1. Pump and Dump Schemes
Scammers artificially inflate the price of one or more selected stocks, then encourage traders to buy in (this is called “pump”) to take advantage of rising prices. However, the shares are over valued and once the scammers think they have pushed the price as far as possible (before people realise what’s going), the scammers sell their stock (i.e. “dump” is), collect their regards and disappear. The traders innocently caught up in the scheme will see their stock plummet in value, perhaps as far as to zero.
2. Investment Scams
These are basically the same as investment scams to the public offering unrealistically high returns on anything from property to gold bullion to pharmaceutical remedies to shares guaranteed to rise in price.
These scams can be targeted at online traders and are marketed through email, social media and even magazines. Fraudsters typically promise high returns and use fake celebrity endorsements and images of luxury items to entice people to invest in their scams. The ads then link to professional-looking websites where consumers are persuaded to invest by trading themselves using the firm’s platform.
Many victims report initially receiving returns from the scam to give the impression that their trading has been a success. They will then be encouraged to invest more money or introduce a friend or family member to invest. However, then the returns stop, the customer’s account is suspended and there’s no further contact with the firm.
3. Fake Traders
British and Australian victims of a sophisticated enterprise were apparently lured by fake ads posted on Facebook and mobile phone games featuring celebrities such as Gordon Ramsay, Hugh Jackman and the moneysaving expert Martin Lewis.
But the investments in bitcoin, commodities and foreign currencies all appear to be fake.
Victims of the scam were persuaded to install software on their computers and phones that gave fraudsters access to their bank details.
How to protect yourself
- Be wary of adverts online and on social media promising high returns from investing online.
- Always be wary if you are contacted out of the blue, pressured to invest quickly or promised returns that sound too good to be true.
- Always do your own further research on the product you are considering and the firm you are considering investing with.
- Check the FCA register of authorised firms. If you use an unauthorised firm, you won’t have access to the Financial Ombudsman Service(link is external) or Financial Services Compensation Scheme (FSCS)(link is external), so you’re unlikely to get your money back if things go wrong.
- Check they are not a clone – a common scam is to pretend to be a genuine FCA-authorised firm (called a ‘clone firm’). Always use the contact details on our Register, not the details the firm gives you.
- Check the FCA Warning List
- Check with Companies House to see if the firm is registered as a UK company and for directors’ names.
- To see if others have posted any concerns, search online for the firm’s name, directors’ names and the product you are considering.
As a general rule, you should consider getting independent financial advice or guidance before making any kind of serious investment. You should make sure that any firm you deal with is regulated by us and never take investment advice from the company that contacted you, as this may be part of the scam. The Money Advice Service has information on investing and about how to find a financial adviser.
Ask Traders has created a guide to online scams targeting traders. It is free to download at https://www.asktraders.com/the-cyber-security-guide-for-trading-beginners/
If you have any experiences with phishing scams do let me know, by email.
