Almost ninety per cent of adult internet users report that they have encountered content online that they believed to be a scam or fraud. Additionally, nearly half of adult internet users report being drawn into an online scam or fraud. These figures show the scale of the problem that online fraud presents, but the good news is that there is plenty of easily accessible information out there, as well as strong cyber security, that can help you reduce your chances of falling victim to a scam yourself.
Investment Scams
Investment scams operate by either promising low or no risk for a high return, it is important to spend time making sure that you do your research on exactly what you are investing into before you pull the trigger on your investment. Trading scams are designed to look convincingly similar to real investment opportunities, which is why they manage to scam over 100,000 Americans each year. There are some different investment scams including:
Ponzi Scheme: When you think of an investment scam chances are the Ponzi scheme will cross your mind at some point, this scam promises high returns to investors, but there is no actual investment. People hooked into the scam are encouraged to bring in more investors to pump more money into the scam, making the scam look profitable and encouraging new investment. New investors are then encouraged to find their new investors. At the top of this pyramid of investors, the promoter of the scam will have easy access to investors’ money that they can withdraw and make a hasty escape with. Fake financial statements are often conjured up by those with the most power in this scam, to further dupe investors into thinking that the scam is profitable. You can avoid Ponzi schemes by watching out for the following:
- People talking about pooling money with other investors.
- People talking about complicated and secret investment techniques that are only known to them.
- People selling investments that are not registered to trade securities or other investment products.
- Financial Statements of contracts that are not connected with a registered firm, or documents that look like they have been forged.
Crypto Investment Scams: Within the last 5 years cryptocurrency has become big news at times, promoting a flurry of investment, however, there are always people out there who capitalise on the excitement of investors by devising scams that defraud investors. Cryptocurrency is a relatively new, highly complex form of investment that can seem daunting to those first starting. This is why they may entrust their investment decisions to someone else who may claim to know what they are doing; this individual will promise the investor high returns for little to no risk.
Scammers may also use high-pressure sales techniques, possibly telling investors that they know there is going to be a huge rise in the value of the cryptocurrency soon and investors need to act fast! Once the investor has ‘invested’ by transferring their cryptocurrency to the scammer for them to manage, the scammer often stops communicating with the investor. You can avoid cryptocurrency investment scams by watching out for these scam characteristics:
- Investments offering a guaranteed high return on investment
- Overly complicated jargon that is difficult to understand. Try to make an effort to have a basic understanding, have at least a basic understanding of how cryptocurrency works in general, plus the coins you are investing in. Learning more overtime yourself and reading about cryptocurrency scams can help you spot cryptocurrency scams and reduce the chance of you falling for them.
Gold Scams: During market downturns the value of gold and precious metals only rises, this can make investing into gold more attractive to investors. Fraudsters will also offer investors a high return on their investment plus a stake in a gold mine. However, the fraudsters will just take your invested money and run. Gold scams can also involve scammers offering to sell you gold bullion and keep it in a secure vault, promising to sell it for you once it appreciates and gives you a tidy gain on your investment. However, you will just end up losing your money. Characteristics of gold scams include:
- Exaggeration of how much gold is actually in the mine and claims of the gold being higher quality than it is
- An overestimation of the share price of a gold company, or claims based on speculation about a mine that is based on proximity to a proven gold mine.
- Pressure campaigns over the phone, social media, email or direct mail about the speculative future of the share price of the gold mine in the future.
- Plan to find sunken treasure on the ocean floor or find gold in a secret location.
Imposter Scams : Imposter scams are where people receive a message or phone call out of the blue from what they perceive to be a friend or family member, they claim that they are under some sort of distress and need cash sent to them urgently. These scams are the most common example of digital fraud. There are several different types of imposter scams including:
Romance Scams: These are where an imposter pretends to want to be romantically involved with individuals who are usually overseas. Over time the victim may become increasingly entranced by the individual they may grow to love. This is why victims are conned into thinking that when the person they believe themselves to be in a romantic relationship with wants to come to visit them; but don’t have enough money to make the trip. In this scenario, the imposter attempts to get the victim to send money for travel arrangements. For the victim, instead of greeting their romantic interest for the first time in person, they are just sending sometimes significant amounts of money to the scammer.
- Phone Calls Or Texts From Law Enforcement Or Social Security: Sometimes scammers impersonate authority figures and contact people and ask for either sensitive account information or payment. They may think something like a local bank branch is handing out counterfeit notes, and they need your help! They want you to withdraw money from the affected bank and hand it over to a fake undercover officer for an investigation. However, all that is happening here is unsuspecting victims being conned out of their hard-earned money by scammers.
- Tech Support Scam: Scammers impersonate tech support and call you up to claim that there is something wrong with your computer, all you need to do is send them money or give them access to your computer so they can steal your data or passwords.
Online Shopping Scams
Online shopping scams can be fake online retail sites, when you make your purchase the website will just take your money and you won’t receive the products that you were promised. You may find these ecommerce websites through a search engine such as Google, but you may also find them on ads that may be on legitimate websites. You can also find online shopping scams on social media, where they are becoming increasingly common. Fake reviews on the scam websites may be another component of the scam, which promotes unjust trust from customers. You can help protect yourself from online shopping scams by:
- Check the warranties and return policies before ordering anything, you should also type the name of the online retailer into Google and look for an influx of negative reviews. You should look for negative reviews that mention people not receiving the product they ordered, or receiving products that are lower quality than promised. Most legitimate businesses are likely to get a few of these, but websites that are scams are likely to get many more negative reviews than normal.
- Check URLs and make sure they start with ‘https” and a closed padlock icon, this means that the website has a secure payment method, so that the website won’t have direct access to your banking details.
Conclusion
Keeping clear of online scams requires you to be vigilant when you surf the web, but by familiarising yourself with different types of online scams you can reduce your chances of falling victim to online scams yourself.
