Cheating on investments on the Internet: schemes, tips for novice investors
As in any financial industry, investment fraud takes place. The principle used by scammers is simple to the banal: to attract as many customers with money as possible, and then disappear, taking with them the collected capital. In order to secure their capital, investors should know well what tricks scammers use in the field of investment and how to protect themselves.
Investment fraud: Common schemes
The global economic crisis provoked by the pandemic has led to a decrease in the income level of many categories of citizens. Even more people realized the need to invest and diversify their portfolios.
In search of a new source of income, many of them, inspired by numerous advertisements, began to consider various investment proposals.
When choosing a way to place your savings in order to make a profit, it is important to evaluate the reliability of the instruments, and not only the level of promised profitability, so as not to become a deceived investor. And here are the tricks used to achieve this goal by scammers:
Offers in social networks
Fans of sitting in social networks, which are overflowing with “profitable” investment offers, often come across such tricks. And since unfamiliar brokers are believed less, scammers create sites very similar to the original ones, using the names of well-known companies for this. For example, on the Internet, you can find brokers under the Tinkoff brand. The original name of the broker sounds “Tinkoff Investments”, so any deviation from the norm should alert.
There are other signs of investment fraud, such as: clearly unfair advertising, promising a comfortable life and containing scientific words incomprehensible to the layman, sky-high numbers, discrepancies with the address of the official website.
Conditions are too generous
This sign of investment fraud involves obtaining unlimited profit, the amount of which allegedly depends only on the amount of investments. Investments don’t work that way.
No real, self-respecting broker will offer an increase in profit by one and a half times at the first replenishment of the account.
Some brokers practice campaigns that allow you to purchase shares by attracting a new client. However, none of them will claim that it will be the most expensive security. More often these are inexpensive and not the most profitable gifts, and they are distributed under certain conditions. The latter, although they may be written in small print, are always present on the broker’s website. Otherwise, the fabulous profit is nothing but an investment fraud.
One of the main techniques of investment fraud is to cause not just interest in a particular product, but also a panic fear of missing out on benefits. To do this, the advertisement mentions that the offer period is limited, and if the client does not invest now, he will lose fabulous profits. At the same time, when visiting the site the next day, nothing changes, and this is already a sign of fraud.
High profit on secret tips
This is a myth. If you have already fallen for a tempting offer, scammers will not leave you alone. And such a technique is one of the ways of persuasion. Sometimes the so-called leads turn out to be correct, but this is just a clever trick. The fraudster gives a forecast for the growth or fall of the share price of a company, and in the near future he is justified. In fact, the forecast does not come true for all investors, but about half. For example, the same tip is given to 10,000 investors. Of course, some of them will make a profit. And if one half is disappointed, the other half will invest even more.
Fake broker companies
In this case, we mean both fake websites and brokers that do not inspire confidence among investors. These include:
- intermediaries who in reality do not have access to an organized stock market;
- brokers who do not have a license from the Bank of the Russian Federation (relevant for citizens of the Russian Federation). Such organizations are under the jurisdiction of other states, which complicates interaction with the broker or are generally registered in offshore zones, for example, in Cyprus, the Bahamas, the Virgin Islands or Hong Kong;
- organizations masquerading as licensed well-known brokers, which are essentially duplicates. For example, fraudsters can act on behalf of Tinkoff Investments, VTB or BCS.
Fraud in courses
An effective method for those who are used to taking their word for it. The so-called coaches and financial advisors only need to push the investor to the right decision. And then a solid divorce. Most of these mentors charge a fee for their services, and the rate is fixed and does not depend on the result in any way. Of course, there are conscientious consultants among this set of proposals, which can be distinguished by the following signs:
- the consultant’s recommendations are always justified;
- the consultant designates all possible risks for the investor;
- a conscientious mentor will teach you how to invest, but upon completion of training, he will not insist on opening an account with a particular broker.
How to feel investment fraud and not fall for the bait of scammers
Everything should be alarming: from intrusive advertising to a crooked company logo and fabulous bonuses. You should also not blindly trust brokers, it is easy to check the availability of a license if you use the service of the financial regulator, which provides information free of charge.
It is important to pay attention to such a nuance: which banks and payment systems the broker contacts. If settlements are carried out only through electronic wallets or through cryptocurrencies, most likely, the broker is a fraudster. The downside will be the persistence of the mediator. Sometimes false consultants call potential victims several times a day, trying to convince them of the need for investment. Reputable brokers don’t behave like that.
The following tips will help reduce the risk of fraud on investments and protect you from unscrupulous intermediaries:
- Check the broker for jurisdiction and license availability. It is better to give preference to licensed intermediaries.
- Take a close look at the broker’s website. Links usually do not work on fraudulent sites, grammatical errors are often present in the text, the address does not completely match the original one, there is no https protocol.
- Make sure that the company cooperates with large credit organizations and payment systems.
If the broker’s advertisement is placed on a social network, pay attention to the duration of the existence of the page on whose behalf the ad is placed. Sometimes such pages exist for only a few days and are anonymous, and the comments left are entirely positive. This should alert you. It is advisable to search the Internet for reviews of real customers posted on specialized sites.
Published: 8 January, 2022