Types of Fake Investment ads and Methods to Identify Them
No matter which social media platform you open on your mobile today, you will see investment ads running all across the internet, somewhat driving you to invest. The extent of investment ads is so deep that it is now an indispensable part of our digital lives. While some exude authenticity and smart financial moves for a person, others come with an investment trap, pretty hard to identify. And just like every financial independent person finding ways for economic security in their life, falls prey to the shady ads offering high returns. The fake investment ads feed on not just the vulnerable people, but high-profile intellectuals too, with their cutting-edge masquerading talent.
When fake endorsements of Prince Harry and Meghan Markle can circumvent the internet to promote Bitcoin-related investments, we can only ideate the penetration of this scam in our daily lives. This nexus of scam advertisements has risen from merely 8,000 in 2016 to 34,000 in 2021, according to the FCA(Financial Conduct Authority). While it can be partially blamed on the rampant internet usage, there is a lot of contribution of the get-rich-quick attitude for the surge in scam investment ads over search engines and social media.
We all have someone in the family who has been a victim of such fake investment ads but seldom do we take our learnings from such incidents to become more vigilant on a platform as sensitive as the internet. Therefore, to ease your discomfort towards fake investment ads hiding behind the claims of huge return of investment, whilst stealing your hard-earned money, we have curated a complete guide to understanding the type of fake investment ads and how you can anticipate their truth.
Let’s dig in then.
Types of Fake Investment Ads
1. Advance fee scheme - This scam investment ad persuades the person to pay money upfront, never to hear from them again. Scammers in this case usually target those people who have lost their money before in some scheme and lure them with the offer to recover their financial loss. This, however, comes with the catch of paying a refundable fee, in the form of a deposit which when paid to the scammer is lost forever.
2. Boiler room scam - The famous Hera Pheri scam, where fraudsters create a makeshift office to convince people of their existence and persuade them to invest in their schemes has only turned more sophisticated. Boiler room scam has turned to the digital world now, and both physical and digital offices run away with your money by the time you realize it was fake.
3. Forex scam - The largest and the most liquid financial foreign exchange in the world has also been the scapegoat on many occasions for fake investment ads. Trading in foreign currency is always risky and many fake forex ads promote easy access to the exchange market through software or some courses. This highly sophisticated scam may turn out to be an unregulated act where your finances will not be invested as promised and you will end up transferring your hard-earned money to an offshore account, only to find it gone forever.
4. Offshore investing scam - For all those trying to avoid or reduce your taxes on your income, scammers are finding vulnerable gaps in your vigilance through offshore investing scams. These fake investment ads promise high ROI and profits if you send your money to an offshore account. Also known as tax-avoidance schemes, they are highly risky and might leave you to pay even more money in penalties or taxes, not to mention the high chances of you losing all or some of your money.
5. Pension scam - Targeting the most vulnerable of the lost, the retired people who have saved their life savings in FD or Locked-in retirement account (not eligible to be withdrawn until 55 or older). Such fake investment ads impersonate as a special Registered Retirement Saving Plan (RRSP), and promote lock-in your funds with high return, or get you 60-70 % of your money from the locked-in retirement funds. While the investment tends to be worthless, it causes a retired person to lose their life savings as well.
6. Pyramid scheme - The fake investment ads running across digital and physical platforms promoting pyramid schemes have engulfed the entire world and challenged even the most financially equipped nations. Pyramid schemes recruit people with the promise of enhanced finances and money multiplied on every addition of a person. However, for every person to join the chain, they have to pay a certain amount. While people do make some money and profit in their initial days of investment, it soon boils down to a big scam that gulps the entire families of their finances and life savings.
Signs that reflect an investment ad is a scam:
- Claims of low risk in investment and high returns
- Trying to convince you that it is based on insider information and hence less risky
- Insisting on investing right away
- Business or individual seller with no registration to sell investments.
How can you protect yourself from being deceived by an investment scam?
- Verify Business - Be sure to confirm authenticity by checking the background of the business or individual selling you an investment. A person or business needs to be a registered and licenced seller to be able to offer investment schemes, as well as a disciplinary history in the domain.
- Quick Rich Schemes are Scam - The quick and easy rich scheme is always a scam and no matter how lucrative they sound; you need to stop yourself from being lured into such scams.
- Don’t Trust Unknown Sources - Steer clear from fishy promotional ads, emails, phone calls, or even in-person meetings that can potentially cheat you of your money.
- Don’t Rush to Invest - The urgency factor in investment is one of the prime signs that the ad is a scam. All the talk of; only for your scheme or the scheme will expire tomorrow is simply a way to lure you into the trap and steal your money. Always do some research on your end.
- Do not fall for some rich couple having a luxurious holiday giving testimonials for an investment scheme. Remember if the video of Prince of Sussex can be misused for an investment scam, there is very little you can trust without inquiring about the actual facts.
The increasing number of investment frauds is impacting millions of lives where people invest their life savings in the hope of receiving high returns. This hoax has been crippling the entire financial domain and is consistently becoming a challenge to overcome. Senior citizens are more likely to fall prey to such internet frauds but they can avoid this if they take precautions in advance.
However, with some information and staying vigilant on the prospects where you invest, you can easily avoid such scams. The best way is definitely to not fall prey to high return schemes and always double-check the registration of the business or individual who is trying to sell you the investment scheme.
It is the small step towards awareness that can save your finances and lead you to security.