What some foreign exchange traders claim to be an industry that is becoming the latest "Black stock market," others warn is being utilized by scammers to prey on financially vulnerable communities.
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When former President Donald Trump approved legislation for a second stimulus check for American citizens on December 27, 2020, a cohort of social-media users had already prepared their unsolicited advice on how others should spend it. In fact, the words “LLC Twitter” trended at #16 on Twitter within one week that the $600 federal assistance began distribution. Members of “LLC Twitter”—also known as the subsection of the social-media site where alleged financial gurus notoriously share unwarranted financial recommendations—proposed that the Black community dig themselves out of their own systemic wealth gap by using stimulus money for things like starting a business or depositing it into savings accounts. Their hustle-heavy advice was met with criticism for its disregard to injustices that historically have stifled the Black community.
Has it ever occurred to LLC Twitter that there are people who don't want to be business owners, but would rather enjoy the small pleasure of life? Hustle Twitter is so empty, lacking of creativity and depth. When will you learn that your occupation isn't a character trait. https://t.co/ouLiqiJmZ2
— Golding (@GoldingGirl617) January 2, 2021
This tweet is for black llc twitter. An LLC isn’t going to protect you from racism and anti blackness. So stop adhering to respectability politics and using it to demonize other Black People.
— Moon Wave Atelier™ (@MoonWaveAtelier) February 15, 2021
forex & LLC twitter lining up in our mentions telling us how to invest OUR $600 stimulus check pic.twitter.com/zHWHkGn0oc
— JORDIOOO (@jorboomin) December 21, 2020
Among their financial tips was trading currency in the foreign exchange market. As COVID-19 continues to devastate the country, disproportionately affecting marginalized communities, more people are getting involved within the industry, according to Finance Magnates. “Turned my phone to an ATM,” Instagram user @relliofficial touts in their bio. “Anyone can do it. You have no excuses!” a speaker in a Clubhouse room preached.
Foreign exchange is often advertised as the one-way ticket to easily making quick money at home and “becoming your own boss” as distrust in American institutions within Black communities is prevalent. But what some foreign exchange traders claim to be an industry that is becoming the latest “Black stock market” and the key to creating generational wealth for Black families, others warn is being utilized by scammers to specifically prey on financially vulnerable communities during an unprecedented pandemic that is affecting them the most.
“There is a target on the people who really have nothing to lose,” says Damanick Dantes, global macro trader specializing in commodities at Dantes Outlook. “Anything that has a potential for higher returns and that also has some learning curve really allows other people to exploit.”
The foreign exchange industry—also known as “forex”—is one of the largest liquid asset markets in the world and arguably dates back to when nations first began producing currencies, according to Investopedia. Trading essentially works by taking advantage of a foreign economy’s future fluctuations, Global Head of Research at Forex.com, Matt Weller, tells me. Essentially, traders exchange different fiat currencies in hopes that the country’s economy in which they’re trading with, strengthens.
In a study recently published by Compare Forex Brokers, only 10.9% of the approximate 10 million traders in the world are women; men comprise 89.1%. And despite social media’s gleaming perception of the practice, Forex School Online concluded that only about 15% of traders are actually making a profit.
Although anyone can technically become a forex trader, Johnathan Lee, the creator of Facebook group, Black Forex, says that in order to be successful within the industry, appropriate training is required—which can come at a cost.
“If you teach a person how to cook, they will be able to cook. If you teach a person how to trade, they will be able to trade,” Lee says. “If you have the proper education and the proper knowledge, you can be able to trade and consistently make money just as good as anybody on Wall Street.”
Aside from running his group on Facebook, the former intensive care unit nurse also runs his own forex educational company, which he created after breaking free from a personal experience of being scammed in a forex-advertised school. Lee’s 30 currently enrolled students are expected to pay an initial $100 and then a recurring monthly fee, which he says goes toward advertising and personal market investments. Existing students also are commissioned for recruiting others to Lee’s forex school and benefit from informational online classes while enrolled. He says that recruiting others provides current students the added benefit of a free month of participation in his school program.
“If they’re serious, they’ll be willing to pay,” Lee says. “If you want to be able to make a certain amount of income, you have to be willing to put in the work.”
But paying for online forex education is what longtime trader Dantes says could put some early traders on the fast-track to fraud.
“There are a lot of resources out there online that are free,” he says. “There should be no program where you have to pay for education or pay anything out before you actually see earnings. If anything, that should be tied to your performance.” Dantes mentions paper trading as a safe and easy way to make mistakes with foreign exchange trading while reducing the risk of losing any actual money in the process.
Dantes, who learned the craft from his father when he was 12 years old, says that the individualized process of forex trading can initially seem daunting and that schooling can appeal to new traders because of so.
“People just don’t want to take the initiative themselves, and they’d rather trust other people to really teach them things that they might necessarily not know on their own,” he says. “[Forex trading] is not as easily understood as someone who’s going to Walmart and can actually see what they’re buying.”
The trader says that a strong financial literacy and funds to fall back on are some of the keys to success for those that are just starting out in the forex market. But a 2019 study conducted by the Global Financial Literacy Excellence Center found that personal finance knowledge has a distinguishable gap between Black and white Americans, which is due to an abundance of factors, one of which being education inequities in minority-heavy grade schools.
And if new traders aren’t joining online academies like Lee’s, Weller of Forex.com says that some new traders may also look toward joining informal teams as well.
“Trading can be a lonely endeavor,” Weller says. “It can be beneficial to have someone to bounce ideas off of, to ask questions of a group, and help fill in any gaps in your knowledge, or identify something that you may be overlooking.”
However, there’s a thin, nearly indiscernible line between which trading groups can be trusted and those that are simply looking to exploit—especially when recruiting on social media. “Some sort of illicit ways where perhaps the end user is not benefitting are unfortunately very common,” Weller says.
Former forex group trader Joeb Underwood knows this unfortunate reality all too well. Underwood tells me that in 2020 he joined a group of traders after someone—who’s often called a “network marketer”—reached out to him on social media. Underwood left his trading group after three days.
“You can’t make money unless you’re scamming,” Underwood says of his trading group experience. “It was a waste of time, and I would never do that again. It’s not worth it.”
He compared these multilevel forex groups to pyramid schemes, also known as illegal investment scams that focus on new recruits who start at the bottom of the hierarchical setup and bring in income, according to Investopedia.
But some traders have other ideas about recruitment.
“Yes, it has pyramid scheme qualities, but I wouldn’t call it a pyramid scheme,” Howard University student and forex trader Justin Stewart says. “The only reason I say that is because the person who you bring in can very well pass you, and they can pass you at a crazy rate.”
He adds that any job in a capitalist society is technically a pyramid scheme, providing the example of a fast-food cashier whose salary will never exceed his CEO no matter how hard they may work. But with network marketing in the forex market, Stewart says that it’s possible to “kind of pass them on the pyramid,” should you recruit more people than your higher-ups.
And the computer science major says that a lot of people become “blinded” by recruiting instead of actually trading currencies because of the short-term profits that it can return. “It’s kind of like a double-edged sword,” he says. The catch is that each new recruit brought onto a team must stay for a certain amount of time in order to ensure the recruiter’s commission. “If they get a refund, that money will come out of [a network marketer’s] monthly subscription and will hurt the whole group,” Stewart says. If the recruiter did not have additional recruits, it would also hurt the recruiter.
For this reason, forex groups on social media are often desperate to keep new members.
“When they’re making money, of course they’ll try to do anything to make you stay,” Underwood says. “They got totally disrespectful with me out of nowhere. It’s really trashy.”
Last October, in a viral tweet, Underwood detailed his difficult experience of leaving his forex trading group where members brought up his mother’s finances as a tactic to try and make him stay. Eventually, Underwood—who now works as a grocery selector at a Harris Teeter distribution center—was refunded his initial payment and no longer is in contact with the rest of the team.
This is what happens when you try to leave Forex smh. pic.twitter.com/lkqE5Ldu2e
— grimsta 🖤 (@1grimeystain) October 18, 2020
Following the wide reception of his tweet, he says that his Twitter messages were filled with others who had similar experiences and who asked for advice on how to leave their own groups.
CEO and founder of charitable organization Wall Street Bound, Troy Prince, says that network marketing in any form is a major red flag. “If your benefit is coming from your ability to recruit other members, run the other way,” he says. “It’s not only not what you’re looking for, chances are it’s also illegal.”
He says that traps like these oftentimes appeal to marginalized communities who have historically faced adversity.
“For many communities, especially those of color, or any of a certain socioeconomic strata, the easy way tends to have an appeal,” Prince says. “We’re dealing with 400 years of inequity with different points of access and financial success which just makes us more vulnerable.” Forex scammers, he says, are “a function of unscrupulous human beings taking advantage of what is the case.”
To avoid running into scams, he advises strengthening “internal fortitude” and becoming prepared for the hard and unglamorous life of actual trading. “They will never tell you the hard work that goes into becoming successful and that most of our work is actually internal, mental, behavioral, psychological. It takes time, self-discipline, self-awareness.”
Weller agrees, saying that making money in the forex market isn’t easy, and to prepare for hard work over a long period of time. When looking to join a legitimate group, he advises traders to be cautious. “Intuition can be very valuable,” he says. “It comes down to the attitude and again making sure people aren’t necessarily just trying to sell you something in a short-term myopic way.”
But the bottom line is that scams within the foreign exchange industry are easy to come by yet hard to discern, especially when advertised to marginalized communities during a vulnerable time in the country. And although LLC Twitter’s go-getter motivation may motivate some to get involved with stock market trading where one can “be their own boss,” investors must educate themselves on all of the risks associated. Take GameStop’s lesson in multi-billion dollar hedge funds and short-selling from January of this year for example.
So while exchanging currencies in one of the largest global markets in the world is profitable to some traders, many report that it took a long process to arrive at that point.
“There are a lot of schemes out there that will try to convince you that it’s easy and they try to break down that barrier of accessibility with marginalized communities,” Dantes says. “You don’t want to let it take advantage of you.”
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