"Copy trading is a scam," "Copy trading is illegal"—a search for these terms will bring up many people who are feeling uneasy. In fact,investment solicitations disguised as copy trading are real scams that the Financial Services Agency and the police have repeatedly warned about.
On the other hand, copy trading (a system that automatically replicates the trades of a selected trader into your own account) is alegitimate service officially provided by overseas forex brokers, and using it is not illegal in itself.
This article willexplain, based on publicly available information from the Financial Services Agency, the National Police Agency, and the National Consumer Affairs Center, what constitutes an illegal act, from the legal framework to actual fraud methods, how to identify them, and whatto do if you become a victim.
Conclusion | Key points regarding the fraud and illegality of copy trading
- There is no law prohibiting individuals from using official copy trading services of overseas forex brokers. The regulations apply to the "brokers and those soliciting trades," not the users.
- The actual damage is not occurring through the company's official services, but through third-party solicitation schemes via social media and LINE . The standard method is: "Purchase software → Open an account with a designated company → Submit a power of attorney (POA) → Unable to withdraw funds ."
- There are three key ways to spot a scam:① If you are asked to submit a power of attorney or bank account information, it's a scam. ② If you are asked to pay upfront fees (software fees, participation fees), it's a scam. ③ If you are told with absolute certainty that you "will not lose any money," it's a scam.
*This article was created by the MoneyCharger editorial teamtheir content creation policy, based onthe Financial Services Agency,Police Agency,the National Consumer Affairs Center, andthe Consumer Affairs Agency(as of August 2026). This article provides general information and does not constitute legal advice. For individual problems, please consult the public consultation services introduced in this article.
The mechanism of copy trading, comparisons between different brokers, and how to get started are explained in our "Recommended Copy Trading Ranking." This article will focus specifically on the "fraud and illegality" aspects.
Is copy trading illegal? A look at Japanese law
Let's start with the conclusion. There is no law in Japan that prohibits individuals from using copy trading services . Whether it is illegal or not can be clarified by considering the perspective (whether you are the provider or the user)
| position | Legal treatment |
|---|---|
| Users (followers) | It is not illegal. The Financial Instruments and Exchange Act regulates "those who conduct business as a business," and users who manage their own funds in their own accounts are not subject to regulation. |
| Those who solicit and provide services within Japan | Registration as a financial instruments business operator is required . Soliciting or brokering transactions with Japanese residents without registration is a violation of the Financial Instruments and Exchange Act ( imprisonment for up to 10 years or a fine of up to approximately $62,500 - Article 197 of the Financial Instruments and Exchange Act). There have been cases of arrests. |
| Overseas Forex Brokers | Because it is not registered in Japan, it is listed on the Financial Services Agency's "List of Unregistered Businesses." While there are no provisions for penalties for users,it is not subject to Japanese supervision or compensation. |
Reasons why the user's actions are not illegal
The Financial Instruments and Exchange Act regulatesthose who sell, solicit, advise on, or manage financial products as a "business." While registration is required for activities such as managing other people's assets or providing investment advice for a fee,users who manage their own funds in their own accounts are not subject to this regulation.
In copy trading, the funds remain in your own account, and you decide when to start and stop the copying process. This structure is the crucial difference from the MAM/PAMM type "deposit" schemes, which will be discussed later
Please note that profits from copy trading are subject to comprehensive taxation as miscellaneous income and must be declared on your tax return (for salaried employees, an annual profit of approximately $1,250 or more is a general guideline). Failure to declare is illegal. For more details, please refer to the Overseas Forex Tax Guide (supervised by a tax accountant)
The party making the offer or soliciting is the one who is acting illegally—there have been cases of arrests
on the other hand,Soliciting, mediating, or providing copy trading services within Japan without registration is a violation of the Financial Instruments and Exchange ActThat's right. Operating a business without registration is subject to prosecution, and according to the National Police Agency's statistics..Arrests in SNS-based investment fraud casesThis is published every year
In other words, the reality behind the claim that "copy trading is illegal"it's not about getting arrested for using the service, but rather that it's illegal for those who solicit and manage others without registration. Individuals soliciting people on social media with messages like "Would you like to participate in my copy trading?" are highly likely to fall under this category of unregistered business practice.
How to correctly read the Financial Services Agency's "List of Unregistered Businesses"
You often see explanations that "companies on the Financial Services Agency's warning list are scams," but thisdoesn't align with the reality of overseas forex trading.
Facts confirmed on this site
that our website confirmed through copy trading investigationsare listed on the Financial Services Agency's list of unregistered brokers. As a general rule, businesses that are not registered as financial instruments business operators in Japan are included in this list, so structurally, almost all overseas forex brokers are included.
In other words, this list is not a "list of fraudulent businesses" buta "list of businesses not registered in Japan.Being on the list does not mean it's a scam, and not being on the list does not mean it's safe. In fact, many of the fraud schemes described later are carried out by unknown "businesses" or individuals that don't even appear on this list.
If you use an overseas forex broker, you accept the risks of not being covered by Japanese supervision or compensation. The legality and safety issues of overseas forex in general are explained in detail in " The Legality of Overseas Forex | Warnings from the Financial Services Agency and Legal Opinions "
Five Patterns of Copy Trading Scams [Based on Warnings from Public Institutions]
The scale of the damage is expanding year by year. According to statistics from the National Police Agency,in 2025 (Reiwa 7), the number of reported cases of SNS-type investment fraud was 9,523,with losses amounting to approximately $805,000,000, an increase of about 1.5 times in both the number of cases and the amount of damage compared to the previous year. Solicitations promoting copy trading and automated trading are one of the typical entry points for this "SNS-type investment fraud."
Source:National Police Agency, "Status of Recognition and Arrests Regarding SNS-Type Investment and Romance Scams"(Final figures for 2025, published May 2026)
By comparing the warning cases issued by the Financial Services Agency with the consultation cases handled by the National Consumer Affairs Center, the methods can be categorized into the following five patterns . What they all have in common is that while they pretend to be official services of a company, the actual flow of money is completely different from that of "legitimate copy trading. "
| Modus Operandi | Features | Differences from regular services |
|---|---|---|
| ① Recruitment via social media/dating apps | After building a relationship, guide them to a LINE group or similar platform | There are no "people who try to solicit" you to use the official service |
| ② Software purchase → Power of Attorney (LPOA) | Purchase automated trading software → Open an account with the designated broker → Submit a power of attorney | A power of attorney is not required for the account under the regular service |
| ③MAM/PAMM nominal | They trick people into entrusting their funds and accounts to them under the guise of "professional management." | Copy trading does not require you to deposit funds |
| ④ Impersonating celebrities or investors | They use the names and images of real, famous people to gain credibility | Unrelated to the person in question or official sources |
| ⑤ Unidentified businesses with plausible names | A service name that evokes the concepts of "mirror" and "copy" | The company's existence and location cannot be confirmed |
Modus Operandi ① Recruitment via social media, LINE, and dating apps
This is the most common entry point. Investment ads on social media, people met through dating apps, "mentors" in investment groups—although the entry point may differ, the common thread is that trust or romantic feelings are built first before the topic of money is brought up
They'll show you a screenshot of their performance, claiming, "I'm making a profit with this copy trading," butthat screenshot itselfis fake. After you deposit money, the app will show your profits increasing, but when you try to withdraw, they'll ask for additional deposits under the guise of "taxes" and "fees," and eventually, they'll just stop contacting you.
If the recipient of the transfer is a "personal account," you should immediately assume it's a scam.The National Consumer Affairs Center of Japan has issued a clear warning: "If you are asked to transfer money to a personal account, absolutely do not do so." Legitimate FX brokers will never ask you to transfer money to a personal bank account.
The National Police Agency has also issued a warning about this type of solicitation, stating, " Beware of get-rich-quick schemes using social media, etc. "
Method ② Purchase automated trading software → Open an account with a designated broker → Submit a power of attorney (LPOA)
that frequently appears in the Financial Services Agency's warnings against unregistered companies.Its structure is difficult to understand, and it often results in large financial losses. The process is as follows:
| step | What will I be made to do? |
|---|---|
| ① Purchase | They were pressured into buying "FX automated trading software." |
| ② Open an account | As a condition for using the software, you will be required to open an account with a designated overseas broker. |
| ③ Submission of power of attorney | You will be required to submit a "Limited Power of Attorney" document, which authorizes the attorney to make investment decisions. |
| ④ Unable to withdraw money | The account balance is displayed, butI can't withdraw the money. |
This is not a hypothetical scenario. The Financial Services Agency's list of warnings includes linked cases where vendors of FX automated trading software specified that accounts be opened with specific overseas companies (such as FFCN Ltd. and TRUST FF STATION) and requested the submission of a "LIMITED POWER OF ATTORNEY" document entrusting investment decisions to them (Japan Technology Systems Co., Ltd., HERITAGE Co., Ltd., etc.), and cases where information has been received that " withdrawals are not possible despite having account balances " regarding these designated companies
If you are asked to submit a power of attorney (POA/LPOA), stop trading immediately.Legitimate copy trading does not require any documents to transfer control of your account to a third party. Starting and stopping the copy trading is normally done by you, after logging in.
Modus Operandi ③: Depositing funds and accounts under the guise of MAM/PAMM
MAM and PAMM are systems where you entrust your account and funds to an account manager for management, and some overseas forex brokers offer them legitimately. However,because the structure involves entrusting the management of funds and accounts to others, they are easily used as a tool for fraud.
| item | Copy trading | MAM PAINCA |
|---|---|---|
| Where to put the funds | My own account (only I can operate it) | Leave it to the operator |
| Suspension/Cancellation | Stop yourself anytime | There may be a contract period during which you cannot cancel |
| How to view a transaction | Each copy is duplicated in your account one by one | Sometimes all you can see is the operational results |
In these fraudulent schemes, victims are introduced to MAM/PAMM accounts run by non-existent "companies," andtricked into depositing money into accounts that don't even exist. Be wary if you are told it's "copy trading," butwhen you ask about the actual mechanism, it turns out to involve depositing funds or an account.
Modus Operandi 4: Impersonating celebrities and investors
This scam uses the names and images of real investors, businesspeople, and celebrities without permission in advertisements to lure victims into LINE groups. In May 2024, the National Consumer Affairs Center of Japanabout a sharp increase in consumer troubles related to financial products and services solicited by people claiming to be famous or having connections to them, and warned that "once you transfer money, it is difficult to recover your losses."
In most cases, the person themselves or their management agency officially denies that they are soliciting investmentsIf you come across the name of a famous person, try searching for "impersonation warning" using that name
Modus Operandi 5: Using an unidentified service name that evokes the concepts of "mirror" and "copy."
Warnings have also been issued against "companies" with names that evoke copy trading or mirror trading, but whose actual operations are unclear
Example of a Financial Services Agency warning: "Mirrox"
In July 2026, the Financial Services Agency (Financial Bureau) issued a warning letter to Capital Crest Ltd , which provides a service called " Mirrox, " for soliciting over-the-counter derivative transactions without registration.
What's noteworthy is that the Financial Services Agency has pointed out that this company's location is identical or very similar to that of 14 other companies . This suggests a scheme where a single base of operations is mass-producing multiple "services" under different names. Even if the name evokes mirror trading, it's not a legitimate service if the actual operation cannot be verified .
It should be noted that the official wording in the Financial Services Agency's (FSA) warning list is "solicitation of over-the-counter derivative transactions" and "discretionary investment decisions," and the term "copy trading" itself is not used. The FSA itself also notes that one cannot assume something is safe simply because it is not on the list
Actual victim case: "Withdrawals require a tax of approximately $10,000."
Let's look at a typical scenario of a victim based on a consultation case published by the National Consumer Affairs Center of Japan (January 2024, "Fraudulent FX trading troubles solicited through investment groups on social media")
Case study (man in his 60s)
I was invited to join an investment group through social media, offered to trade FX, and transferred a total of approximately $31,250 to a designated personal account . Later, when I requested to withdraw the money after being told I had made a profit, I was asked to deposit another amount, with the explanation that " a tax of approximately $10,000 is required for withdrawal ."
This case contains all the typical elements of fraud① Solicitation via social media ② Transfer to a personal bank account ③ Profits only shown on screen ④ Additional charges upon withdrawalEven though the names may change, such as "taxes," "fees," and "deposits,"The moment you are asked to make an additional deposit to withdraw your funds, it's definitely a scamPlease keep this in mind. There is no system in place at legitimate FX brokers that requires you to pay taxes in advance before withdrawing your funds (you are responsible for filing your own tax return and paying taxes)
The range of inquiries is also expanding. The National Consumer Affairs Center of Japan received3,021 inquiries regarding FX trading in fiscal year 2023 (as of the end of November),an increase of approximately 1.5 times compared to the same period last year. Combined with the National Police Agency statistics mentioned at the beginning (SNS-type investment fraud: estimated losses of approximately $805,000,000), it is clear that such incidents are no longer "uncommon."
Source:National Consumer Affairs Center of Japan, "Fraudulent FX trading troubles solicited through investment groups on social media - Can you really trust those people?"(January 24, 2024)
Checklist to determine if something is a scam
While the methods may vary,you can distinguish between legitimate services and scams by looking at the "flow of money" and "control over the account." If even one of these applies, stop and think before making a deposit.
| Checklist | Signs of fraud | Legitimate copy trading |
|---|---|---|
| ① Whether or not there was solicitation | Being solicited by people on social media, LINE, or dating apps. | No one tries to solicit you. You apply yourself through the company's official website |
| ② Bank transfer destination | Have them transfer the money to a bank account in a personal name. | Only the vendor's official payment system (credit card, bank transfer, etc.) is accepted |
| ③ Prepaid expenses | They require payment of software fees, participation fees, and membership fees in advance. | No upfront fees. The only cost is a success fee based on profits generated |
| ④ Control of the account | a Power of Attorney (POA)and your account ID and password. | Only you can manage your account. No authorization is required |
| ⑤ How profits are perceived | Profits only increase on the dedicated app/website. | Each transaction, including the day of the loss, is recorded in your trading account |
| ⑥ Withdrawal | They request an additional deposit for taxes and fees when you withdraw funds. | No additional deposits are required for withdrawals. Tax filing is done by the individual |
| ⑦Assertive expression | "You absolutely cannot lose money," "A guaranteed monthly return of X%"—they assert with certainty | The risk of loss is always clearly stated |
| ⑧ Substance | The company's location and operating history cannot be verified | The official website has a company information and features page |
When in doubt, the final check iswhether the copy trading function page actually exists on the company's official website. Don't rely on links sent by recruiters;search for the company name yourself to find the official website. If you can't find the official website through a search, or if there is little information available in Japanese, it's safest to stay away.
The " Recommended Copy Trading Ranking " compiles information on legitimate service providers and their respective terms and conditions, based on information verified on their official websites
How to deal with being a victim: Consultation services and the reality of refunds
If you suspect you've been scammed,time is of the essence. Especially if you've made a bank transfer, contact the recipient's bank as soon as possible. There's a chance the funds are still there if the recipient's account hasn't been frozen yet.
The order in which things should be done
| order | action | contact address |
|---|---|---|
| ①Top priority | Contact the financial institution to which the money was transferred, inform them that it was a fraudulent transfer, and request that the account be frozen. | The bank used for the transfer and the recipient's bank |
| ②Police | File a police report or seek advice. If it's not an emergency, please call the dedicated consultation line | #9110(For emergencies, dial 110) |
| ③ Financial Services Agency | Hotline for advice regarding fraudulent investments | 0570-050588(Weekdays 10am-5pm) |
| ④ Consumer Affairs Center | Consumer Hotline (connects you to the nearest service center) | 188(No way!) |
| ⑤ Preservation of evidence | Save screenshots of the exchange, transfer records, the other party's account information, and URLs | — |
The possibility of a refund—the mechanism and limitations of the law to provide relief for victims of wire fraud
If you have been a victim of fraud through bank transfer, there is a system under the "Act on Relief for Victims of Bank Transfer Fraud " (officially known as the "Act on Payment of Restitution for Damages Caused by Funds in Deposit Accounts Used for Criminal Purposes") that allows you to receive a distribution of funds from the frozen account of the recipient, in proportion to the amount of your loss . Applications should be made to the financial institution from which the transfer was made .
however,Cases where the full amount is reimbursed under this system are actually in the minorityTherefore, since there is a lot of information that raises excessive expectations, I will honestly tell you the limitations
The limitations of relief laws (realities you should know)
- Only the amount remaining in the account will be returned. Fraud groups withdraw funds immediately, so the balance is often almost zero at the time of freezing.
- If there are multiple victims,the balance will be divided proportionally according to the amount of loss(account balance × individual loss ÷ total loss).
- This appliesonly to bank transfer fraud. Cash payments and cryptocurrency transfers are not covered.
- Remittances to overseas accounts and overseas businesses are practically impossible under this system
If the amount is large, consulting a lawyer specializing in recovering losses from fraud is an option. However, be aware of the risk of secondary damage from advertisements that guarantee success, such as "we will definitely get your money back," or from "refund agencies" that only charge exorbitant upfront fees. Make sure to check whether the lawyer is qualified and what their fee structure is before hiring them. Starting with a free consultation at the Japan Legal Support Center (Houterasu) is also a sensible approach.
Social media solicitations promising to "recover your losses" are a common tactic in secondary fraud using victim lists.Victims are vulnerable to this scam immediately after losing money and are desperate for any help they can get. Always start your consultation with the public hotlines listed in this article (#9110, 0570-050588, 188) or find a lawyer or legal aid service yourself.
How to start copy trading safely
We've looked at various scam tactics, but conversely,simply by "signing up for an official service from a legitimate company yourself, without going through someone else's solicitation," you can almost completely block the entry point to fraud. There are three steps to get started safely.
3 steps to get started safely
1. Choose your own broker → Open an account yourself through the broker's official website where you can verify their operating history and company information, rather than through a link you were solicited to use.
2. Check the terms and conditions on the account screen → Only use services where the success fee rate and minimum investment amount can be confirmed on the broker's screen (do not trust explanations given verbally or via LINE).
3. Start with a small amount → Begin with an amount that won't affect your life if you lose it, and make sure you can actually stop at any time.
Specific details on choosing a broker, such as which brokers officially offer copy trading, and what their fees and minimum investment amounts are, are summarized in a separate article where we have checked and compared each company's official websiteCompanies that advertise themselves as "copy trading compatible" but have actually discontinued or stopped providing the service(Exness,AXIORY, FBS, etc.) are also listed, so please check them out as well
Frequently Asked Questions about Copy Trading Scams and Illegality
Is copy trading legal?
There is no law prohibiting individuals from using official copy trading services of overseas forex brokers. The regulations and penalties of the Financial Instruments and Exchange Act applythose who solicit, manage, or advise on such services "as a business," not to users who manage their own funds in their own accounts.
However, overseas forex brokers are not registered in Japan andnot subject to the supervision of the Financial Services Agency or the domestic compensation system. Please understand this before using their services.
What is the most common type of scam?
This type of scam uses social media and dating apps as entry points for recruitment. According to statistics from the National Police Agency, the number of victims of social media-based investment fraud is projected to reach 9,523 cases and approximately $805,000,000 in 2025, an increase of about 1.5 times from the previous year.
The typical pattern is: "Build a relationship → Invite them to an investment group → Have them transfer money to a personal account → Profits increase only on the screen → Additional charges are made for taxes and fees when the money is withdrawn." This is explained in detail in the section on 5 different tactics
What kind of people are most likely to fall for investment scams?
It's not just those without knowledge who are targeted. The modus operandiinvolves building trust and romantic feelings first beforemoving on to discussions about money, so victims include people of all ages and with no investment experience. Cases published by the National Consumer Affairs Center of Japan show that high-value losses are particularly noticeable among middle-aged and elderly people with substantial assets.
The most reliable defense is to avoid assuming "I'll be fine" and to be suspicious of all financial matters shared via social media
Is the copy trading service that promises "absolutely no losses" legitimate?
It's not the real deal.No matter how skilled a trader you copy, you will still incur losses. No one can predict the future of the market with certainty, and even managers of major hedge funds experience losses.
Statements like "You will never lose money" or "Guaranteed monthly return of X%" are impossible promises in the realities of finance, and you should consider them a sign of fraud the moment you hear them
Is it possible to lose money even with legitimate copy trading?
Yes, it's possible. Even with legitimate services, you'll incur losses if the trader (provider) you're copying from performs poorly, and your own performance will be less favorable due to success fees and spreads."Not a scam" and "making a profit" are two different things.
Operating a service is your own responsibility, including the decision to discontinue using a provider whose performance has declined. How to choose a provider (checking past performance over the entire period, questioning claims of a 100% win rate, etc.) is explained in the section on how to choose a provider in the ranking articles
Isn't copy trading by major companies like XM andHFMillegal?
XMTrading andHFMIt is not illegal for individuals to use copy trading services officially provided by major overseas forex brokers such asas mentioned abovethis list is "a list of businesses not registered in Japan," and being listed does not mean they are fraudulent.
What you should be wary of is not the broker itself, butthird parties who approach you offering to "do copy trading for XM." You do not need an agent or intermediary to use the legitimate service.
Are profits from copy trading taxable?
Yes, it does. Profits from copy trading in overseas forex areconsidered miscellaneous income subject to comprehensive taxation, and for salaried employees, an annual profit of approximately $1,250 or more is a guideline for filing a tax return (the tax rate is progressive according to income). Failure to file is illegal, so be sure to file a tax return if you make a profit.
For detailed information on tax rates, calculation methods, and filing procedures, please see " How much tax do I have to pay on overseas forex trading? (Supervised by a tax accountant) ". Please note that any request to "pay taxes in advance for withdrawal" is 100% a scam. Taxes are something you declare and pay to the tax office yourself, not to brokers or intermediaries.
Can I get my money back that I was scammed out of?
If you are a victim of a bank transfer, youa proportional distribution of funds remaining in the frozen account. However, funds cannot be recovered once they have been withdrawn from the account, and cash payments and cryptocurrency transfers are not covered by this system.
That's whythe most important thing is to request an account freeze (contact the financial institution to which the money was transferred) the moment you realize something. The procedurethe section on how to deal with fraud. Do not respond to refund solicitations on social media that say "you can definitely get it back," as these are secondary scams.
Summary: Fraud can be prevented at the "entry point." Choose legitimate services yourself
Key points of this article
- Users are not guilty of any illegal activity. Those who solicit or operate the service without registration are the ones who are guilty (punishable by imprisonment of up to 10 years or a fine of up to approximately $62,500).
- The number of victims of social media-based investment scams is rapidly increasing (9,523 cases and approximately $805,000,000 by 2025).The entry point is always "recruitment by another person."
- Signs that immediately disqualify you:Bank transfers to a personal account / advance payment fees / submission of a Power of Attorney (POA) / additional charges upon withdrawal.
- If you realize you've been a victim of fraud,contact the bank that received the transfer as a top priority→ Call #9110, 0570-050588, or 188 for advice.
- To get started safely,choose and sign up for an official service from a legitimate company. Do not use promotional links.
The essence of copy trading scams lies not in the service itself, butthe structure of the solicitation process, which involves "moving money through other people." Conversely, if you choose a legitimate service where the terms and conditions can be confirmed on the screen without going through a solicitation, almost all of the tactics mentioned in this article will not work.
The following ranking article summarizes information verified on official websites regarding which companies officially offer copy trading, compares their terms and conditions, and provides guidance on choosing a provider
For information on the legality and safety of overseas forex trading in general, please also see "The Legality of Overseas Forex Trading | Warnings from the Financial Services Agency and Legal Opinions ," and for information on EAs (automated trading systems), please also see " An Introduction to Automated Trading (EAs) in Overseas Forex Trading ."
