How to Spot Investment Fraud
An informed skepticism can help protect you against investment fraud. Red flags include promises of above-market returns or quick action being required of you; be wary of investments with only mobile phone numbers or PO boxes listed as contact details.
Fraudsters may attempt to manipulate the price of listed stocks by spreading false rumors or purchasing shares shortly before going public, then selling them at a profit for less than their market value, leaving other shareholders with low-value holdings.
Signing up with a scammer
Investment fraud comes in various forms. Perpetrators may take on different identities: telemarketers, financial professionals or even family and friends may use telephone, mail, email, Internet or fax communications channels to commit the act. They may claim special access to stocks or commodities and want you to transfer funds into “holding accounts.” Always inquire and inquire before investing money with anyone!
Scammers frequently target groups of people with similar connections, including social or professional networks, religious congregations or ethnic communities. These scams are known as affinity frauds. Scammers take advantage of trust established between members in these groups by spreading fraudulent information via social media channels or text messages that appear legitimate – such as those imitating bank number.
Be wary of investing with companies or individuals that have not registered and/or obtained licenses from MAS to sell securities, as it’s vital that you check all registrations independently. Furthermore, take care when dealing with claims which can’t be independently verified – such as years of experience and numerous accolades.
Calling a scammer
Investment fraud is an increasing threat in today’s high-tech world, so it is wise to maintain a healthy dose of skepticism and learn to identify potential red flags. Any investment opportunity promising above market returns should raise red flags; you should also avoid purchasing securities sold by people unregistered to sell securities; be wary of anyone seeking personal information from you such as Social Security numbers or passwords.
Fraudsters may pose as friends of friends or celebrities to appear reputable, while using popular news stories as bait to draw you in. Always independently verify any claims made in media reports or bulletin board postings by independently checking. Furthermore, be wary of promoters who downplay risks or appear dismissive of written risk disclosure documents as mere formalities. Finally, any sudden pressure put upon you to make a quick decision should be treated with suspicion: legitimate companies will provide sufficient time for research before pushing you into making one quickly.
Sending money to a scammer
Sending money to a scammer can make it impossible to retrieve your funds; therefore, it is vital that you conduct due diligence prior to investing on any quick sale offers.
Fraudsters often utilize social media to commit community-based investment fraud (commonly referred to as affinity fraud). Their attacks target groups that share commonalities in ethnicity, religion and military service ties; furthermore they employ various tactics – testimonials and celebrity endorsements – in order to make their scheme look legitimate.
Be wary of investments that require you to deposit into multiple bank accounts or use crypto-assets as these investments tend to be highly volatile, unregulated, and difficult to track. Also avoid companies using pooled investment accounts. If you suspect investment fraud has occurred against you, report it immediately with both the RCMP and local police departments; additionally it would be wise to familiarize yourself with The Little Black Book of Scams produced by Government of Canada for better protection.
Investing in a scammer
Investment scammers can be dangerous because they may use your personal data against you to commit theft, such as taking out loans in your name or emptying bank accounts. Furthermore, identity theft can cost thousands of dollars, so to protect against this possibility it would be prudent to enlist an ID theft protection service.
Fraudsters frequently promote their investment schemes on social media and instant messaging platforms, using celebrity endorsements or testimonials to make the scam seem legitimate. You should be wary of claims that an investment opportunity is exclusive or relies upon “inside” information or is confidential.
Before investing with any fraudulent individual or organization, always obtain a written prospectus and inquire as to whether their company and person offering investment are registered with government agencies. Although this won’t always protect you against scams, at least this gives some recourse should your investment turn out to be fraudulent.
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