DaVinci Pro forex trading bot - where is the scam?

Question

A friend of mine, Ivo, recently got into automated forex trading with a bot by the encouragement of a friend of his, Martin. Martin convinced Ivo that the bot can yield forex returns of 10% per month. This kind of returns seem possible only in scams to me. However, I could not understand where the scam is and so I could not convince Ivo to not put money into this. So far he has put 1000 euros into it, and I would like to convince him that this is shady before he puts in more (which I am sure he will).

Here is what he did:

• he created an account at Roboforex (he passed KYC by providing passport pictures)

• he bought the license for DaVinci Pro - a forex trading bot (it costs a couple of hundred dollars per year)

• he installed/added the bot to MetaTrader 5

• he rented a server from https://zomro.com/ where MetaTrader runs non-stop

He initially invested 100 euros. After about 1 week, he showed me(via screen sharing with Skype) that he has returns and we calculated the returns to be around 10% per month, indeed. After this he put another 1000 euros into this.

After a while, I asked him how the forex trading is going, and he showed me that he is making about 10 euros per day.

The red flags I see are:

• Roboforex (https://roboforex.com/) is a company from Belize (we are from Europe). As I understood Roboforex is the broker, and MetaTrader is used to send the orders to Roboforex. However, Ivo transferred the money to a bank account from Singapore.

• Roboforex has many negative reviews only about problems with withdrawals (but also just as many positive ones) - https://www.forexpeacearmy.com/forex-reviews/7374/roboforex-forex-brokers.

• there are no trading fees

• when he was transferring the money, the employee warned him that this might be a scam

• DaVinci Pro's website (https://da-vinci.pro/en) has almost no information (who built the bot, how the bot works, what it does as a strategy, etc.) - in fact, before registration, the only available page is a registration page. After registration, the only available information is: how to purchase the bot, some promotional images, a few disclaimers that you might lose money.

• the trading bot is of Russian origin (as far as I can tell), as is Zomro

• the trading bot can only be bought with the cryptocurrency ethereum

• the promotional materials for the trading bot are quite amateurish

• extremely high returns

• there is a reward system to invite friends (which if you do, your returns can go up to 30% per month)

• Martin holds meetings regularly to recruit more people into this

The green flags I see:

• Ivo does not try to convince me to join the scheme

• Ivo has known Martin for several years (I met Martin once)

• the advertised returns actually seem to be happening... for now... (for the last 2 months)

• Ivo claims he has control of his money (can withdraw at any time, although he has not tried so far)

• Ivo passed KYC

• there are YouTube videos from different people vouching for the bot's abilities (few videos though, with few views)

As a result of these high returns, he is in the process of quitting his job and starting an internship at a not-for-profit organization. The internship is unpaid and he intends to put his savings into the bot to support himself (a couple of thousand euros).

He has no previous experience with forex (or any kind of investing). But to be fair, neither do I. However, I am quite convinced some unknown Russian trading bot cannot generate consistent 10% monthly returns with none of us knowing how it even works (me - a software developer, Martin - a businessman (allegedly), or Ivo - a former software developer), or who built it (not even sure if it is a company or just 1 person behind the bot).

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Where is the scam in this DaVinci Pro trading bot? Is it possible it is showing false values/trades in MetaTrader, only so that you pay for the license?

Answer 1

There are certainly a lot of ways this could be a scam.

One is that it's a straight-up take-the-money-and-run scam. You pay to buy the trading bot and you pay to deposit money, but all of it is fake and you will never get a single penny back out.

It could also be a Ponzi scheme. In this case, the trading bot is still fake and the balances displayed are still fake, but now they'll pay out enough money for some people to trust them.

Another possibility is that the trading bot is a Martingale betting bot. This means that the balances displayed are real, and the gains you've gotten so far are also real, but the bot is achieving the gains by gambling with a disadvantage. That would mean that each month, you have about a 91% chance of gaining 10% and about a 9% chance of losing your entire balance. In this case, the scam is that you've paid for a trading bot which looks wonderful but is actually worthless.

Answer 2

There is one thing that absolutely 100% makes sure this is a scam:

there is a reward system to invite friends (which if you do, your returns can go up to 30% per month)

How would that work? If the returns come from real trades, how can they magically get 200% better results and why?

Also, why is passing KYC a green flag? He provided some unknown scammer pictures of his passport, making him susceptible for future identity-theft attacks. Why would that be in any way a sign of not being scammed?

Also the few positive reviews on the site you linked seem pretty artificial to me. Whereas a lot of the people complaining about not to being able to withdraw is a absolute red flag. Also there are not differentiated reviews mostly 1 and 5 stars, that is never a good sign.

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Where is the scam in this DaVinci Pro trading bot? Is it possible it is showing false values/trades in MetaTrader, only so that you pay for the license?

Possible from a technical standpoint but much more likely the fake values come from Roboforex. They have to be in on this anyways because that´s where you send all your money to maximize on those sweet sweet returns!

Answer 3

There are three real red flags that I see with this:

1. It is not possible to make money consistently in the FX markets without making it your life's work. These are massive ($5.1 trillion dollar a day) markets traded by many large and experienced hedge funds. If they could make returns by buying a license for this bot, they would buy the license, buy the bot and buy out the entire team.
2. 10% a month is a ridiculous return. That compounds to 213% annual return. To put this in context, CNBC readers balked when an article suggested that you could make a 10% annual return. The most successful hedge fund in history made 35% a year. If you could make 213% per annum why would you sell the secret to someone else?
3. Currency trading is extremely addictive, and even experienced traders in investment banks lose hundreds of thousands of pounds trading financial markets. I haven't heard of anyone who has won. An investigation by the UK Financial Conduct Authority notes that 82% of CFD trades (which is what Roboforex does) lose money, and the average loss per trader was £2,200.

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As Tanner Swett mentions, it sounds a lot like a Ponzi scheme, with no transaction costs, and people like Martin being paid to bring more people in. Of course all of the money remains as a virtual balance in your account, so it never materialises (it's a fugazi). But I would expect that Roboforex cannot lie about the account balance - that would be against the law, and they would get closed down. Also their website https://roboforex.com/ mentions that there are spreads (which are transaction costs).

Alternatively, as Tanner also mentions, the scam could be a what is sometimes called picking up nickels in front of bulldozers - you make small gains every month with a small risk of being totally wiped out. Eventually everybody gets wiped out.

My advice would be advise Ivo not to trade FX, if he does, don't follow him.