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A Licensed Broker Can Still Be a Scam Broker–How to Stay Safe

A license is like a Good Housekeeping seal of approval for brokers. Many people look for a broker with a license and then stop asking questions. Although it is a good idea to value a license when choosing a broker, being regulated or at least appearing to be regulated is no guaranteed protection against forex trading scams. 

In fact, an expired or third-rate license is like a fig leaf that can help scam brokers pass themselves off as legitimate. Before signing up with any broker, it is important to look at not only their license but their reputation, services, and reviews from reliable sources. Since many online broker reviews are fake, it is important to seek those that are created by experts, such as Trader Defense Advisory. 

In this risky environment, you need to stay safe. Trader Defense Advisory experts will help you evaluate whether an opportunity is legit or fake. If you have lost money or are experiencing fund withdrawal problems, contact TDA experts who are experienced in dealing with all types of scams and can help you seek redress for your claims. 

Anatomy of a Broker Scam: Former Registered Broker and Attorney Swindles Investors of $25 Million

We can learn how to stay safe and avoid forex scams and other trading frauds by looking at the headlines. This fraud is an example of the kind of broker scams TDA deals with on a daily basis. In April 2021, Daryl Bank, a Virginia attorney, and formerly licensed securities broker was found guilty of defrauding investors, mainly elderly clients of $25 million.

This is a particularly upsetting story since he and his partners sought out retired people and those preparing for retirement. The investors cleared out their 401 (k)s and divested from reliable investment vehicles such as IRAs because they were persuaded by Daryl Bank’s extravagant promises of huge returns. 

Daryl Bank operated his scam out of his Florida office and had investors all over the country. He enlisted the aid of several accomplices who were also charged. Together, they attracted 300 investors and persuaded them to invest in fake companies supposedly run by Daryl Bank. Instead of being used for investment, the funds bankrolled Bank’s luxurious lifestyle between the years of 2012 and 2017. 

What We Can Learn from This Broker Scam

Where did these clients go wrong? How would they have known that Daryl Bank was a fraudulent broker? He had a license and was also an attorney. Were there any signs that could have protected these clients? 

The reality is that any one of these 300 clients could have done some research to discover the truth about Daryl Bank before investing a dime in his false companies. The following are telltale factors of this broker scam that are features TDA sees repeatedly in forex scams and broker frauds. 

  • Daryl Bank’s License Was Out of Date
  • Bank charged unreasonable fees
  • Bank encouraged investment in assets he owned
  • Bank persuaded older people to divest from their reliable retirement funds

Daryl Bank was a licensed securities broker, but this ended in 2010. His license had been taken from him by the SEC. Despite this Bank continued to operate a private equity company called Dominion Private Client Group, which was fraudulent and sold unregistered securities. Clients simply saw the license, the fact that Bank ran a private equity group, and if they did not dig deeper, they may have had the false impression he was reliable. 

Another bad sign that this was a broker scam was that Bank charged fees starting at 20% and going higher. These of course went right into his pocket. Researching moderate fee rates for legitimate brokers would have caused many of these clients to look elsewhere. 

In addition, it should be suspicious when a broker pushes investment in his own companies. Usually, legitimate brokers offer a variety of trading vehicles, like stocks, CFDs, and forex. Someone asking for investment in their own entity makes it easier for them to simply pocket the money, which is what Bank did. 

An established, reliable broker will be able to accommodate IRAs and 401(k)s without expecting clients to divest from these secure funds. Usually, they will hand over the management of these funds to a new broker rather than getting rid of them and starting over with new management.

3 Questions to Ask About a Regulated Broker 

  1. Is the License Current?
  2. Is the License Genuine? 
  3. Where Is the License From? 

Anyone who would have checked Daryl Bank’s license would have seen it was no longer current and in fact, had been taken away from him by the SEC. It is also vital to check which regulator gave the license to the broker. A broker can have a license from a third or fourth-tier regulator and still easily get away with forex trading scams and broker frauds. Insist on working with brokers who have first or second-tier licenses. 

Do Research First, Sign Up Later

The internet has made researching products and services easier. Take advantage of technology and do a simple Google Search on a broker you are considering signing up with. Taking a few minutes to research his or her licensing and reputation can save you thousands of dollars that could be lost to forex scams or fraudulent brokers. 

Sometimes it can be hard to tell whether a broker is legitimate or not. That is where a service like Trader Defense Advisory can be helpful. Our experts have decades of combined experience in the financial industry and are aware of what to look for. We can also help you with fund recovery in the case of broker scams or forex trading scams. 

Have You lost Money in Broker or Forex Scams? Talk to TDA Experts Today

If you have been the target of a forex broker scam, talk to Trader Defense Advisory. Our team of experts has vast combined experience dealing with broker scams and advocates for our clients. Consult with us and we will create a claim and help you get started on the path to fund recovery.

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