Investment
Fraud alert!
December 9, 2022: The CAFC is warning the public about an increase in reports of investment scams. Victims are reporting that they sent funds to Panama, Costa Rica, Belize and Peru, mostly through wire transfer. As of September 30, 2022, victims have lost over $109 Million via wire transfers this year.
Investment scams were the highest reported scams based on dollar loss in 2021. Victims of investment scams reported a total loss of $163.9 Million to the CAFC in 2021. The majority of the investment scam reports involve Canadians investing after receiving a call or seeing a deceptive advertisement.
How to protect yourself:
- Prior to investing, ask for information on the investment
- Research the team behind the offering and analyze the feasibility of the project
- Verify if the investment companies are registered with your provincial securities agency or the National Registration Search Tool
- Be wary of individuals met on dating sites or social media who attempt to educate and convince you to invest
- If you receive a suspicious message from a trusted friend, reach out to them through a different means of communication to confirm that it is them
Scam medium:
- Email and text
- Internet
- Phone and fax
Targeting:
- Individuals
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:
- Cryptocurrency
- Fixed income
- The "pump and dump"
- Ponzi
- Initial Coin Offerings
- Franchise/business opportunity
- Gem
- Pyramid
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.
Cryptocurrency
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.
Fixed income
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.
Ponzi
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.
Franchise/business opportunity
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.
Gem
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.
Pyramid
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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