The Canadian Securities Administrators (CSA) has
issued a warning about fraudulent “investment groups” proliferating
on social media. These groups use platforms like Facebook and Instagram to lure
unsuspecting investors with promises of high returns, only to leave them with
significant losses.
Tactics Used by Scammers
CSA mentioned that these scams, commonly referred to
as “pump and dump”, exploit social media to deceive potential
investors. Scammers start by heavily promoting a stock they own shares in,
artificially inflating its price. Once enough investors buy in at the elevated
price, the scammers sell their shares, causing the stock price to plummet and
leaving new investors with substantial losses.
One way the scam works is through private WhatsApp chats, where scammers promote their groups on social media and subsequently invite investors to encrypted group chats. Others use fake
credentials, posing as registered professionals or claiming affiliation with
legitimate companies or celebrities.
According to the Canadian watchdog, other fraudsters
use a shifting target model. Initially, they might discuss well-known stocks
but later push investors towards riskier, less familiar stocks, often listed
abroad in markets like Hong Kong.
CSA has also determined that the unscrupulous
individual could also use pressure tactics by aggressively persuading investors
to commit large sums, including borrowing from friends and family.
CSA Cautions Investors
Following these findings, the regulator has urged
users to safeguard against these scams by remaining cautious of unsolicited
investment advice on social media. CSA has also urged users to conduct due diligence, including research on the background, qualifications, and disciplinary history of investment advisors using the CSA’s National Registration Search.
CSA’s latest warning comes amid a reported surge in investment scams. In April, Finance Magnates reported, citing a report by Barclays, that the financial space had been rocked by a 29% surge in investment scams over the past year. These scams have reportedly affected the
bank’s current account customers, accounting for the highest proportion of
money lost to fraudsters, with an average claim exceeding £14,000.
Interestingly, 6 out of 10 investment scams now happen
on social media platforms, where scammers promote unverified financial
advertisements. Millennials and men are particularly vulnerable, with men’s
average investment scam claim rising to £16,306 and claims by young people aged
21-40 accounting for nearly half of all investment scams.
The Canadian Securities Administrators (CSA) has
issued a warning about fraudulent “investment groups” proliferating
on social media. These groups use platforms like Facebook and Instagram to lure
unsuspecting investors with promises of high returns, only to leave them with
significant losses.
Tactics Used by Scammers
CSA mentioned that these scams, commonly referred to
as “pump and dump”, exploit social media to deceive potential
investors. Scammers start by heavily promoting a stock they own shares in,
artificially inflating its price. Once enough investors buy in at the elevated
price, the scammers sell their shares, causing the stock price to plummet and
leaving new investors with substantial losses.
One way the scam works is through private WhatsApp chats, where scammers promote their groups on social media and subsequently invite investors to encrypted group chats. Others use fake
credentials, posing as registered professionals or claiming affiliation with
legitimate companies or celebrities.
According to the Canadian watchdog, other fraudsters
use a shifting target model. Initially, they might discuss well-known stocks
but later push investors towards riskier, less familiar stocks, often listed
abroad in markets like Hong Kong.
CSA has also determined that the unscrupulous
individual could also use pressure tactics by aggressively persuading investors
to commit large sums, including borrowing from friends and family.
CSA Cautions Investors
Following these findings, the regulator has urged
users to safeguard against these scams by remaining cautious of unsolicited
investment advice on social media. CSA has also urged users to conduct due diligence, including research on the background, qualifications, and disciplinary history of investment advisors using the CSA’s National Registration Search.
CSA’s latest warning comes amid a reported surge in investment scams. In April, Finance Magnates reported, citing a report by Barclays, that the financial space had been rocked by a 29% surge in investment scams over the past year. These scams have reportedly affected the
bank’s current account customers, accounting for the highest proportion of
money lost to fraudsters, with an average claim exceeding £14,000.
Interestingly, 6 out of 10 investment scams now happen
on social media platforms, where scammers promote unverified financial
advertisements. Millennials and men are particularly vulnerable, with men’s
average investment scam claim rising to £16,306 and claims by young people aged
21-40 accounting for nearly half of all investment scams.
This post is originally published on FINANCEMAGNATES.
