Trading

What are the types of trading frauds?

Alex Walia

June 23, 2026

2 Min Read

Trading frauds occur in many financial markets worldwide, including stocks, commodities, forex, cryptocurrencies, and derivatives. Common types include:

1. Pump-and-Dump Schemes

Fraudsters buy a low-priced asset, spread false or misleading positive information to inflate its price, and then sell their holdings at a profit. The price usually collapses afterward.

2. Ponzi Schemes

Returns paid to earlier investors come from money contributed by new investors rather than legitimate profits. The scheme eventually collapses when new investments slow down.

3. Pyramid Schemes

Participants earn money primarily by recruiting others rather than through legitimate trading or investment activities.

4. Insider Trading

Trading securities based on material, non-public information obtained illegally or in breach of trust.

5. Market Manipulation

Activities designed to artificially influence market prices or trading volume, including:

• Spoofing (placing fake orders)
• Layering (multiple deceptive orders)
• Wash trading (trading with oneself)
• Cornering the market

6. Front Running

A broker or trader executes orders for their own account before carrying out a client’s large order, benefiting from the expected price movement.

7. Churning

A broker excessively buys and sells securities in a client’s account mainly to generate commissions.

8. Boiler Room Fraud

High-pressure sales tactics are used to convince investors to buy worthless or highly speculative securities.

9. Fake Investment Platforms

Fraudsters create websites or apps that appear to be legitimate trading platforms but are designed to steal deposits.

10. Forex Trading Scams

Fraudulent forex brokers may manipulate prices, refuse withdrawals, or falsely promise guaranteed profits.

11. Cryptocurrency Trading Fraud

Common examples include:

• Fake exchanges
• Rug pulls
• Fake token offerings
• Market manipulation
• Impersonation scams

12. Binary Options Fraud

Unregulated operators manipulate outcomes or refuse withdrawals while promising unrealistic returns.

13. Signal Provider Scams

Individuals or groups sell “guaranteed winning” trading signals that are fabricated or unproven.

14. Copy Trading Fraud

Scammers falsely claim exceptional trading performance to attract investors who automatically copy their trades.

15. Account Management Fraud

A supposed professional trader takes control of client funds and either steals the money or reports fake profits.

16. Affinity Fraud

Scammers target members of specific communities, professions, religions, or social groups, exploiting trust within the group.

17. Deepfake and Impersonation Scams

Criminals use fake videos, voice cloning, or stolen identities of celebrities, executives, or financial experts to promote fraudulent investments.

18. Trade Allocation Fraud

A trader allocates profitable trades to favored accounts and losing trades to other accounts after seeing the results.

19. False Performance Reporting

Investment managers or traders manipulate records to exaggerate profits and hide losses.

20. Advance Fee Fraud

Victims are asked to pay upfront fees for access to exclusive trading opportunities, funds release, or guaranteed profits that never materialize.

Common Warning Signs

• Guaranteed or risk-free returns
• Pressure to invest quickly
• Unlicensed brokers or platforms
• Secret or “exclusive” strategies
• Difficulty withdrawing funds
• Unrealistically consistent profits
• Lack of transparency about risks

Most financial regulators worldwide treat these practices as illegal and can impose fines, trading bans, asset seizures, and criminal penalties on offenders.