July 19, 2023: The CAFC is warning Canadians of investment recovery pitch scams. In this type of scam, fraudsters retain a list and contact previous investment scam victims by telephone, email, social media or will use search engine optimization and claim that they can return the funds the victim lost in a previous investment scam. Fraudsters will tell victims that there is a fee for their services and, in some cases, will ask for remote access to the victim's computer or device. In the end, no funds are returned to the victim and more funds are potentially stolen.
- Email and text
- Phone and fax
An investment scam is any solicitation for investments into false or deceptive investment opportunities. These opportunities falsely promise higher-than-normal returns. However, investors lose most or all their money.
Ongoing investment scams include:
- Fixed income
- The "pump and dump"
- Initial Coin Offerings
- Franchise/business opportunity
Always be suspicious of:
- Unsolicited investment opportunities (even from friends and family)
- Higher-than-normal returns
- Fake cryptocurrency websites
- High pressure tactics
- Requests for cryptocurrency payments
Never rely on the website and phone number included in the unsolicited materials provided to you. Make sure you do the research yourself and look for possible scam alerts about the investment being offered. Check the legitimacy of the investment with your provincial/territorial securities regulators.
June 1, 2023: The CAFC is noticing an increase in romance/investment scams which are often referred to as "pig butchering". In these scams, victims are contacted on dating apps or social media by a fraudster who is attempting to develop a relationship with the victim in order to gain the victim's trust. After trust is gained, the fraudster will claim that they have been a successful investor in cryptocurrency and can help the victim also make money and "get rich".
Fraudsters use fake online trading platforms and convince victims to transfer funds or cryptocurrency into their trading account. In most of the reports received at the CAFC, victims are instructed to purchase cryptocurrency from a legitimate exchange and transfer it to a crypto address controlled by the fraudster. Occasionally, the victim will be able to withdraw a small amount of their "investment" in the hopes they'll be persuaded to invest even more of their money. The fraudster will do everything it takes to make you think the investment is legitimate and lucrative. In most cases, victims realize they have been defrauded when they try to withdraw their funds and are unable to.
Cryptocurrency scams and fraud attempt to steal money, personal and financial information. Fraudsters will offer you cryptocurrency buy-ins promising a high rate of return and in a short amount of time. Instead, the victim will lose their investment and sometimes their personal and financial information.
Get your cryptocurrency from well-known and reputable exchanges. Purchase any hardware wallets directly from the manufacturer.
Cryptocurrencies operate independently of a central bank and are currently unregulated in Canada. The CAFC warns that there isn't the protection from fraud when using cryptocurrencies, as there is when using a credit card. No government agencies will ever request payment in the form of cryptocurrencies.
Scammers offer fake fixed income opportunities while spoofing legitimate company names and offer higher than normal returns. These opportunities can include guaranteed investment certificates (GICs) and bonds.
The "pump and dump"
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 worthless stocks.
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 their investment is returning high profits, but the scheme will eventually collapse.
Initial Coin Offerings
The virtual currency market 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 virtual or crypto 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.
Scammers offer business or franchise opportunities promising high returns. Recent scams have included:
- ATM machine investments
- point of sale machines
- cleaning businesses
Often the startup cost 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.
Gems scams involve high-pressure sales tactics to convince you to buy gems over the phone. The scammer insists the purchase is a sound financial investment because of the resale value of the gems. They ask you to wire money to an offshore bank account. A real gem arrives in the mail.
In the reports we've received on this scam, police say that 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 came in, or they will cancel the deal. Victims who opened the containers anyway and got the stones appraised discovered that they were worth about one-tenth what they paid, police said.
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.
Pyramid selling is illegal in Canada. It's a criminal offence to establish, operate, advertise or promote a scheme of pyramid selling.
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