With online forex trading and digital investment platforms becoming more widely available to a growing cohort of would-be novices, many of them are falling victim to fraud, as scammers now flood social media channels with promising investment returns and lucrative opportunities.
Digital scams are nothing new, and even as users experienced a sharp spike in new scams during the height of the pandemic, many have witnessed fraudsters becoming smarter, and less obvious as they leverage social media to lure in uninformed victims.
Social media has become an attractive ecosystem of online scams, as it allows fraudsters to conveniently connect with users, and create an online persona, hidden behind a fake social media profile and awash with illicit investment content.
A social love affair
Currency trading platforms have become widely popular in recent years, allowing novice and veteran traders convenient access to forex markets from basically anywhere in the world. While there are dozens of online trading platforms now available on the digital marketplace, some of the best forex trading platforms include the likes of Pocket Option, Robo Forex, Exness and Tick Mill, among several others.
Although there are obvious signs that some social media profiles may be fake, or even related to a scam, the easiest tell-tale sign being bad use of grammar, and stock photo images plastered across their profiles, the Federal Trade Commission (FTC) reported that the number of romance scammers on social media has surged in recent years.
According to reports by the FTC roughly 77,000 people fell victim to romance scams last year, with an estimated $1.3 billion in reported losses. This resulted in a median reported loss of nearly $4,400 per person.
Romance scammers promise their victims love, money, and endless happiness, but this comes at a price. Fraudsters typically identify their victim on social media, getting to know their every move and activity.
They begin to spin a web of lies, making up stories as they go along, hoping to lure in their victims. FTC research showed that scammers typically turn to one of several lies, either their family member is sick or in the hospital and they need money to support them, or they need help with an important delivery, while they’re working on an offshore oil rig.
Starting to sound familiar? Well, perhaps you remember the case of the Tinder Swindler, real name, Simon Leviev, who duped more than $10 million out of innocent women on the popular online dating app, Tinder, before disappearing into thin air.
While Leviev might’ve turned to online dating, and promised his victims a world of luxury and love, trading and investment scammers are promising novice traders unheard-of strategies and methods that can help turn their investments into millions, almost overnight.
Social media has become a gateway for scammers, as roughly 40% of victims reported that they have lost money to a romance scam through someone they met on social media, while 19% said that first contact was made on a website or app.
Clone scams are now clone wars
An investigation by the independent news and research platform, Finance Magnates, revealed that social media scammers, those soliciting trading strategies and methods to their uninformed followers, are now impersonating well-known trading platforms on social media.
Their findings revealed that many of these platforms would typically provide users with trade information, signals, market research, and analysis. This would then further help traders to make more informed decisions, and build winning strategies.
However, in some instances, the Finance Magnates team found that many of these platforms are often being impersonated by fraudsters, looking to reel in thousands of dollars in scams and fake promises.
While some platforms, such as Plus+500 Official Signal, eToro Signals, and FXStreet Signals, among several others have existing profiles on social media platforms such as Telegram, many fraudsters will create imposter accounts with similar near-identical social media handles.
Further investigation allowed them to notice that these fake forex signals typically offer free services, with fees and costs out of sight. Some guarantee a 99 percent profitability, while others can provide users with eight to ten different “Gold Signals” every day.’
One insider told journalists working on the investigation that these clone platforms are like mushrooms, as you begin to dismantle one, you realize that there are ten more ready to replace it.
One fake platform promises a return of $15,000 with an investment of only $1,000 within five days. These returns are often exorbitant, and above anything even experienced and seasoned professionals can attain.
Traders that make use of the best forex platforms, and seek to obtain legitimate signals and market analysis will typically need to sign up and pay for a subscription service provided by a trading platform. Even once they’ve signed up, and made their monthly subscription payments, these platforms will typically not guarantee any success from their services or signals.
These sorts of forex and investment scams on social media stretch further and wider than one might think. In the United Kingdom, more than $32 million (£27 million) were reported lost between 2018 and 2019 due to forex-related trading scams. What’s more, over four million Instagram accounts at the time were linked to the hashtag #forextrader, making it increasingly challenging for authorities to differentiate between real and fake accounts.
How to Spot an Investment Scam
With investment scams being more prevalent than ever before, due to the presence of social media in our everyday lives, taking measures to educate and secure yourself is perhaps the best leverage you may have.
Over-encouraging sales pitch
One of the best ways to spot an investment scam, or any online scam for that matter is the promise of guaranteed high returns, with minimum risks associated. Anything takes time, and nurturing in the world of investing. When a broker or financial advisor promises to double your money within a few days, with no risk of effort to you, you might find yourself caught up in a potential scam.
“A once-in-a-lifetime opportunity”
Often scammers may look to exploit less-informed investors and novice traders. Scammers will typically advertise an investment opportunity as a “one in a million” opportunity, pushing you and others to invest in seemingly up-and-coming markets. These practices are common with more complex market segments, typically with things such as cryptocurrencies or technology.
Scammers will take advantage of investors' limited knowledge of a specific security or investment, using their supposed experience in the market as a way to get someone to invest. While there are investment opportunities available in up-and-coming market segments, ensure that you are well-informed beforehand, and have conducted enough research before investing in anything you’re not clued up with.
Cold Calls or Emails
Investment companies and brokers won’t contact a potential client through a cold call or email, or even through social media for that matter. Any supposed broker that contacts you unsolicitedly might be a malevolent scammer, and you will need to be wary of these types of interactions. Look out for any suspicious messages, emails, or numbers that might have been trying to contact you over the last several weeks, and see whether you can report these contracts to the authorities.
Minimal company information available
Maybe you’ve stumbled across an investment broker or opportunity that promises a seemingly good deal, however, after doing a bit of digging online, and asking around, you begin to find that there is limited information about the company available online.
Any brokerage company or investment firm will need to be registered with the necessary regulatory authorities within your country in order to freely operate. In the United States, the Financial Industry Regulatory Authority (FINRA) oversees the U.S. broker-dealers. The Securities and Exchange Commission (SEC) is another not-for-profit government organization that oversees financial securities and investments.
Make sure that you do a thorough investigation on any broker or company beforehand, and see whether you can find a broker number that may be linked to either FINRA or SEC.
Misleading customer testimonials
Another red flag to look out for is misleading or often false customer testimonials. Some scammers will set up fake accounts on social media or search engines to generate fake customer testimonials. This is usually done to promote their products and services and seem more legitimate to uninformed customers.
Investing is not a get-rich-quick scheme
Any professional or seasoned investor will tell you that it takes years of research, practice, and multiple failures to successfully generate substantial income from investing in the public or forex market. Scammers typically promise unsuspected victims the opportunity to make money, fast, without nearly any risks associated with their investment.
This is not only untrue but highly unlikely to ever happen, as not even some seasoned professionals can get outrageous returns on their investments, even after years of practice.
You think you were just scammed. Now what?
Unfortunately, due to the sophisticated nature of social media scams, even following every possible step to make sure you’re not getting tangled in scams remains a reality. In 2021, more than 95,000 people reported about $770 million in losses due to fraud on social media platforms according to the Federal Trade Commission.
Contact your bank
If you find yourself on the receiving end of a potential social media investment or forex scam, one of the first attempts should be to retrieve the money. Often, banks provide a chargeback scheme, that allows users to contact their bank, and attempt to retrieve the money that has left their account. While there is little guarantee that this might be possible, it’s worth the effort.
Additionally, you want to close off any of your bank accounts, and block access to your credit cards for added security. While it’s advised to provide minimal banking and financial information via phone, ensure that you protect your accounts against any further potential risks. Make sure that you inform the bank of the incident, and ensure that they monitor your account for any suspicious activity.
Collect all necessary information
Next, you want to collect as much information as possible, including any names, contact numbers, email accounts, or social media handles. This information can be used to either help track the person responsible for the scam or be used to add to a database.
Report the incident
Following the incident, make sure that you report the scam to the Federal Trade Commission (FTC) online at ReportFraud.ftc.gov. Additionally, you can contact your local state consumer protection office, and provide them with any information you have available. Make sure that you provide them with as many details as possible.
Initiate a fraud alert
You might need to initiate a fraud alert on your credit report. This service enables you to keep better track of all your activity online and will help to keep credit bureaus and lenders informed about any potential fraud you may have encountered on your report. Placing a fraud alert on your report ensures that any scammer cannot open additional accounts in your name going forward, and will alert you of any suspicious activity.
Share the information you have
Keep other constituents informed about the event, and share any possible information you might have available on the scammer, their name, and their company. While you might want to lay low for the time being and minimize your online activity, share the available information with your followers to help raise more awareness of these malevolent actors, and how they can spot a potential fake scam.
Update your security information
As an added security measure, update all your security information, on all your devices, and social media platforms. Due to the sophistication of online scams, you will need to be extra cautious of any suspicious emails, links, and messages you open on your devices. It’s advised to use strong and complicated passwords for all of your social media platforms, including any bank information to ensure your safety and security.
Keep up to date about any new scams that have been taking place on social media over recent weeks. The more you know about possible investment scams or any other type of scam, the easier it will be for you to identify malicious actors online.
What’s real and what’s fake?
Online trading and investment scams will become a bigger pain for regulators in the coming years, as financial markets are now more democratized and growing more decentralized. These problems not only create challenges for investors, as they will need to use intuition to differentiate between real and fake accounts, but at large, regulators and lawmakers will sit with bigger problems on their hands having to trace down millions of fake accounts operated by bots or bad actors, only to realize the crevices in their regulatory framework.