Investment scams

Overview

Variation(s)

Binary Options

Similar to gambling, binary options work much like a wager. All or nothing "bets" are invested based on how an asset will perform within a certain timeframe. The asset could be a stock, currency or commodity.

Websites are designed to attract users to trade binary options, and many claim to be risk free or reimburse for lost wages. Initially, a virtual gain is seen, but there is no way to access the profits because they are non-existent. Currently in Canada, no business is registered or authorized to sell or market binary options.

It is always risky to invest in offshore companies, however investors that buy into a binary option run the risk of having their identity stolen, accumulating losses for unauthorized withdrawals on their credit cards and incurring high interest payments on an investment that doesn't exist.

Warning sign(s) - How to protect yourself

  • Be cautious when asked to provide personal information and credit card details over the phone and internet.
  • Do your due diligence, research an investment opportunity and seek the council of an independent third party.
  • Prior to investing, ask for information on the investment. Check the registration and enforcement history.
  • The Canadian Securities Administrators (CSA) encourages all investors to visit their site.

Investment scams are not only "boiler room frauds" (Boiler room fraud traditionally refers to a room that is selling an investment opportunity in stock that may or may not exist. In the context of mass marketing fraud, boiler room fraud is not limited to scams involving victims who are persuaded to invest money in shares or other investments that are either worthless or non-existent. These types of scams are categorized as investment scams and are one of many Mass-marketing fraud scams being reported to the Canadian Anti-Fraud Centre). An investment scam is any solicitation (telephone, mail, email, etc) for investments into false, deceptive or misleading investment opportunities, often referring to higher than normal or true monetary returns which consumers lose most or all of their money.

In 2011, 167 victims reported more than 15.62 million dollars in losses to investment scams. This represents a 51 percent increase in reported dollar loss since 2009, when 10.33 million dollars in losses were reported by 13 victims and a 27 percent increase in victim reporting.

The average loss per victim is more than $93,000.00, but the CAFC data only represents a fraction of loss when compared to 50 million dollars in losses associated to the Earl Jones Ponzi scheme or the 300 million dollars in losses associated to an international Ponzi scheme run by Milow Brost and Gary Sorenson.

Canadians between the ages of 50 and 60 represent the most at risk group to fall victim to an investment scheme, followed by those in their forties. Canadians were also most likely to invest when solicited or referred by a friend. Telemarketing solicitations represent 14 percent of the reports received by CAFC in 2011.

Types of investment reported to the CAFC included ponzi schemes, franchise opportunities, futures trading, multi-level marketing opportunities, mortgage investment opportunities and pump and dump schemes. The most common pitches were offers in "green energy projects" and gold.

Many victims reported sending money to accounts in the United Kingdom, Panama, New York, Indonesia, Hong Kong, and Canada.

Warning sign(s) - How to protect yourself

  • Talking about a great investment opportunity with a friend or associate.
  • Talking about an investment opportunity with higher than normal returns.
  • Talking about an investment opportunity made over the telephone.
  • Displays of urgency to make an investment, they don't want to miss out.
  • Clients have done limited due diligence and have little knowledge about the investment.
  • Clients that don't have a contract or agreement about the investment.
  • Making unusual withdrawals both in amounts and frequency.
  • Making large dollar wire transfers to foreign countries for an investment.

Were you a victim?

Canadian Anti-Fraud Centre
Toll-free: 1-888-495-8501

Competition Bureau of Canada
Toll-free: 1-800-348-5358

Ontario Provincial Police
Toll-free: 1-888-310-1122

Financial Consumer Agency of Canada
Toll-free: 1-866-461-3222

Better Business Bureau
(BBB Locator Tool)


Fraud: Recognize, report and stop it!

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