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Online Fraud

Let’s face it, none of us are too big or too clever to get caught out by online fraud, especially when dealing with today’s more sophisticated fraudsters, who have, over time, refined their techniques and honed them to perfection, and who use the internet to reach a mass audience with minimum effort. While the web is a fantastic tool for investors to conduct research into buying stocks and obtain general investment information and receive important updates, it’s often difficult to distinguish between the truth and well-constructed lies, and fraudsters involved in online fraud can use the legitimate tools available to them to lure unsuspecting victims to their well-laid trap, usually involving amazing investment opportunities. These tools are generally just more modern versions of traditional methods which have been around for a long time, like telemarketing or direct mail.

Spam Mail

Spam Mail


Bulk email programs which are used to send personalized messages offering amazing investment opportunities to millions of people for a lesser cost than traditional mail or cold calling. Many scams involving buying stocks or other investments use this method to reach their victims. We recommend that you avoid emails whose subject box contains any variation of “This is your lucky day!” and whose text refers to an too-good-to-be-true investment opportunity, a new program, stock or company…

Newsletters

Newsletters


Again, perfectly legitimate tools of the trade when it comes to buying stocks and can indeed be very useful. In fact, we often use them ourselves and we find they’re the perfect tool to spread valuable information about investment opportunities to our customers. However, they are open to corruption and many companies will pay online newsletters to promote their stocks – this is actually not illegal or considered online fraud so long as the newsletter discloses who paid them and how much.…

Online Bulletin Boards

Online Bulletin Boards


These are great tools by which investors can share information about investment opportunities and help each other out. However, they can also be used by online fraudsters to promote false shares and get you buying stocks which don’t exist, supposedly reveal ‘inside’ information about upcoming products or stocks, or pump up a company, by posting numerous messages under various aliases. All these tools can be used for various different online fraud scams, all designed to separate you from…

Pump-and-Dump

Pump-and-Dump


Promoters will start buying stocks, usually companies with small floats which are more volatile and thus easier to manipulate, especially if little information about the company exists, and then try to boost the price up by spreading false information and recommending it to the masses. People then rush out to buy some of this stock and push the price up, at which point the unscrupulous promoters will then sell off their shares for huge profits. The flip side to this is known as the…

Ponzi Scheme

Ponzi Scheme


As old as the bible and pretty simple. A pyramid scheme where the money from new investors is used to pay returns to old investors, and which will eventually collapse when the new money is less than the money owed to previous investors, when the promoter will usually run off with the principle. The things to look out for are: an emphasis on recruiting others to join the program with you (and you’ll get a fee); the business will normally be hard to value, like a “tech service” business…

Offshore Investing

Offshore Investing


The internet has eroded former barriers of different time zones and long distance international phone calls, but always beware of investment opportunities originating in another country, since it’s practically impossible for Law Enforcement Agencies to investigate foreign criminals.

Prime Bank

Prime Bank


This is a term which is used to describe the top 50 or so banks in the world, and it is a term which fraudsters use to lend legitimacy to their online fraud scam, claiming that the investors’ funds will be used to trade in “prime bank instruments”. Unfortunately, these instruments do not actually exist and investors lose their money. While all of the above are the most common examples of online fraud and tools of the online fraudster’s trade, there will no doubt be new and more…

Spam Mail

Bulk email programs which are used to send personalized messages offering amazing investment opportunities to millions of people for a lesser cost than traditional mail or cold calling. Many scams involving buying stocks or other investments use this method to reach their victims. We recommend that you avoid emails whose subject box contains any variation of “This is your lucky day!” and whose text refers to an too-good-to-be-true investment opportunity, a new program, stock or company where you will make a massive profit on your investment with minimum risk – GUARANTEED!

Newsletters

Again, perfectly legitimate tools of the trade when it comes to buying stocks and can indeed be very useful. In fact, we often use them ourselves and we find they’re the perfect tool to spread valuable information about investment opportunities to our customers. However, they are open to corruption and many companies will pay online newsletters to promote their stocks – this is actually not illegal or considered online fraud so long as the newsletter discloses who paid them and how much. Fraudulent newsletters claim to be unbiased but are in fact mere propaganda with the specific aim of pushing worthless stocks on to naïve investors so the promoter can make personal profit.

Online Bulletin Boards

These are great tools by which investors can share information about investment opportunities and help each other out. However, they can also be used by online fraudsters to promote false shares and get you buying stocks which don’t exist, supposedly reveal ‘inside’ information about upcoming products or stocks, or pump up a company, by posting numerous messages under various aliases.
All these tools can be used for various different online fraud scams, all designed to separate you from your hard-earned money with bogus investments. There are several common swindles which you must look out for:

Pump-and-Dump

Promoters will start buying stocks, usually companies with small floats which are more volatile and thus easier to manipulate, especially if little information about the company exists, and then try to boost the price up by spreading false information and recommending it to the masses. People then rush out to buy some of this stock and push the price up, at which point the unscrupulous promoters will then sell off their shares for huge profits. The flip side to this is known as the “short-and-distort”, where fraudsters use a smear campaign to portray an investment opportunity in a negative light in order to drive the price of a stock down and then make a profit by ‘short selling’. The things to look out for are: promoters who go all out with high pressure pitches insisting you buy big and buy now; promoters you have never dealt with before offering you the deal of a lifetime – ask yourself, “why me?”; stocks being offered which only trade in the ‘Over-the Counter’ market and are quoted on the OTC Bulletin Board.

Ponzi Scheme

As old as the bible and pretty simple. A pyramid scheme where the money from new investors is used to pay returns to old investors, and which will eventually collapse when the new money is less than the money owed to previous investors, when the promoter will usually run off with the principle. The things to look out for are: an emphasis on recruiting others to join the program with you (and you’ll get a fee); the business will normally be hard to value, like a “tech service” business where no actual product is being sold; an investment opportunity with promises of high returns for doing very little other than recruiting others; no revenue being shown from any actual sales and complex commission structures. Online fraud, pure and simple.

Offshore Investing

The internet has eroded former barriers of different time zones and long distance international phone calls, but always beware of investment opportunities originating in another country, since it’s practically impossible for Law Enforcement Agencies to investigate foreign criminals.

Prime Bank

This is a term which is used to describe the top 50 or so banks in the world, and it is a term which fraudsters use to lend legitimacy to their online fraud scam, claiming that the investors’ funds will be used to trade in “prime bank instruments”. Unfortunately, these instruments do not actually exist and investors lose their money.
While all of the above are the most common examples of online fraud and tools of the online fraudster’s trade, there will no doubt be new and more sophisticated ones being developed every day. Be vigilant, and, as always, research, research, research.

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