Ramesh to his friend Suresh: I am planning a trip to Dubai with my family.
Suresh: That’s great! But how come you manage your finances as you just run a small business like me?
Ramesh (showing a YouTube video on his mobile): Yes, we ran the same business but watch this video. I came across a strategy to trade in forex where I am making good profits by trading on the Quotex platform.
Suresh: Forex trading? Are you out of your mind? Don’t you know that it is illegal and unauthorized trading in India?
Ramesh: There is nothing like that, there is not one but multiple videos where Youtubers are guiding to trade and this particular have added me to his VIP group as well.
Suresh: Stop doing this right away, as you can get into big trouble.
Ramesh: You can’t see me ahead of yourself and just saying all this out of jealousy.
Suresh: Okay, if you don’t believe me then let me aware you of the dark reality of forex trading and influencers promoting it.
It is good to follow finfluencers, but at the same time important to stay aware of the market regulations that differentiate between authorized & unauthorized trading in India.
How Forex Trading Works?
Now many of you confuse regulated currency trading with forex trading. However, there is a difference.
Currency trading in USD, EUR, JPY, and GBP is regulated by SEBI and could be done on the platforms of registered stockbrokers. However, after April 01, 2024 one cannot trade in naked currency contracts either.
Other than this, trading in any other foreign currency is neither authorized nor regulated by SEBI or RBI hence any issue or losses you face in this trade can’t be reported on either of these platforms.
Instead, as per the Foreign Exchange Management Act, 1999 (FEMA) regulations, if you got caught in trading forex in India, then you are liable to pay three times the trading amount or 5 years of Jail or both.
Now, to be aware of the same, RBI issued two notices in February 2023 and December 2023, where it provided the list of 35 trading platforms including Binomo, iqOptions, OctaFX, Quotex, Olymp Trade that have been banned by RBI.
But even after such news and regulations, there are a few Youtubers who promote such platforms for their benefit. They first attract traders by displaying their fake lavish lifestyle.
Later they created a paid video where they influenced their followers to trade in such unauthorized illegal trading platforms. Now the question is whether they are not aware of the regulation or they are but do it for their interest.
Here are some of the YouTube channels that are promoting one of these platforms, Quotex by creating multiple videos around the same.
- Satya Trader with 55k subscribers and 2.5 lakh views.
- Modern Trading with 47k subscribers and 2.5 lakh views.
Along with these, there are many other channels with a subscriber count of around 2.5 lakhs. Now these fake finfluencers not only influence you to trade in Forex but also create FOMO.
They further attract users by providing them with VIP groups if they register using their links and add at least ₹50,000 to their trading account. Further, they provide tips or recommendations. Now irrespective of whether their tips are helping you to make money or not they are making money for sure.
How?
Hidden Benefits of Fake Finfluencers Behind Promoting Forex Trading
Now, these forex trading platforms generally provide upto 7% of the commission on the trading turnover. Not limited to this further they earn a brokerage sharing up to 80%.
So let’s calculate their average earning. Let’s assume that on one Youtube the views were 1,00,000. Assuming 1%, 1,000 of users registered on the platform. Each user added ₹50,000.
Assuming the commission to 5% of the total turnover:
=5%*50,000
=₹2500
No. of Users = 1000
Total earning from commission = ₹2500*1000
= ₹25,00,000
Shocked?
This is just an estimated value. Beyond this, they earn from the brokerage you pay on placing every unauthorized and illegal trade.
Now the objective of this blog is just to create an awareness of how a misinfluence by your favorite YouTuber can get you in trouble.
What if You Lose Money in Forex Trading?
Let’s look at the other side.
Every other day you come across one or the other technical glitch in the app or a scam or fraud by a registered entity in the stock market. Now there are provisions to report such scams and the possibility of getting a refund of losses as well.
But assume a scenario where one particular day your forex trading app stops working or you encounter any other issue. As a consequence, you are not able to log in or withdraw your funds.
Now what?
You can’t reach out to SEBI, since it is not regulated, nor you can report to RBI because forex trading is unauthorized. Even if you try to do so, you would be penalized with three times the value you put in the trading account or sentenced to 5 years JAIL.
Thus, you got trapped between death and the devil and left with no way for you to go.
Eventually, you will end up losing your hard-earned money in the greed of earning quick gains.
Ramesh: I’m completely shocked. I had no idea about this. Thank you so much, Suresh! You’ve saved me from getting scammed.
Suresh: It is not a bad idea to let your money work for you but at the same time it is important to stay alert and aware of the regulations as well.
Just like Ramesh, it’s time for everyone to stay alert and protect themselves from getting scammed. Even if you’re taking advice from others, it’s crucial to distinguish between what’s right and wrong. After all, it’s your money, and it’s your responsibility to safeguard it.
