Forex Scams Exposed by Godfrey Onyango - HTML preview

Chapter 3: Managed Account Fraud

Managed account fraud occurs when someone offers to trade forex on your behalf, promising professional management and consistent returns. You deposit money into an account they control, and they supposedly trade it for you, taking a percentage of profits as their fee.

The appeal is understandable. Professional traders with years of experience should be able to generate better returns than amateurs, right? The problem is that most "professional traders" offering managed accounts are not professionals at all. They are fraudsters who will steal your money through various methods.

Methods of Managed Account Fraud

Method 1: Direct Theft

The simplest form of managed account fraud is pure theft. You deposit money into an account the scammer controls. They may show you fake trading statements showing profits to encourage additional deposits. When you try to withdraw, they disappear or make excuses until you give up.

Method 2: Unauthorized Trading

Some scammers do actually trade your account, but recklessly. They take enormous risks because it is not their money. If the trades win, they take a percentage. If the trades lose, you bear all the losses. This creates an asymmetric risk where the "trader" has everything to gain and nothing to lose.

Method 3: The Ponzi Structure

More sophisticated managed account operators run Ponzi schemes. They collect money from new investors and use it to pay "returns" to earlier investors. The trading statements showing consistent profits are entirely fabricated. As long as new money keeps coming in, the scheme continues. When recruitment slows, the scheme collapses.

Case Study: KP Financials

In November 2020, the Texas State Securities Commissioner entered an Emergency Cease and Desist Order against KP Financials, LLC, an Austin-based firm fraudulently soliciting investments in managed forex accounts.

The firm, incorporated only months earlier, was telling potential clients it had been operating for years. They claimed to employ more than 40 account specialists and 20

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Forex Scams Exposed | Financial Fraud Prevention Guide

traders. Their marketing promised 3% monthly returns with "minimal risk and maximum reward."

The fraud included:

• False claims of registration with the "Texas SEC" (no such registration existed)

• Claims that principals had passed the Series 34 exam (they had not)

• Management agreements authorizing the firm to act as an investment adviser (they were not registered as investment advisers)

Warning Signs of Managed Account Scams

• Promises of consistent monthly returns (legitimate trading has ups and downs)

• Claims of being able to generate high returns with little or no risk

• Pressure to deposit quickly to catch a "limited opportunity"

• Reluctance to provide verifiable track records audited by third parties

• Requests to send money to personal accounts rather than regulated brokerages

• Unwillingness to answer detailed questions about trading strategy IMPORTANT: In the United States, anyone managing forex accounts for others must be registered with the CFTC and NFA. Always verify registration at NFA.futures.org before considering any managed account service.

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Forex Scams Exposed | Financial Fraud Prevention Guide