Some common scams and frauds that pop up in times of financial crisis. Check these out so you can be aware if you get a call.
The “Pump and Dump”
This fraud often surfaces at times of high volatility on the stock markets.
In a pump and dump scam, the scammer promotes an incredible deal on a low-priced stock.
However, the scammer owns a large amount of this stock.
As more investors buy shares, the value skyrockets.
Once the price hits a peak, the scammer sells their shares and the value of the stock plummets.
The investors are left holding highly devalued or worthless stocks.
Gem scams involve high-pressure sales tactics to convince you to buy precious gems.
The scammer insists the purchase is a great financial investment because they are selling to you wholesale.
They ask you to wire money and a real gem arrives in the mail.
This makes it seem legitimate.
However, Police reports say once the victim has a portfolio of stones, they’re told there’s a buyer for their collection as long as they add a few more gems.
Once the victim pays for the additional stones, the deal falls through.
The scammers also tell victims not to open any of the clear, sealed plastic containers the gems come in.
If they do the deal will be cancelled.
Victims who opened the containers anyway and got the stones appraised discovered that they were worth a fraction of what they paid.
Gold & Precious Metals
There is nothing wrong with diversifying your portfolio with precious metals.
Just be sure to purchase the commodities from legitimate sources.
During a financial crisis, scammers will attempt to sell gold claiming it is the only safe investment.
They will claim that the currencies of the world and the economic system will collapse and only gold will retain value.
The same claims were made in 1987, 1991, 1998, 2001, 2008 etc.
Sometimes the offer will be gold or silver coins sold at highly inflated prices just like gems.
Sometimes it will be a pyramid scheme where you are sold a small amount of gold at an inflated price.
If you bring in other investors you are told you will receive more gold for free.
Licensed financial advisors can provide options to purchase precious metals at current market rates.
Initial Coin Offerings.
The virtual currency market has become quite popular and is constantly changing.
New virtual currencies are developed monthly.
Like an Initial Public Offering (IPO), an Initial Coin Offering (ICO) is an attempt to raise funds to help a company launch a new virtual currency.
In an ICO scam, the scammer sends an email soliciting investment opportunities with fake ICOs.
They provide official looking documentation, use buzz words and may even offer a real “token”.
In the end, everything is fake, and you lose your investment.
In a ponzi scam, an investor buys into a scheme offering higher-than-normal returns.
The scammer then pays early investors with money from new investors.
Investors believe the fund is returning high profits, but the scheme eventually collapses.
Bernie Madoff is an example of a famous Ponzi fraudster.
Similar to a ponzi scam, a pyramid scam focuses primarily on generating profits by recruiting other investors.
A common pyramid scam today takes the form of a “gifting circle”.
Participants gift a sum of money to join and ultimately must recruit others to make their money back.
These schemes may offer products, but they usually have very little value.
It’s a criminal offence in Canada to establish, operate, advertise or promote pyramid selling.
Scammers offer business or franchise opportunities promising high returns.
Recent scams have included:
ATM machine investments,
point of sale machines
and cleaning businesses.
Often the startup costs for the machines or products is high.
Once you’ve paid, you may not receive the product or the sellers don’t place the machines as agreed.
This video was brought to you by National Best Financial Network with the help of information from the Canadian Anti-Fraud Centre.For an up-to-date list of scams and frauds in Canada please refer to the Canadian Anti-Fraud Centre website: https://www.antifraudcentre-centreantifraude.ca/index-eng.htm
This presentation contains images that were used under a Creative Commons License. Click here to see the full list of images and attributions: