"Private FX Margin Trading Is Gambling"…FSS Issues Consumer Alert

[Asia Economy Reporter Kim Hyo-jin] The Financial Supervisory Service (FSS) announced on the 1st that it has issued a consumer alert level 'Caution' due to a surge in damages from private FX (Foreign Exchange) margin trading on platforms such as Facebook, internet blogs, and YouTube.

FX margin trading refers to a type of foreign exchange arbitrage designed so that profits and losses are determined by exchange rate fluctuations between different currencies.

Domestic consumers can invest in FX margin trading only by depositing margin through licensed financial institutions authorized by financial authorities, such as securities firms.

The FSS emphasized, "Private schemes like 'FX Rent' that lure investors on the internet as a 'burden-free financial technique' are gambling imitating securities firms' FX margin trading."

In 2015, the Supreme Court ruled that FX Rent transactions do not fall under derivatives under the Capital Markets Act. Recently, a private FX margin trading company was found guilty in the first trial for the crime of operating a gambling space.

Private FX margin trading mostly involves ultra-short-term trades under 5 minutes and small transactions under 100,000 KRW per trade, where the direction of the exchange rate (rise or fall) is predicted and payments are settled accordingly. To disguise these as legitimate trades, they often describe the actual content of FX margin trading or falsely claim to be licensed by foreign financial authorities.

Consumers who invest in private FX margin trading are not protected by deposit insurance nor are they eligible for complaints or dispute mediation by the FSS, thus they cannot receive institutional protection.

Private FX Margin Trading Website and Advertisement Examples (Provided by the Financial Supervisory Service)

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