I was first introduced to the Iraqi dinar scam by a friend of mine who asked me if it was a good investment several years ago. And I’m amazed to see how long it has persisted, not to mention how active the scam is today.
The Iraqi dinar scam disproportionately makes victims of people who don’t have money to lose — including returning servicemen and women — and that’s why I’m passionate about speaking out against it.
How the Iraqi Dinar Scam Works
The scam is basically perpetrated by dinar currency dealers, who work through “promoters” on message boards and through church and social groups to sell physical dinar currency. They promise that the dinar, which currently trades at about 1,200 to the U.S. dollar, will soon be “revalued” to a much higher rate. They usually promise returns of several thousand percent when you buy dinar.
The dealers get away with it because as long as you are not directly promoting the dinar as an investment, the dealers can sell it without it being a registered/regulated security.
The promoters get away with what they do because, as long as you are not selling the dinar, you can pretty much say anything you want about it.
The connections between the dealers and the promoters are usually hidden behind false names and corporate shells.
For example, there is a large dealer here in my local area owned by the wife of a popular dinar promoter who goes by an online pseudonym. Hidden relationships like this are more common in this scam than you might think. Very few have been shut down by the FTC or SEC, and I expect that will remain the case in the future.
Why Is This a Scam?
The underlying premises used by the dealers/promoters to convince inexperienced currency traders that this is a “sure thing” are relatively easy to refute, but victims have to be willing to confirm the facts for themselves.
Here is a brief summary of the lies told by the scammers and why they aren’t true:
Currencies are not stocks: Scammers suggest that because Iraq sits on one of the world’s largest (and easiest-to-access) oil reserves, the dinar will appreciate as they export this commodity. If Iraq were a company and the dinar was a stock this would be true, however, oil exporters work very hard to prevent their currencies from appreciating. There is even an economic problem called “Dutch disease” that describes what happens when a commodity exporter’s currency appreciates in value. The bottom line is that Iraq doesn’t want an appreciating currency because it wouldn’t do the country any good. Iraq wants economic growth, not currency growth. If oil exports increased the value of a currency, why don’t other exporters experience appreciation? Much more often they experience the opposite: devaluation.
You can’t do business internationally with a low exchange rate: The argument that a country can’t do business if its base currency (the dinar) is only worth a fraction of a U.S. penny is a common but absurd argument. In the modern global economy, the decimal place in an exchange rate doesn’t matter. If it did, how could South Korea, Indonesia, Madagascar, or Vietnam be such large exporters of consumer goods? You don’t need to look farther than the tag on your shirt to confirm that each of these exporters, with currency exchange rates lower than the dinar, don’t have any problems exporting goods.