How to recognise investment fraud
March 23, 2023
4 minutes to read
Anyone who has ever visited a games arcade may be familiar with the game of “Whack-a-Mole”.
The concept is pretty simple. At random times, moles pop up from underground. Armed with a hammer, it’s your job to bash them back into the ground. But no matter how fast and hard you try to get rid of the moles, they just keep on coming back. The same thing is true with investment fraud. Even after their fake websites or trading platforms have been taken down, scammers keep on looking for new openings to carry on with their fraudulent activities.
Investment fraud comes in many forms and is one of the many ways in which criminals are targeting your money. Fraud in trading and cryptocurrency platforms, in particular, appears to be a persistent problem. In 2022 alone, the FSMA (the stock exchange watchdog in Belgium) received 660 complaints about fraud involving trading platforms and 56 complaints about fraud involving crypto platforms. Almost two Belgians per day fall victim to the malicious practices on these platforms. Generally speaking, the victims do not get their money back; either the platform or their "investment expert" disappears without trace or the victims are asked to pay extra costs or "taxes". How do investment fraudsters do it?
Scammers approach victims in a variety of ways. Sometimes this is done over the phone with a convincing story to get you to invest in a certain cryptocurrency, foreign real estate, an investment fund, exclusive wines, gold, etc. Often, this is done through social media ads, websites and other online channels. These ads often contain claims about how to get rich quick. Sometimes they (mis)use the name of a well-known person to stimulate your curiosity (This is how Kevin De Bruyne really made his fortune!). Some fraudsters even approach their victims through dating apps and fake social media accounts. If you click on their ad, you are usually redirected to a website or trading platform. Once here, you can register or open an account and start "investing" straight away. Fraudsters sometimes also offer “free and revolutionary” trading software and training courses.
How can you spot a fraudulent trading or crypto platform?
There is no 100% watertight formula to tell a reliable platform or provider from a fraudulent one. However, there are some warning signs that may indicate malicious practices:
Awards, quality seals and permits
Scammers will do everything they can to create a professional impression. To convince you that you are in good hands, they like to display quality seals, awards and permits on their website. Either these are fake, or those seals and awards were simply copied from somewhere.
The scammers sometimes use fake testimonials to convince you there is a lot of money to be made. The story often plays out as follows: "Tim was struggling to make ends meet. But when he started trading on our platform, his life changed. Now he is swimming in money and drives around in a flashy car."
You can withdraw your money at any time and your investment is guaranteed. At least, this is (sometimes too) explicitly what is promised to you.
An account in less than a minute
The process of opening an account and depositing money (often in a foreign account) is usually a piece of cake. There are no difficult questions to answer. Withdrawing your money or closing the account is a completely different story. Meanwhile, the scammers keep trying to convince victims to deposit larger and larger sums.
Become stinking rich!
The platforms claim to offer high returns and unrealistic profit levels. In practice, the victims become poorer, and it is the scammers who become richer.
No or low costs
Fraudulent platforms can claim to be cheaper than the competition, but in reality they often hide costs that are only disclosed later.
Are you planning to invest? A few tips
- Check whether the platform is licensed by the FSMA. You can also check whether the platform is blacklisted and see the latest warnings. Only use a platform from a well-known and reliable financial institution if you want to invest. (N.B. we know one of those)
- Check whether the provider is trustworthy by searching for reviews (but remain on the lookout for fake testimonials from suspiciously happy customers). If there are no or only bad reviews, this is a warning sign.
- Check if a customer service exists, and if they can actually be reached and are helpful. Check where the company is located (and double-check the address, e.g. on Google Maps with Street View).
- Research anything you are considering investing in. The products in which you want to invest may be fictitious, or can be highly speculative and extremely risky, such as binary options, CFDs and Forex. These are products where you're betting on a price falling or rising. No less than 75% to 89% of these investments end up making a loss. In Belgium, there is good reason why there is a ban on the marketing of these products to private individuals.
- Never share your bank account number, credit card details, date of birth or other sensitive information if asked for them. Never give access to your bank account or your computer because someone asks you to do so.