Detangle this potential scam?

External question — Personal Finance Stack Exchange Author: kmort Original post: https://money.stackexchange.com/questions/88331 License: CC BY-SA 3.0 — https://creativecommons.org/licenses/by-sa/3.0/ Adaptation: HTML converted to plain text; contact email addresses removed. My cousin [we'll call him Chuck] has gotten involved with an investment "tutor" [we'll call him Tim] that has "hired" Chuck to make investments for Tim. From what I understand, Tim allows Chuck to invest Tim's money in what amounts to day-trading. Chuck currently has zero exposure of his own money in the market, and is making trades with Tim's money. Tim pays Chuck 30% of the profits on investments (I don't know if this is daily, monthly, yearly, or upon sale of an asset, but only that my cousin said he makes 30% of the profit). Tim emails Chuck stock picks, which Chuck acts on e.g. Tim says "Buy XYZ", Chuck buys XYZ. Tim says "Sell XYZ", Chuck sells. Chuck is also free to make other transactions as he sees fit. Chuck is a university student in the United States. He has said there are a group of others working for Tim, doing the same thing. Independently, this is the second time I've heard about a situation like this, where the other "trainee" has recently completed high school in the United States. I do not understand how this could possibly work. I would not put my money on the line for some kid who just graduated high school. This can't be for real. My mind screams SCAM , but I can't for the life of me figure out how Tim will cash in on Chuck and his friends. Does Tim want to lose money on particular transactions? Is he trying to make it look like there is a large groundswell of support (or lack thereof) for a particular stock? Why can't he just have bots do this (bots that don't take 30% of the profit?!!?!?). Could it be a long con where my Chuck eventually is convinced to put his own money in and loses it? Did Chuck (and this other guy I heard of) just find a very wealthy benefactor that is trying to help them learn about markets? (Although this is what I'm hoping for, it doesn't seem very likely.) What is going on here? I've learned a little more from my cousin. Chuck is not exposed to any risk financially and nothing is in his name. The company opened an account and gave him a login to trade with. He also does not trade stocks. It's only Forex and futures. Chuck has met the founders in real life, they have an actual office location, he had to go through 12 intensive weeks of training before being allowed to trade, and can direct his profit into his personal bank account at any time. The other one (the high school graduate) seems far more shady. So it seems we might be dealing with two different classes of things.

External answer — Personal Finance Stack Exchange Author: Dheer Original post: https://money.stackexchange.com/a/88345 License: CC BY-SA 3.0 — https://creativecommons.org/licenses/by-sa/3.0/ Adaptation: HTML converted to plain text; contact email addresses removed. Could be raising a particular stock. Could also be the margin account trading, if the trade goes south, he can simply walk away leaving the victim to fill margin call. He could also be an entity in past punished and restricted from trading in stock market and is looking to circumvent it.

External answer — Personal Finance Stack Exchange Author: Aganju Original post: https://money.stackexchange.com/a/88361 License: CC BY-SA 3.0 — https://creativecommons.org/licenses/by-sa/3.0/ Adaptation: HTML converted to plain text; contact email addresses removed. How does he receive the initial money? If it is cash, it could be simple money laundry. if it is electronic transfer, it could be revoked later, after he already returned the wins. He would then end having paid a stranger his money, with nothing ever received. it could be that he is getting hooked to finally invest his own money too in some penny stock, as it looks like magic winning tips, and then the stranger cashes in (by being the other end of a larger trade) he might end up owing taxes on the gains it could be a setup for a future scam; everything will work out nicely, building trust, until the final heist, when he receives an urgent wire transfer for an invest (which turns out to be fake) Nobody gains anything from handing out free money, so it is always a scam.

External answer — Personal Finance Stack Exchange Author: CQM Original post: https://money.stackexchange.com/a/88419 License: CC BY-SA 3.0 — https://creativecommons.org/licenses/by-sa/3.0/ Adaptation: HTML converted to plain text; contact email addresses removed. Proprietary trading firms (prop shops) make this arrangement routinely. Often times there are some form of pay-to-play such as renting a desk or a seat, or getting 20 times the amount you paid in the education. It isn't impossible that there isn't a fee at all. Anyone can make limited power of attorney on their brokerage accounts and have a subtrader fill in. If they are just trading forex the only potential scam is the potential waste of time. Not sure what the pedantic threshold is but this arrangement doesn't make it a scam. The reason people would use random nobodies is because they might have an original idea or a profitable view of the market. Seasoned traders know how to trade last season's markets. They have overfitted their strategies with a myriad of exceptions because of that one time their strategy failed, and that other time, and that other time. Their charts look like trash a 3-year old scribbled together and they won't necessarily look at basic things. They did offer your friend some education it seems, so he has the basics, the rest is gut.