PAMM account fraud

Until recently, investing in PAMM accounts managed by traders was perceived as a high-risk investment. All investors were well aware that their account could be managed by an amateur, and the slightest deviation from the manager's trading strategy could lead to a complete loss of funds.

However, despite the riskiness of this investment method, every brokerage firm had both talented individuals who skillfully managed their money, and investors who were willing to take desperate risks and provide funds to a trader.

Investors have never had any issues with PAMM accounts, as this system of interaction between traders and investors suits both parties, as the broker and its PAMM system act as guarantors of the inviolability of funds (there is no possibility of withdrawing the investor's money).

All sorts of drawdown and loss limits allowed investors to exit the system with minimal risk, and for traders dreaming of large investment sums, the PAMM system's publicity allowed them to attract constant influxes of investment.

Overall, the PAMM system itself is an excellent and unique tool for interaction between investors and traders. However, many scammers have emerged around this type of system. Previously, no one could even imagine that PAMM accounts could be the subject of such scams.

High-profile company bankruptcies.

However, the first shocking news about the closure of the forex broker MMSIS and the investigation by regulatory authorities revealed that it was the PAMM system that became the shell behind which an ordinary pyramid scheme, or HYIP, .

Initially, the company operated as a normal company, where everything was clean and PAMM account managers' rankings fluctuated dynamically from day to day. However, one day, a top 20 trader emerged who consistently generated profits for investors, made no mistakes, and none of them lost money.

You must admit, it's quite mystical that 20 traders are confidently holding their positions and none of them are making any mistakes, even during the most difficult market periods, when Greece alone, with its statements, was doing whatever it wanted with the euro exchange rate.

But the company didn't stop there, even creating its own top-20 index, which it offered investors the chance to profit from. Ultimately, one day, the company had amassed millions in investor money and simply disappeared.  

The above-described case was just the first warning sign that whoever holds the PAMM account can manipulate it however they want.

The second wake-up call for investors came when one of the most popular PAMM platforms, Forex Trend, and its subsidiary, Paneton Finance, went bankrupt. In this case, the brokerage scammers took things to the next level, offering investors PAMM 2.0, which allows investors and traders to share risks and profits equally.

Agree, no trader is ready to take on such risks, and if he can compensate for the manager's loss, then why take the money?

But for some reason, investors were unwilling to take a realistic look at the whole picture, and the company simultaneously created a fictitious, stable backbone that supposedly generated profits. As you can imagine, the two brokerage firms ultimately turned out to be a typical Ponzi scheme, and the investors' funds disappeared.

Such damage to the reputation of the PAMM system as a whole makes one question whether this type of investment is even worthwhile. However, one shouldn't paint everyone with the same brush, as there are companies that operate transparently.

How things are with real brokers.

For example, at Alpari and InstaForex, the manager ratings are so dynamic that it's very difficult to see the same trader in their position for the same month.

The number of PAMM accounts destroyed by traders is sometimes simply astonishing. However, this reality must be accepted, as traders lose more often than they earn.
How can you avoid scammers?

You've probably all encountered annoying calls from brokerage companies that guarantee you a certain percentage of profit if you invest with certain traders. If you're guaranteed something, that's a good reason to avoid the company, as no one offers guarantees in investing, not even the largest hedge funds.

It's also important to understand that stable traders can be counted on the fingers of one hand, so investments should be short-term and last no more than 1-3 months per trader. Even if you fall into bad hands, leaving the company promptly will not only allow you to save your money but also withdraw any earnings you've already earned.