registration. You can also buy a mailbox in another city too. So be sure you google the address as well.

If you want to learn the negative side of a service, type into google "servicename sucks" an "servicename problem" and "servicename bad reviews" and see what comes up. Also do "servicename forums" and see if they have an active forum. If it does, you can see first hand what ppl are saying.

You can also go here:
http://www.cftc.gov/marketreports/fi...fcms/index.htm

And get the financial data for the FCM in question (if they're regged with the CFTC, which most have to be now). That'll tell you exactly how much they have to cover positions.

There's also NFA's BASIC service. Any NFA regulatory action will be listed here:
http://www.nfa.futures.org/basicnet/

Search for the firm name. You'll notice some have multiple names, some of those names may or may not be related to the company you're looking for.

A search on oanda turns up no regulatory complaints, gives you their NFA number, tells you when (2003) they became an NFA member and who has a financial interest in the company. You can then click on those names to search thru and see if the principals of the company have ever had NFA actions against them.

Excellent post Rabid.

With regards to anonymity services, I usually put up a major red flag when I see that. The majority of the time, whenever an anonymity service is used, the address under the "contact us" section of the site will have either a P.O. box or some prestigious address (Wall Street, Canary Wharf for example).

If it's a P.O. Box, I classify it as a scam at worst or at best a company I don't want to deal with. No physical address, no money from me.

But if it's a street address, I will google it. I think I posted about it on here a really long time ago but there was this supposed broker headquartered on Wall Street. I googled the address on their site and I found out that the very suite they where headquartered in was shared by a bunch of other separate companies. 3 or 4, I can't remember. But I digress

So I googled the other companies and they where all related to Forex in one way or the other. One was a bizarre site concerning investing in art and forex. The names on one site where the same names as on another. So it was basically one small circle of con artists.

A search on "servicename sucks" and "servicename problem" does help. But use your better judgement as some items may just be the work of a disgruntled (former) client.

You can also check the NFA records.
You can search by, firm name, NFA ID #, individuals name, etc.

http://www.nfa.futures.org/BasicNet/

I want to post this under separate cover.

One thing to look at is the site itself. From a design and aesthetics standpoint.

Does the site look like it's something that could be whipped up in 5 minutes using Frontpage and MS paint? Does it look like it was the coolest site...in 1995? Or is the site professionally designed?

I'm not saying that a site has got to have the latest bells and whistles and must have been designed last week. But a site is a business's face. If they don't put any effort in their first impression, what makes you think that they will put any efforts into service? And whoever says "don't judge a book by the cover" obviously never took a marketing class.

If you're knowledgeable in html, have a look at the coding. Is it all over the place or not? Are they hotlinking graphics? Whether the site is a scam or not, if it's all over the place and has an amateur design, it shows lots about what the company culture can be like. Scam or not.

Yea, if you search the address you'll find out if there's others attached to it.

On the site design thing, be careful there. You can buy a template at template monster for really cheap, or get cheap template packs from ebay, and use one. They look pretty decent, but they're just cookie-cutter and cheap.

Good point. So if the site looks like you've seen it elsewhere, be careful.

Templates look "generic" ... ie: there's not a lot of topic or site-specific information on it. So look for site and topic-specific information, links and sub-areas on the site.

Like if you go to oanda.com, you'll see a sitemap with a lot of different areas. FXCM is the same way, ibfx and forex.com too. But go to "fxpro.com" and there's no sitemap. The site is basically a template w/ rollovers at the top, it's a block-by-block template site w/ stuff filled in. There's no obvious site map either.

If you really want to get into it, do a netblock lookup. Use nslookup on their servers and get their IP address. For instance fxtrade.oanda.com is 216.12.138.246. Then go to http://www.ip2location.com/free.asp and put in the IP.

It shows:
Sterling, Virginia. Servervault corp.

They are using Servervault. If you google for them, you'll find their an IT company that focuses in financial companies. They make an important issue of being compliant in different regulatory setups. They too have a sitemap, and it's obvious from looking at the whois of that company that they've been around since 1999 and are related to a small group of other hosts. It's clear this is not a fight-by-night company.

Let's try that on fxpro. Is in the UK, belongs to "telecity." If you look at telecity's website at telecitygroup.com you'll see that they're a co-loc provider. Basically you rent a server from them. There's nothing wrong with that, per sae, but it's no where near the level of oanda's upstream. They were created in 02.

Now let's try crownforex @ www.crownforex.com

No site map, some expanded info, but it looks like the main page is it.

75.126.213.131, belongs to "Client Intellect Inc" in Orlando Florida @ clientintellect.com

According to their site they're based in switzerland? Why is a european broker running from the US?

Clientintellect.com was created in 03. Their site is clearly a template site, and basically they're a windows hosting network.

Based on this we can clearly gauge the how developed each is. All 3 have rackspace somewhere, so they're not just a $20/mo hosting setup. But it's clear that oanda's more serious about it's business than the other 2.

Combine that information with the regulatory info at the CFTC and the NFA and you've got a clear picture of the company, it's principal officers and it's financial backing.

Wow! Thanks Rabid.
Would you be acceptable to posting your research on the other providers{which I am sure you have already done}?
This info is very much apprieciated.

Ditto and ditto... Wow. Talk about going to bed smarter than when you woke up...

Seems like there's only so much that can get posted on a thread like this one w/o getting redundant. Then it begins to go into obscurity. Maybe a redo into the Forex Articles section of the Rookie Discussion to keep it handy? Or a better solution I'm not aware of? Sticky?

It's just too good to lose or fade away.

There's another thing that comes to mind...

When looking at a broker's IP address you can learn a lot by seeing how many other machines they may have. Obviously if everything is on a single machine, that server is likely to get overloaded, probably at the worst of times. It's also cheaper, a company with 10 servers is more likely to stick around than a company that has 1 or 2.

So we can search around...

First, by typing in
site:sitename.com

Into google we can find out what is indexed on their site. Take a quick scroll thru the list and write down any subdomains you see (www.whatever.com, the www is a subdomain. Like fxtrade.oanda.com, the subdomain is fxtrade). Once you have that list, do an nslookup...

Nslookup:
http://www.webmaster-toolkit.com/ns-lookup.shtml

Do one for each of those subdomains and notice if they have the same IP, or if there's multiple IPs. Multiple IPs usually means that there's more than one server, altho a single server can have more than 1 IP, usually you'll only see 1. Certainly if they all have the same IP, or if there's only 1 subdomain, then there's a good chance they have only have 1 server.

You can perform the same search on MT4 servers too. All you need is the server name. If you can't find the server name, it's in MT4, in the config directory scattered in the .srv files. If you open it w/ notepad, it's a bit messy, but at the top you'll see stuff like: ibfx-mt4-07.interbankfx.com:443

That tells you the name of the server. It also tells you the scheme, there's prolly an -06, and -05, etc. If you can't find it that way, you can always just log in the way you normally do, go into the command prompt with win-R "cmd" and type "netstat" (without the quotes) into the box and hit enter. That'll print out a list of everywhere you're connected to.

You can also do a "class C" search, like here:
http://nerdlabs.org/tools/revdns.php

For instance the IBFX server is 66.114.120.37. It'll search 66.114.120.* to see what's there. What you'll see is a few SMTP servers, but no other MT4 server. Which sends up a big "WTF?" because I see "mt4-01.ibfx.com" in another file. So why aren't they there? Because if you reverse that IP, which is 66.114.120.31, you'll find it doesn't actually reverse to anything. Let me explain...

mt4-01.ibfx.com -> 66.114.120.31
But...
66.114.120.31 -> goes no where.

It's configured for a 1-way setup only. That's very telling. While it doesn't mean anything about their company, it does tell you that their IT people have overlooked this key detail. Would you want to invest a million dollars with a company who's IT people miss potentially important details?

Of course from this we also have the naming convention they use for servers. And with that we can find out that they have multiple servers.

It's also somewhat telling, if you do the google search and then look thru those subdomains, that they have a japanese language version at jp.ibfx.com, but that the site resolves back to the same netblock (66.114.120.27). In otherwords their "japanese language server" is located in the US. If you look at their spanish version site and resolve it, you get the same IP, 66.114.120.27, and their main website is 66.114.120.26. They have 1 server for all foreign languages, and odds are it's the same machine as the main web server.

If you do the netblock lookup from earlier you'll see they own the entire 66.114.120.* netblock, or atleast it's registered to them. A tracert will tell you who their upstream provider is, viawest.net. They're a co-loc facility. Basically ibfx has bought a few servers from them along with a netblock of IPs.

They don't just have servers sitting in their basement (which is certainly good), but it explains why they find it difficult to reboot their servers... since if their remote desktop freezes, they have to call the co-loc and have them do it. Explains why a 3am reboot at the EU open takes an hour. I wouldn't want to be that network tech, lol.

Compare that to oanda... 216.12.138.246

What you get is a whole list of servervault servers, just as you'd expect. The last chunk...

Shows that they clearly have multiple servers. While they do have some servers that don't reverse back, they have some that do too. Clearly their IT people are more dilligent about registering a reverse DNS back to their provider. However they don't own the entire netblock.

Maybe they don't need one tho, why would you spend a small fortune leasing an entire netblock if you don't plan to use it? There's perhaps some prudence there. You could look at that both ways.

All and all you get a good idea of what makes both companies tick from a technical perspective. Some of this can tell you how stable the company is, others just tell you how stable their servers are. Both are decent brokers, but both have their own issues.

Let's compare that with, say, crownforex.com. 75.126.213.131. A google search shows all their foreign translations are on www.crownforex.com. I see only 1 server there. If I do a reverse of 75.126.213.131 I turn up the co-loc name of their server, rather than a "crownforex.com" domain. That means they don't have much (if any) clout with their co-loc provider. It takes money, time and technical skill to get a reverse DNS to work, and the fact that the others have done this, and they haven't, that's very telling.

If you reverse it to si-sv2361.com and go to that URL you get "Invalid Hostname." If a single server was at that location, it wouldn't need a host redirect. That suggests that they're sharing the server with atleast 1 other domain.

If you run the class C search you get a lot of softlayer.net servers. If you go to softlayer.net they have prices on their
front page. You could get a server on their network for under $200 a month! Not much of an investment when they're asking to be a broker.