Is MT5/MT4 a scam? MetaTrader 5 Fraud Tactics: An Anti-Fraud Guide

The following post is an adapted translation of an article written by Simon Xiao from February 11, 2021 from Trading Asia. The original article in Chinese can be found at the following link.

MT5/MT4 is currently a very popular foreign exchange (forex) trading platform. Most foreign exchange traders choose to conduct foreign exchange transactions on these two platforms because they trust their security. However, some platform users have reported that they have encountered fraud on MT5/MT4 and suffered losses. Thus, in this article, I will summarize and sort out the issues related to MT5/MT4 fraud, and also introduce you to forex brokers with better security to help you complete each trade with peace of mind.

1. What is MT5/MT4? MT4 vs MT5

MetaTrader 4 (MT4) was developed in 2005 by MetaQuote, the Russian financial software market leader, as a platform dedicated to forex-related trading. It became one of the most popular forex trading platforms soon after its launch, as it allows users to perform highly customizable operations based on their trading preferences and supports automatic execution of trades using algorithms.

If MT4 was specifically designed for CFD [contract for differences] foreign exchange tools, then the main purpose of MetaTrader 5 (MT5), released by MetaQuotes in 2010, was to provide new features and improve some of the existing ones from the previous version (MT4). In addition, MT5 adds more advanced graphics and better analysis tools to the MT4 base, such as an integrated basic calendar, dedicated indicators, and a black box for programming, all of which make the user's operation easier.

You can refer to the table below to understand the difference between Simple MT5 and MT4.

2. Is MT5/MT4 a scam?

I must tell you loud and clear, NO! MT5/MT4 is actually just a software that connects to different trading platforms and allows trading through your computer or smartphone. In other words, any trading done on the MT5/MT4 platform is essentially done between you and the broker or dealer, and MT5/MT4 is only a bridge to receive quotes and place orders during the trading process.

Since brokers or dealers have their own trading platforms, and MT5/MT4 only provides brokerage services, why do most brokers and dealers still generally choose to cooperate with MT5/MT4?

The main reason is that the operating cost for a broker or dealer to link with an established MT5/MT4 is relatively lower than building a trading platform from scratch. Moreover, the platform of MT5/MT4 is relatively complete and can support users to carry out data retesting, EA [Expert Advisors] automatic trading and other operations, which can meet the requirements and conditions needed for general forex trading. It is MT5/MT4's own cheap, convenient and efficient advantages that support the Metatrade series platforms to occupy a place in a world flourishing with trading platforms.

Therefore, the so-called MT5/MT4 scams have nothing to do with the MT5/MT4 platform itself, and MT5/MT4 is not a scam platform. If you lose money on MT5/MT4, in addition to the normal fluctuations in earnings, there is a high probability that you have encountered fraudulent brokers and dealers.

3. What are the common fraud methods of MT4/5 brokers?

1. Attracting customers under the name of MT5

Since MT4 has been discontinued and the new version of MT5 is now legally available in Taiwan, many illegal underground forex traders are conducting fraudulent promotions under the name of MT5. For example, on LINE, you may encounter a customer service agent with the avatar and nickname "Metatrade 5" inviting you to open an account with MT5 and recommending trading with those fraudulent forex traders. However, in reality, MT5's promotion service is not for general customers, as it requires a legitimate brokerage platform to join.

So if you get contacted by someone claiming to be MT5 customer service, don't trust them.

A fraudulent platform pretends to be the customer service for MT4/5 to scam unsuspecting individuals. Note also the misspelling: MateTrader5 [sic]

2. Exaggerated EA automatic trading returns

EA is one of the features of the Metatrade family of platforms. It is a program that compiles the investor's logic, judgment and algorithms into the computer and automatically places orders when the initial conditions are met. Compared to manual work, EA's can guarantee faster order and position placement and are more responsive to price and trend changes.

However, some illegal brokerages over-exaggerate the advantages of MT5/MT4 automatic trading, fabricating extremely low-risk and lucrative scams to attract investors, and once many investors are deceived into EA automatic trading, they experience retractions, liquidation/burst positions, or even lost all the funds in the account.

3. When withdrawing money, you can't withdraw money from MT5/MT4

The basic scam of some fraudulent brokers is a typical Ponzi scheme, i.e. by continuously absorbing new funds to repay investors' profits. However, some fraudulent brokerage firms that use MT5/MT4 after having a "lease" with Metatrade refuse to withdraw funds whenever investors want to do so in order to scam them, and they also shirk their responsibility to MT5/MT4. I would like to make it clear to you that, as mentioned earlier, MT5/MT4 is only a trading intermediary, and you should ask the brokerage firm that opened your account about the specific conditions and process for withdrawing funds, not about transferring funds from your account on MT5/MT4. In addition, even though most brokerage firms have a complicated and slow withdrawal process, it is still possible to withdraw funds.

As for those brokerage firms that do not allow for the withdrawal of funds, this indicates you have encountered a scam -- don't doubt it.

4. Developing pirated MT5/MT4 platforms

Since MT5/MT4 has an open API interface, many traders or fraudulent platforms develop their own pirated versions. If you are unfortunate enough to use a pirated version of Metatrade software, Because pirated versions of MT5/MT4 are completely controlled by the developer, the specific quotes and spreads will differ from the real data, but they are generally not so deviant from the norm as to attract your attention, but the small differences can eat up a lot of profit for traders over time. There is also the problem of frequent disconnections and unstable transactions on the pirated MT5/MT4. Sometimes you can't set a stop loss point, or the transaction is unsuccessful, or you can't even close a position, and the occasional glitch can make the loss significant. Therefore, I have posted a link to download the genuine MT4 and MT5.

MT4 download link (Google Play)

MT5 download link (Google Play)

4. How does one determine whether the foreign exchange platform/brokerage is a fraudulent platform? 1. Check the registered address and the website address

To determine whether a foreign exchange platform or brokerage is a fraud platform, a relatively simple method is to directly query the website's functional variable name information. The registered addresses of many fraud platforms do not match the actual website addresses. Even if the two are consistent, the fraudulent platform will not be registered for too long, yet they claim to have been operating in the foreign exchange market for many years, which is obviously one of the biggest flaws.

2. Check the regulatory agencies and the scope of regulation

There are many foreign exchange regulatory agencies, but the most authoritative are the British Financial Conduct Authority FCA , the National Futures Association NFA , the Swiss Financial Market Supervision Authority FINMA , the Australian Securities and Investment Commission ASIC , and the Cyprus Securities and Exchange Commission. CySEC etc. Illegal forex platforms and brokerage firms may pay for a weaker regulation, which is equivalent to no regulation, because they are not regulated by a formal agency. Or if they are really regulated by a formal agency, you have to pay attention to whether the agency's regulatory scope includes foreign exchange, if not, then these platforms and brokerages are still in an unregulated state when it comes to foreign exchange.

Read more→Analysis of foreign exchange regulatory license

3. Verify the financial regulatory license

Please note that even if you are using genuine MT5/MT4 software, it STILL may not mean that the foreign exchange platform and brokerage firm is necessarily legal and compliant, because Metatrade does not verify whether the company purchasing the product has a financial license. For some fraudulent platforms and brokerage firms claim to hold licenses issued by formal regulatory bodies, but the actual information given on the website is all false, and the license number provided is not available on the official regulatory agency's official website. There are also platforms and brokers who use non-regulatory bodies, such as New Zealand FSP license to deceive users. In fact, the real regulatory agency in New Zealand is FMA. When we do not know much about the regulatory system in foreign countries, we should check which one is the official regulatory agency and verify the existence of the license before we start trading.

For example, let's take Mitrade, which is regulated by ASIC, as an example, and check the authenticity of the Mitrade license on the ASIC official website. Step 1: Go to the ASIC official website, address: https://asic.gov.au/ and select "Professional registers" at the top right of the page.

Step 2: Enter your company name (Mitrade) or license number (398528) on the verification page. Note that only one of the two can be selected. Select "Australian Financial Services Licensee".

Step 3: Click on "search" to find out the information about Mitrade's registration with ASIC.

4. Understanding the "biography" of the company and employee information

Many fraudulent platforms and brokerage firms are licensed companies. They may claim to be a branch or regional headquarters of a well-known company with a formal regulatory license, but they have little knowledge of the company's biography and are vague about regulatory content, and even the employee information is randomly found on the Internet. Therefore, when you identify the platform and brokerage firms, don't forget to take a look at the company information provided by the platform, and you may be able to find clues to uncover the fraud here.

Mitrade LinkedIn Page

5. Browse the contents and functions of the foreign exchange platform

Generally speaking, scam platforms and brokerages are short-term cash-outs and do not have long-term business intentions, so you can fully browse the websites of these platforms and brokerage firms, personally try and analyze the content and functions provided by the platform. You can also compare multiple platforms and brokerages, and be wary of platforms and brokerages with obviously crude and shoddy page designs and relatively large data errors. You should start to be vigilant.

6. Be wary of the advertisements of platforms and brokerages

Many illegal platforms and brokerages and their usual tricks are to attract investors into the game by advertising high rates of return and risk-free trading, and even more exaggeratedly, stable profits without losses. These are obviously old tricks, but investors still fall into the trap. I would like to remind you that whether you are trading foreign exchange or other financial products such as securities and cryptocurrencies, they are essentially investments, so as long as they are investments, there will be risks, there will be price fluctuations up and down. Aside from scammers, no one dares to make promises in the investment world that they will not lose money. The more strictly regulated platforms and brokerages are, the more they emphasize risk, and even investigate and test investors' risk-taking ability before opening an account.

5. What should I do after being scammed on the MT4/MT5 platform?

If the investor has the misfortune of being scammed, I believe that one can try to minimize one's losses by working in the following directions:

1. Remain calm and collected. Even if we already know that the platform is a fraudulent company, there are still many people who don't know who they really are. Be an activist, a whistleblower. Post on FB, contact the media or go to their fan groups to expose them and get their attention so that they can deal with us.
   

2. Report the case as soon as possible. If the fraudulent companies on the MT4 and MT5 platforms are registered or have offices in Taiwan, the first time to report the case, the police can be the first to locate the suspects based on clues.
   

3. [Taiwanese specific] Follow the website of the Ministry of the Interior Police Department for a list of scammers and fraudulent schemes that have been exposed. The following link is to the Taiwanese Ministry of the Interior Police Department's 165 National Fraud Prevention Website.

Finally, I would like to remind all readers that everyone must keep their eyes peeled and open an account with a proper foreign exchange broker. Editor's note: For those who believe they may have been scammed, please check out the following resources, and contact the GASO Live Chat:

1. Forex Peace Army: an online forum on foreign exchange with reviews of various brokers.

2. Five steps to do after you've been scammed on MT4/5

3. Report your incident to the CFTC (for those in the U.S.)

4. Is your forex broker a scam?

5. Can you actually get your money back from a fraudulent broker?

6. Beware of recovery scams; do your due diligence regarding ANYONE who claims to be able to get your money back.