The Internet is a quick and easy way for scam artists to find potential victims for their investment scams. First, the internet provides a large audience at a very low cost. And second, with the Internet, a scam artist can operate anonymously from anywhere in the world, making them especially hard to catch. Once you’ve given your money to an online scam artist, it’s likely gone for good.
Internet fraud often appears in the form of spam e-mail. Spam is unsolicited e-mail that usually promotes a certain product or service: cheap prescription drugs, a wide variety of what we’ll politely call marital aids, and very often, investments. Because spam e-mail is cheap and easy to create, scam artists can use this to reach thousands of potential victims at a time.
E-mail spam may promote a wode variety of investment scams, from Ponzi schemes to Pump-and-Dump scams.
The best way to deal with spam is to ignore it. Never reply to spam e-mails. Even if you just reply to ask the sender to remove you from their mailing list, that tells them that they’ve found an active e-mail address. Instead, delete the e-mail and block further e-mail from that sender.
And if you haven’t figured this out already: NEVER give out your personal information. A legitimate businesses will never ask you to provide personal information through e-mail, and neither will a legitimate investment adviser. If you get an e-mail asking for confidential information, don’t click on the included links and don’t send any information.
The best way to protect your money is to be an informed investor. Before you invest in anything, find out as much as you can about it. Read financial documents like the prospectus and financial statements, which you can find on www.sedar.com. Public companies and investment funds are required by securities law to file these and other documents on the System for Electronic Document Analysis and Retrieval (SEDAR).
Stay tuned for next week’s post on another sneaky form of investment fraud on the internet: spoof websites.
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Beware of swindlers who claim loyalty to your group
In a world of increasing complexity, many people are searching for a way to know who they can trust. This is especially true when it comes to investing money.
Unfamiliar with how our financial markets work, often people don’t know how to thoroughly research an investment and its salesperson. Many fall prey to affinity fraud in which a con artist claims to be a member of the same ethnic, religious, career or community-based group.
“You can trust me,” says the con artist, “because I’m like you. We share the same background and interests. And I can help you make money.”
Another equally effective pitch, if the con artist is not a member of your union or association, is to lull members into a misplaced trust by selling first to a few prominent members, then pitching the scam to the rest by using the names of those previously sold.
The effect is the same: Once the connection to the group is understood, the natural skepticism of the individual member is overcome, and one more group name is added to the sales column.
Once a victim realizes that he or she has been scammed, too often the response is not to notify the authorities but instead to try to solve problems within the group. Swindlers who prey on unions or associations play the loyalty angle for all its worth.
How to avoid affinity fraud
- Beware of the use of names or testimonials from other group members. Scam artists frequently pay out high returns to early investors using money from later arrivals. Accordingly, early investors may be wildly enthusiastic about a scheme that may collapse entirely once you’ve invested. (As with a Ponzi scheme, for example.)
- Obtain a prospectus or other form of written information that details the risks in the investment and procedures to get your money out.
- Ask for professional advice from a neutral outside expert not in your group—an accountant, attorney or financial planner—to evaluate the investment.
- Before investing any money, call your check with the Nova Scotia Securities Commission to learn more about the salesperson and firm. The simplest inquiry is to ask if they are registered to do business in Nova Scotia, and if the investment isallowed to be sold. If one or the other is not registered, that is a sure warning to inquire further.
- Don’t take the word of a salesperson! Check out the investment yourself.
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Tagged as:
affinity,
fraud,
NASAA,
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scams,
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