Scam artists will use victims’ religious, community or ethnic identity to gain their trust. The scam artist will pray with them, volunteer and attend social events for that particular group. Once they have established a strong relationship, they convince people to invest in their scheme.
Binary Options Fraud
These scams direct people to binary options ‘trading’ sites, via social media, online ads, and unsolicited phone calls. Binary options are a form of ‘wager’, where you decide whether a stock or commodity will increase or drop in value within a very short time span. However, the overwhelming majority of these sites are rigged to lure in a victim with small early returns. Once larger sums are invested, the victim is bled dry as quickly as possible. Unauthorized credit card withdrawals often follow suit. There are NO binary options firms registered to trade anywhere in Canada.
Cryptocurrency scams can take a number of forms, such as multi-level
marketing schemes, pump-and-dump schemes, or fake digital wallets.
In a multi-level marketing scheme, companies lure investors through the promise of high interest with low risk (for example, one per cent daily returns) on a new virtual token or coin. Investors are incentivized to recruit more members through commissions. Promoters rely on online/social media advertising to hype schemes and attract new investors. Eventually, the company will shut down, and leave investors with nothing but worthless cryptocoins or tokens
In a pump-and-dump scheme, groups collaborate to buy a low-value cryptocurrency, and then heavily promote it on social media to push up demand and increase the price. Once a certain threshold is met, there is a sudden, coordinated sell-off. Those unaware of the scheme are left with the devalued cryptocurrency.
A fake digital wallet can be set up by a scammer to lure users into unknowingly providing their private key or code – once obtained, the scammer will steal all available cryptocurrency.
Fraudulent ICOs capitalize on a general lack of knowledge by the investing public on cryptocurrency and blockchain technologies. Exploiting people’s Fear Of Missing Out or FOMO on a new technology is one way these frauds will use a sense of urgency to get potential investors to make hasty, uninformed decisions.
Common concerns of investing in cryptocurrency include high volatility, a lack of regulation, no recourse if your money disappears, and is untraceable once lost. Unlike money in a bank or credit union, cryptocurrency is not
insured through Canadian depository insurance. Cryptocurrency is also highly vulnerable to hacking and theft.
More information on Cryptocurrency Risks can be found here: http://www.mbsecurities.ca/get-informed/pubs/cryptocurrency.pdf
These scams often find their victims through unsolicited phone calls or emails which direct the victim to a Forex Website. The websites look legitimate and offers what looks like an exciting opportunity to invest your money in the foreign exchange (forex) market. You’ll be told the person or company investing your money has a great track record and you’ll be promised a high return.
What usually happens is that your money is not invested in anything and is stolen by the scam artist.
What is ‘Insider Trading’
Insider trading is the buying or selling of a security by an insider* who has access to non-public, material information** about a publically traded company.
An insider (a company’s CEO, for example) can buy and sell their company’s shares (i.e. trade stock), but cannot do it when in possession of material information that has not been disclosed to the public.
Insiders in Canada are required to report their trades on SEDI (System for Electronic Reporting by Insiders).
Insider trading also includes tipping others when you have any sort of non-public material information.
*An insider is typically a director or senior officer of a company, or a person or entity owning more than ten per cent of a company’s voting shares
**Material information is information about certain facets of a business which have not been made public, but may impact that company’s share price once released. Material information can occur in many forms including revisions to financial statements, pending regulator announcements, a corporate merger, or a change in a company’s board of directors, etc.
Canadian regulators have systems in place to identify potential leaks of inside information. One telltale sign is unusual trading by company insiders or people with connections to insiders that occurs prior to an announcement.
For example, if there is a negative news release by or about a company, and leading up to that release there is an increase of selling volume, regulators can examine who was selling, and whether it involved insiders or people that may have been tipped off.
In another example, say a company was about to post a large quarterly increase in profit, and an insider used that positive news to purchase shares before the material information was made public, they would be illegally benefitting from their non-public knowledge of the increase in share price.
The reason for preventing insider trading is to foster a fair and transparent market, with a level playing-field for all investors.
In this type of scam, the fraudster will promise you a high return from an investment in another country. They will often tell you the investment is a great way to avoid taxes. What you may not know is that once your money is sent to another country and is in someone else’s control, you may not be able to get it back. The promised high return is often used to attract your attention and is never paid.
The promoter promises investors high returns. They operate by paying interest to investors with money brought in by new investors. These new investors are attracted by the stories of people claiming to be getting high returns, and in some cases by receiving small amounts of money back in the early stages of the scheme. Inevitably the Ponzi/Pyramid collapses and the investors lose their money.
Prime Bank Schemes
Investors are asked to contribute money to use in the purchase and sale of Letters of Credit, Prime Bank Notes or some other similarly named financial instrument. They are told that they can earn very high interest rates by buying and selling these instruments on a quick turnover basis.
Investors are often told that this type of investment is a secret transaction, normally available only to the very wealthy and that they should keep all information confidential. The promoters explain that the money is invested offshore and they present investors with a complicated information document, which gives the impression that the scheme is legitimate. In the end, people lose their money.
Pump and Dump
‘Pump and Dump’ involves anonymous people talking up a thinly traded stock (which they own) on Internet chat groups quoting supposed “inside information”. People buy into the hype and start buying the stock and its value shoots up. The original promoters sell their stock at the inflated price and the stock price soon drops. The rest of the group is left holding stock that is worth far less than they paid for it.
Recovery Room Scam
Victims who have been previously defrauded are contacted by an individual claiming they can recover all or some of the money lost in the previous scam. They are asked to pay an advance fee to cover the costs of the recovery. In fact, the investor is being scammed a second time by the same fraudsters who keep the fee with no intention of helping the investor.
RRSP Unlocking Scam
A promoter advertises that his company has found a loophole in the tax law which will allow you to access your locked-in RRSP, RIF, LIF, RESP or LIRA funds tax-free. You are instructed to deposit money in a self-directed registered account and buy shares in a shell company. The company then loans you money and keeps the remainder as a fee. If the monies were lent to you, you owe the company a debt and they could require you to repay it. If the company goes bankrupt, the receiver could require you to repay the debt immediately. Most investors don’t understand that they are buying worthless shares or that any money they receive will likely be taxable.