The peril of trading with unlicensed online investment firms

Investing overseas has never been easier, thanks to our borderless online world but the costs can be crippling if you leave the protection of Singapore laws and gullibly venture into foreign fields.

As tempting as it is to try your hand on the global stage, if you value your money, it is better to be conservative for one important reason: If things go belly up, how are you going to get your money back if you don’t even know where to look for those responsible for your losses.

Even if you have the money to engage lawyers, it is an extremely arduous and costly process to file claims overseas, and that’s provided you can even find the right party to sue.

So it makes sense to heed the advice of the Monetary Authority of Singapore (MAS) and the police, who warn people not to deal with unlicensed online trading platforms that are outside Singapore because their operations cannot be easily verified.

When you trade on online platforms, you may have to use your credit or debit cards to pay for transactions but disclosing such data to unverified parties can be catastrophic if they misuse it.

The caution from both agencies came on June 6, 2025, when they announced a proactive decision to block the websites of two unlicensed trading platforms, Octa and XM, after investigations showed they had conducted activities that run foul of the Securities and Futures Act.

Police had received information that the services offered by Octa and XM often included extending loans to investors so they could make bigger bets on foreign exchange, commodities, indexes and equities.

It was also found that both platforms had been marketing their services to customers in Singapore without official approval.

Companies that want to deal in capital markets products such as securities and leveraged foreign exchange trading must first obtain MAS licences.

The offenders

The Octa platform is operated by Octa Markets and Uni Fin Invest, purportedly incorporated in Comoros in East Africa and Mauritius.

XM Global, which is purportedly incorporated in Belize, operates the XM platform.

None of these entities – Octa Markets, Uni Fin Invest and XM Global – hold the requisite MAS licences to conduct their services.

What this means is that they are not only prohibited from operating in Singapore, they also cannot solicit, advertise and offer services that are targeted at Singaporeans and other investors here.

Their flouting of the law has led to the blocking of their trading websites for Singapore residents from June 20. Users with active accounts with Octa and XM will not be able to access their websites from Singapore.

What you should do

There are close to 2,000 licensed capital markets businesses here so it defies logic to deal with overseas ones that are outside the purview of the Singapore authorities.

While it is not illegal to invest with such entities, you will only have yourself to blame if things go wrong, given that you willingly chose to put money with people with unverified backgrounds.

Don’t be tempted just because such platforms offer online services that make it easy for you to trade with just credit cards.

You should never assume that online investing is the same as online shopping because the risks are far greater and the money involved a lot more.

Popular online shopping platforms such as Amazon and Lazada have a strong physical presence in Singapore, transparent compensation policies and a network of sites to return purchases that do not meet your expectations.

The same cannot be said for many overseas trading platforms because not having any physical presence means your ability to lodge a complaint will depend solely on whether the companies want to respond to you.

Such an unequal relationship alone should make you think twice because there is little you can do if you are treated unfairly.

So you should not need to wait for the authorities to block websites because you will save yourself unnecessary pain if you just restrict your investment dealings to only businesses that are licensed by the MAS.

Hard to sue overseas businesses

Never let your guard down, even if your investment comes with a capital guarantee from any company selling you the deal. Such guarantees are only as good as the company; if it goes bust, so will your guarantee.

Many investors from Singapore, Malaysia, Hong Kong and Macau learnt this lesson the hard way when they collectively lost over $130 million after the Canadian oil company that held their money crashed.

They were enticed to invest on the back of promised annual returns of 12 per cent in a “risk-free” deal that included having their investment refunded at the end of each oilfield project.

About 4,000 investors pumped in $170 million or so between 2012 and 2015. Good times rolled for a while – three of 17 oil projects sold were a success, and everyone was happy.

But no one saw the dark clouds looming over the oil market and things went into a tailspin when the price of crude crashed in 2015. The Canadian oil company went bust and the investors could not get back the $130 million still invested in the remaining projects.

They cried foul, claiming the whole deal was nothing more than a scam.

As it was pointless to sue the overseas company that had gone bust, about 1,000 of the investors launched a class action suit in Singapore against the marketing agents who put them into the deal.

They claimed the agents had fraudulently misled them into investing in crude oil trading when there was no actual business.

The investors lost their case in 2022 because they could not prove that the agents had done anything wrong as there was indeed such an oil business.

Just because you lose money in an investment that sounds too good to be true, it does not mean it is a scam.

The investors argued that the entire oil project was built on “circular fund movements” which used cash from new investors to pay existing ones.

But the evidence showed otherwise: There were genuine and significant crude oil transactions proving the business was “not fictitious”.

Moreover, the company’s troubles coincided with the rout in the oil market; if it was a scam, it would have been able to continue paying “profits” with fresh funds from new investors.

A point of contention was how the agents enticed existing investors to reinvest their profits by offering a “loyalty customer bonus”.

But the Court of Appeal found that offering discounts or bonuses to existing customers is a common marketing strategy and each investor should then decide whether it is worth the risk to put more money in.

So there was nothing wrong with marketing agents encouraging further reinvestment as investors lost money due to the sudden plunge in oil prices and not because of agent misrepresentation.

As all investments already carry risks, you should always avoid putting yourself in a no-win situation by dealing with an unlicensed entity whose background is likely to be mired in secrecy.