In the Valentine’s Day edition of our blog, we apply the term “catfishing” to online investment fraud. An expression typically used in the online dating world,“catfishing” is the act of creating a false online identity for deceptive purposes. In online dating, individuals who catfish create false profiles and lie about their personal life to meet people and build romantic relationships. While online investment fraudsters may not be lying about their appearance or personal profile, they will falsify information about their company’s location, legitimacy and expertise in order to gain your trust and money.
For example, what if you found out that Bob, who you met on a stock message board, is really a scam artist? The same Bob who:
claimed he was an experienced financial adviser located in Alberta and pitched you a “once in a lifetime, low-risk, high-return, investment opportunity too good to pass up”
guaranteed you early retirement when you confided in him about your worries for your financial future
you gave your personal financial information to so he could triple your initial investment
If we told you that Bob is in fact located somewhere overseas, not registered to sell securities and it is his job to try and swindle you out of your savings, would you be surprised?
Many times, victims of online investment fraud have been shocked when they discovered who they were really dealing with on the other side of the screen. Unfortunately, this discovery typically comes after the money is already lost.
There are many ways scam artists use online tools to entice investors with fraudulent investment opportunities including: spam emails, online discussion boards or chat rooms, social networking websites and deceptive online advertising.
Binary options scams are a type of online investment fraud that has increased over the past two years, and unfortunately, one that many Alberta investors are falling victim to. ASC research shows that Albertans who fall victim to binary options scams lose an average of over $20,000. This number becomes even more alarming when you find out that these companies operate overseas and are not registered in Alberta, which means it is illegal for them to solicit Albertan investors.
As the financial industry becomes increasingly web-based, it becomes more important for investors to know how to protect themselves and their savings from online fraud. Here is a list of warning signs to watch out for:
1. Sending money overseas. When investors send their money overseas and something goes wrong, it can be difficult or impossible to get it back because unfortunately, regulators and agencies in Alberta can do little to help. When conducting research on the firm or advisor, it is important to confirm that your money is going where they say it is. Be sure to check that the contact information the firm provides you is accurate.
2. Guaranteed high returns and no risk. No one can offer you a guarantee – with limited exceptions all investing involves some level of risk. Typically, investments that have the potential to generate larger returns come with greater risks.
3. Unregistered investment firm or advisor. With limited exceptions, in order to legally sell securities in Alberta, an individual or company must be registered with the Alberta Securities Commission. Whenever you're online, you can run a quick and free registration check by going to www.aretheyregistered.ca
When it comes to matters of the heart or investing online, take extra precautions to protect yourself by asking the right questions and conducting your own research before spending any time, energy or money.
ASC warns Albertans of top five investor risks for 2017
Investment fraud on the internet