Most people have seen ads for investment scams on social media or other websites. There is very little oversight of which advertisements make it onto websites. Anyone looking into investing online will have their targeted ads filled with scams. This allows scammers to victimize countless people, stealing hundreds or even thousands of dollars from each victim.
Chargeback companies developed as a response to these scammers. They provide fund recovery services for victims, helping them recover their money.
How Do Online Investment Scams Work?
There are more distinct types of scams than anybody could ever count. They vary so much that it’s hard to draw a line between investment scams and the other types.
The core of these scams is the transfer of money from the victim to the scammer, with the promise of delivering some financial asset. These assets can be just about anything, but most online financial fraud involves Forex, CFDs, and binary options.
Forex (foreign exchange) involves the trading of different national currencies. These currencies fluctuate in value compared to each other, allowing traders to buy low and sell high to earn a profit.
There are many legitimate forex brokers and many honest forex traders. Scam forex brokers ride on the reputation of legitimate brokers to trap their victims. New investors hear about how much money professional forex traders make and imagine that they can quickly get a piece of the pie for themselves.
The fluctuations of forex currencies are typically very small. To multiply these small changes, brokers allow traders to trade at leverage. If a trader’s position has a leverage of 1:10, a change of $0.01 translates to a profit of $0.10 instead. This also means that small fluctuations can quickly reduce a position to zero.
Scam brokers advertise leverage that is higher than legitimate brokers allow, playing on the hopes of investors who think forex is their way to get rich quick.
CFDs are a derivative asset. When you buy a CFD of an asset, you’re never actually purchasing the asset. Instead, you agree to pay a specific price for the asset at a specified time. If the price goes up in the interim, you make a profit. If the price goes down, you make a loss. CFDs are most often derivatives of stocks, commodities, and cryptocurrencies. Financial regulators strictly regulate these assets. Scam brokers offer traders a way around these assets, offering high leverage and other perks.
Binary Options Scams
Binary options were once much more popular than they are today. This is because most countries have made them illegal. Traders essentially bet whether an asset’s price will go up or down. That’s why they’re called binary.
Inexperience investors think that this makes trading simpler, but it doesn’t. Traders should avoid binary options altogether. Any broker offering them is almost surely a scam.
General Scam Tactics
While the specific assets vary, there are a few common ways that all these scams draw in victims.
Fake celebrity endorsements are widespread, especially in ads on social media. The ads state that some celebrity has made millions trading with that broker, but it’s a complete lie. Even some registered brokers do this, and many have faced significant fines from their financial regulators.
Scam brokers advertise that their platforms offer automated or robotic trading. They claim that an advanced algorithm will make trading decisions for you and that the algorithm will always make the right calls. This again plays to the easy money crowd by making big promises that they can’t possibly deliver.
How Do Things Go Wrong?
Once the investor has made a deposit, there are a few different ways that scammers spring their trap. The most common is withdrawal denial. Once a person has made some money or had enough of the broker, they try to withdraw their funds. They quickly find that this is impossible. The broker demands that the trader verifies their account before withdrawing their funds but never accepts their verification. They could also point to some obscure part of their terms and conditions that prevents a withdrawal because the trader hasn’t met the terms of their new account bonus.
Others are less subtle in their scams. Brokers, sometimes, set up a new website, launch a social media marketing blitz, and wait for new traders to pour in. Once enough traders have made their deposits, the broker disappears. They take their website down, and most investors won’t have any ability to track them down. They operate from offshore havens, which means that they face little chance of reprisal.
Where Do Chargeback Companies Come In?
When investors realize that they’ve become the victims of a scam, they’re often unsure about what to do next. Sometimes they’ll call their bank, hoping to have the transaction reversed. The traders don’t know the internal bank processes they would need to get their money back. A chargeback company has that knowledge. They understand precisely what they have to do to get your money back. They are highly specialized, with the specific toolset necessary for handling online financial fraud.
Tracking Down Anonymous Scammers
One of the key competencies of chargeback companies is breaking through online brokers’ anonymity. Scam brokers use their anonymity as a shield. They have fake office addresses, fake parent companies, and fake phone numbers. If an investor can’t initiate contact with a broker to ask them to return the money in good faith, they can’t establish their case for a chargeback. Many chargeback companies, Action Refund, for example, specialize in tracking down these brokers.
More often than not, the broker doesn’t have a license from a financial regulator. Registered brokers are much easier to find, as their details are on file. Unregistered brokers are also usually operating out of offshore havens, making them even harder to find. Chargeback companies can cut through this red tape and establish the critical first step of making a demonstrated effort to begin a refund negotiation with the broker.
Navigating Financial Policy
Any victims who establish communication with the broker can contact their bank or payment processor to initiate a chargeback claim. Unfortunately, these claims are very complicated and require specific documentation and formatting. Chargeback companies know exactly what the bank or payment processor requires to push through a successful chargeback.
Good chargeback companies are efficient in gathering information. Action Refund is a prime example of simplifying this process for scam victims. Many chargeback companies ask for many more documents and records than needed. A company with a detailed understanding of the internal workings of banks and payment processors can identify the critical documents for each case.
Handling Client Information
Any scam victim should understand the importance of safeguarding sensitive information. In fact, this should be the top priority when choosing a chargeback company to handle your case. Many illegitimate chargeback companies function as phishing scams, trying to steal personal information from people who are already victims.
Any potential clients should investigate if a company is compliant with the relevant personal information protection legislation within their country. They should also shy away from companies that don’t have things they would expect of a legitimate business, like phone lines and an office address. Any company that only has an online presence could be a scam.
Another quick check is to see where the company is operating from. The United States, Canada, the UK, and Israel are the most prominent centers for legitimate chargeback companies. It would be best to stay away from companies based in offshore jurisdictions.
Is a Chargeback Company Right for You?
If you have lost money investing in an online scam, a chargeback company could be your best chance to recover your funds. You can try to navigate the chargeback process yourself. Still, there could be unexpected hurdles that could permanently damage your chances.
Seeking out a finance lawyer could also be effective, but they charge higher rates than a chargeback company; also, most chargeback companies have free consultations. So, your best bet is to give these companies a call and see what they can do to help you today.