Contracts for differences are a derivative asset that can be taken out on various other assets, like stocks, indices, commodities, and cryptocurrencies. When a trader buys a CFD, they aren’t buying the underlying asset itself. CFD scams often try to hide this distinction, especially in the case of cryptocurrency CFDs.
The most common route that CFD scams take to bring in new victims is offering excessive leverage. There are strict regulations that control how much leverage a legitimate broker can give traders. New traders think that massive leverage is their ticket to easy money, not understanding the enormous risks. The scam brokers are the only place they can find the kind of leverage they’re looking for.
CFD scams also try to bring in victims with less subtle methods like fake celebrity endorsements and account bonuses. The account bonuses are often the key to their traps. The terms to accept the bonus make it difficult to withdraw any funds later on.