There are countless different ways that fraud can take place in online trading and crypto trading. Mirror transactions are a new type of online investment fraud. Potential victims of fraud are lured to fake trading platforms and tricked into depositing funds into other people’s accounts.

Investors are made to believe that their investments are being used for online trading. Instead, the investments are transferred as quickly as possible – usually to accounts abroad.

You should assume that a broker or trading platform is a fraud or at least quite dubious if a so-called “mirror transaction” is demanded from you. This is a scheme that online investment fraudsters use regularly.

Definition of the term mirror transaction

What is a mirror transaction? The perpetrators proceed as follows: They inform the fraud victims that the payout amount must be “mirrored”. Only then can the desired payment be made.

What is meant by the word “mirror” quickly becomes clear. The fraudsters instruct their victims to first transfer the amount they want to be paid out to another account. The perpetrators give the impression that it is a short transaction and that the money will be transferred shortly.

However, the money transferred via this suspicious mirror transaction does not come back. The perpetrators have succeeded in cheating the previous fraud victim out of her money. In this context, also read our article on the topic Broker does not pay out.

It is astonishing how unrestrained the perpetrators are in the mirror transaction. This is due to the fact that the money is split between several bank accounts. For example, if the alleged trade was carried out in the past with cryptocurrencies, the mirror transaction should now be carried out with a standard euro transfer.

Unfortunately, the victims of the scammers believe that this strategy is genuine. This is due to the complexity of the mirror transaction and the limited amount of information.

Especially for comparatively inexperienced investors, the information provided by the investment fraudsters that the mirror transaction is necessary for regulatory reasons sounds credible at first.

Use of mirror transactions to exacerbate the consequences for the fraud victims

The fraud gangs try to further harm the victims through other illegal actions to increase their own profits. It is often not enough for the unscrupulous perpetrators that they have only cheated the victims out of their previous investments.

In particular, the following techniques are used by the fraudsters to further damage the victims before the fraud is discovered:

  1. The demand for alleged tax payments: The scammers claim that the local tax authorities of the alleged crypto broker have ordered the payment of taxes. Only after the tax payment would a distribution of profits be possible.
  2. Commission or similar payments: The scammers demand transfers from their victims as payment for costs already incurred. Only when these costs have been paid would a payout of the deposited money be possible.
  3. Performing a “liquidity check”: According to the scammers, the victim of the scam must do this to prove their liquidity before receiving a reward. The victims are asked to transfer another large sum of money to the scammers for the so-called liquidity proof.

What all of the aforementioned approaches have in common is that they only serve to delay the payment of the money and at the same time deprive the fraud victim of further funds. Regardless of the payments made, the investment is never repaid.

These variants, which continue the original investment scam, are now joined by a new technique, the mirror transaction. The victims of the scam are asked to first transfer the exact payout amount to the account of the gang of scammers before they in turn can distribute the investor’s alleged profits.

The brokers assure their clients that this transaction is only temporary and that a chargeback will be made as soon as possible. The necessity of these mirrored transactions is justified by the fraudsters with alleged money laundering regulations.

Deliberately created “legal bases” that are particularly complicated give the impression of credibility to potential victims of fraud. However, these transactions are not required by any money laundering law.

The fact that little useful information is available online makes matters worse for victims of past investment fraud. The use of official-looking documents by the fraudsters, on the other hand, can give the false impression that the desired transaction is actually a legal requirement.

This fraud is often difficult to detect, especially for non-professionals in the field of financial investments, who usually lack in-depth knowledge of international financial market legislation.

With what aim are mirror transactions demanded?

It is a scam that can be used for a number of things. The simplest scam is the conventional one, where you never receive your share of the money despite paying.

In reality, this is where the scammers make a profit, and in many cases they are even brazen enough to make further demands.

What happens when victims refuse the mirror transaction?

Some victims of fraud understandably feel uncomfortable about making another transfer for a promised compensation. Even if it is only for a short period of time. By no means all victims fall for the mirror transaction.

But the criminals are prepared for it. Through dishonest brokers and dubious trading platforms, investment fraud is a scam that is being carried out more and more professionally. The investment fraudsters use psychological pressure to try to “soften up” their victims. Threats and insults are deliberately used.

The persons responsible for the investment fraud threatened in some cases to file criminal charges against the investor for money laundering. If fraud victims nevertheless refuse to respond to these demands, the perpetrators sometimes take additional measures.

They create fake letters that appear to be official documents. These then state that a money laundering audit has been carried out and that “liquidity must be checked”.

Mirroring cryptocurrencies – another type of fraud

The fraudsters may specify a wallet address as the recipient of the transaction, in addition to the method already mentioned, which often involves “mirroring” by transferring FIAT money to international accounts abroad.

The mirroring is then supposed to take place via a cryptocurrency transfer, the volume of which is also considerable. However, mirroring is not used to meet regulatory requirements and these wallets do not belong to governmental or institutional groups.

In this situation, it is possible for fraudsters to pose as legitimate by using official-looking logos of reputable crypto trading companies. Technical security measures are taken to generate email addresses that can only be distinguished from those of legitimate companies on closer inspection.

Keep blockchain data safe: If you have already carried out such a mirror transaction with cryptocurrency, be sure to archive the target address of the perpetrators. Investigating authorities can trace the payment movements of investment fraudsters thanks to the blockchain.

Other scams by dubious brokers

The mirror transaction is only one of the criminal techniques used by investment fraudsters. In addition, fraud schemes such as the “recovery scam” and the aforementioned ” proof of liquidity” (also called “liquidity check”) are used.

The scammers tell the victims that in the case of a liquidity proof, they have to prove that they already have the payout amount at their disposal. Only then can the desired payout be approved. To provide this proof, access to the victim’s account is required. This can be a bank account or a cryptocurrency exchange account.

The term“recovery scam” refers to case constellations in which the fraudsters try to win over victims with a “money-back guarantee” after a fraud incident. The perpetrators of the investment scam pose as a company that offers unique opportunities to recover the funds stolen or lost in online trading.

How to protect your investments from online trading scams

Online trading has become a kind of popular sport and there are numerous institutions and companies that offer these services and operate completely legally.

Even though competing services may seem cheaper at first glance, respectability is ultimately more decisive. The location of the trader is another crucial requirement.

If you choose a German broker, he is subject to German law and his activity is proven by numerous documents. In addition, you have much more protection and guarantees as a consumer within the EU. Incidentally, this also applies in the event of a necessary investigation and subsequent criminal proceedings.

It is different with providers outside the EU. Your money is gone and, in the worst case, you will never see it again. Here, too, it is worthwhile to check the technical and civil as well as criminal law options. To get your money back in this situation, you need a lawyer who – like our law firm – works with IT forensic experts.

No mirror transaction with trustworthy providers: Reputable providers have a flawless website with detailed general terms and conditions, a privacy policy and a publicly visible imprint. Good providers allow a wide range of trading options. The larger the offer, the safer it is.

What to do in case of fraud or suspected fraud?

Secure all correspondence relating to the fraud. This includes profiles, phone numbers used and call history. The more and the quicker you gather evidence, the more likely it is that a subsequent criminal investigation will be successful.

To protect your interests, you should contact a lawyer to represent you if you have suffered significant financial loss.

Even though international law enforcement agencies have recently seen an increase in investigative successes against globally organised fraud gangs, these cases often involve extremely complicated international legal issues.

If the fraudsters are eventually brought to justice through international criminal proceedings, injured parties run the risk of losing their claims for damages due to international laws they are unfamiliar with and without legal backing.

Guide to avoiding online trading scams

Only contact reputable companies. Always give preference to offers from domestic banks. Even if other providers are cheaper, only use EU and German providers and their offers. Watch out for errors on the website and make sure that the legal information is complete.

If an alleged investment company or broker contacts you without your permission, this is a sign of a lack of seriousness. Before making any investment, check all the information you can find about a provider.

When doing so, also enter the name of the company and the words “scam”, “fraud”, “warning”, “alert” or “fraud” into a search engine. Most questionable brokers are already known and there are corresponding testimonials.

Under no circumstances get involved in demands for tax payments, mirror transaction or proof of liquidity.

If possible, make sure that the companies mentioned are regulated in the EU and have a branch there. If something seems unusual, do some research on the internet or, if in doubt, ask BaFin. Other financial supervisory authorities in European countries also provide information on fraudulent and dubious providers.

Be sceptical if a stranger invites you to join a trading group online: Via social media, fraudsters often write to potential victims and encourage them to join trading channels, e.g. on Telegram.

As already mentioned, these channels are predominantly used by chatbots. Such a cold call is a clear sign that it is a dubious offer. No reputable provider of financial services will randomly write to you in this way and ask you to participate in trading.

If the person writing to you has no connection to your social environment, this is even more true. Reputable financial service providers will not jeopardise their image by luring you into dodgy trading channels because they are well aware of the problem of online investment fraud.

Avoid investing in cryptocurrencies that are completely unregulated. When investing in very unpopular cryptocurrencies or other assets, fraud gangs can only apply their strategy by controlling trading platforms and faking fantastic investment developments.

The price development of almost all shares, cryptocurrencies and other assets can be checked on other reputable sites, so that any manipulations would be quickly uncovered.

The price can be significantly changed by even very small transactions, which makes investing in cryptocurrencies with little or hardly any market capitalisation unwise, as they are very susceptible to manipulation of all kinds.

Mirror transaction: Seek legal advice in case of investment fraud

Many victims of fraud initially feel humiliated and may even be afraid to confide in anyone. Although these feelings are very strong, you should not let them control you. Just remember that it is your money and your right.

You do not have to refrain from filing a criminal complaint. By doing so, you would actually be helping the fraudsters. By protecting your assets and yourself from these evil actors, you are also defending your fellow citizens and other potential victims of fraud.

You should react quickly if an online broker or trading platform now asks you to perform a mirror transaction as mentioned above. The likelihood that the broker or trading platform is fraudulent is very high. Your investment was most likely not one to begin with.

Use the contact form to get in touch with us without obligation and tell us about your individual situation. You will shortly receive a free initial assessment from a lawyer with experience representing clients who have been harmed by online trading fraud.

Please provide as much specific information as possible about your particular situation. Include the names of any related fraudulent crypto exchanges and the amount of the investment. We will respond to your request promptly.

Our law firm has extensive knowledge in the field of cryptocurrencies, online trading and related investment fraud and capital investment fraud.