Fraud Guest Blog5 min readOctober 8, 2020

How to Spot an Investment Scam Like a Pro – Pt.2

PART TWO of TWO

A MoneySmart Guest Blog

Rule 3# – Be wary of high-pressure tactics and a need to ‘act fast’

I use a pseudonym, covert email address and phone number to hide my identity as a government investigator. Given the suspect information that I have uncovered so far, I request more information from the company. Within ten minutes, I receive a call from a salesperson.

He is very friendly and seems knowledgeable—if I didn’t know he was trying to con me, I might like him. He suggests I start with a small deposit to ‘get my feet wet,’ and if I’m not happy I can get all my money back. He also offers me a bonus on any deposit I make immediately. This is actually a common ploy to gain trust.

When I ask about the noise in the background, he claims it is other traders working with clients. I know this is a lie—he is working from what’s called a ‘boiler room’ filled with other scam artists working day and night to snare other unsuspecting victims. He’s likely calling from a country that will not cooperate with Canadian regulators or law enforcement.

Investment fraud schemes will always encourage you to act immediately, either by fake incentives or bonuses, or by scaring you with the fear of missing out on a deal. If you find yourself entangled in one of these frauds, the representatives can become much more aggressive and demanding in an attempt to get as much money from you as possible before the scam is discovered.

#Protip! A registered professional financial advisor should never pressure you into an investment or instill a ‘fear of missing out’ if you don’t act immediately.

 

Extra Advice – Don’t invest in things you don’t really understand

With this particular scam, he recommends I invest using my credit card (a bad idea, which a real investment adviser would almost never suggest) or by transferring Bitcoin to them. He even offers to walk me through how I can buy Bitcoin to send to their online wallet. How kind!

Many investment frauds specialize in foreign exchange trading (Forex), binary options trading, contract for difference (CFD) trading, and cryptocurrencies—forms of investment that the average person likely doesn’t fully understand. Because more common investment types are easier to understand, like mutual funds for example, it’s easier to spot a fraud. Payments using Bitcoin and other cryptocurrencies are also becoming a common tactic scammers use because the transactions can’t be traced.

If you don’t understand how a particular investment works, you absolutely need to find independent unbiased information on the subject before you part with any money. You should also strongly consider investing in something more straightforward.

 

Epilogue

Obviously, I do not commit to depositing any money with this fraudster. I tell him I’m late for a meeting and will get back in touch soon—he’s very anxious to know when we can speak again.

In meantime, I have the company’s ad taken down and prepare an investor alert to warn Manitobans that this company is targeting people in our community. The same morning, I receive a call from a victim in another similar scheme, who has lost all of his retirement savings. He is desperate to get his money back, but most people who invest in one of these offshore scams will never see their money again.

If only he had checked to see if the company was registered.

 

Spot a scam like a pro – three rules of thumb

To summarize – you can spot scams like a pro by:

• Checking the registration of the company and/or individual
• Checking for suspicious claims and details
• Being wary of high-pressure tactics and a need to ‘act fast’

 

And if you’re still not sure if the company is on the up-and-up, contact the Manitoba Financial Services Agency (or your local securities regulator in other provinces) and ask us.

 

Click Here for PART ONE

– Jason Roy is Senior Investigator with the Manitoba Financial Services Agency. He has more than 25 years of experience in securities investigation and anti-fraud work, and chairs the Canadian Securities Administrators Investment Fraud Task Force.