These scammers try to get you to invest in fraudulent schemes by promising you’ll get rich quick or that you will double your money in no time. In reality, they take your money and disappear.
Video length: 1 minute, 57 seconds
How it works
Investment fraud is where someone tries to get you to make an investment decision based on false or misleading information. For example, the scammer may try to get you to buy digital currencies, stocks, bonds, or real estate, or to invest in a business directly.
Some new scams focus on digital currencies including cryptocurrency where fraudsters use social media, dating apps, Internet ads or websites telling you to act now and promising high returns. They may also use classic scams like pyramid schemes and fake or real celebrity endorsements.
How to spot it
Claims of huge returns and high pressure sales tactics are often warning signs that something is too good to be true. Here are four signs that an investment opportunity may be fraudulent:
- Claims you can make a lot of money with little or no risk
In general, high-risk investments offer higher potential returns, and lower-risk investments offer lower potential returns. This is known as the risk–return relationship. For example, when you buy investments like stocks, there’s no guarantee you’ll make money, and you could lose money if the stock price goes down.
- Someone gives you a “hot tip” or says they have insider information
Think about why they’re offering you a tip, and how they benefit by telling you. If the hot tip is false, you may lose your money if you act on it. If it is really insider information about a public company, it may be illegal to act on it.
- You feel pressured to make a decision
Scammers frequently use high-pressure tactics because they want to get your money and move on to another victim. Scammers also know that if you have time to check things out, you may not fall for the fraud.
- The seller isn’t registered with the provincial securities regulator
In general, anyone selling securities or offering investment advice must be registered with a securities regulator in a province or territory.
- Be careful of unsolicited investment opportunities offered over the Internet or phone, including a recommendation from a friend on social media or a text message from a stranger.
- Research the opportunity through credible sources and take your time before making a decision.
- Make sure you know the risks before investing in cryptocurrency. Cryptocurrency payments do not come with legal protections and the payments are typically irreversible. Keep in mind that if the business is not located in Canada, it may be even more difficult to pursue legal action.
- Take 5! 5 minutes, 5 hours, 5 days. Fraudsters will try to rush you. Take your time before making a decision.
- Before you make a decision, verify if the investment companies are registered with your Provincial Securities Agency and check out the company on the National Registration Search Tool.
- Check to see if a person or company has been flagged as a risk to investors on the Investment Industry Regulatory Organization of Canada and your provincial financial regulators.
- How to report fraud and scams in Canada
- Multi-level marketing and pyramid selling
- Tales from the cryptocurrency investment ghouls, goblins and ghosts
- Don’t invest in fraud: Know how to spot investment scams (with the Ontario Securities Commission)
- Tips to avoid investment scams (Financial Consumer Agency of Canada)
- Check before you invest (Ontario Securities Commission)
- Beware the green gremlin of investment fraud (with the Ontario Securities Commission)
- Investment scams (Canadian Anti-Fraud Centre)
- Seniors Guidebook to Safety and Security (Royal Canadian Mounted Police)
- Cryptocurrency scams trick unsuspecting Canadian investors (Better Business Bureau of Mainland BC)