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Home » How Social Media Scam Artists Prey On Beginner Investors

How Social Media Scam Artists Prey On Beginner Investors

Techeconomy by Techeconomy
August 31, 2022
in Security
9

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The advent of social media is one of the blessings that come with the digital age. However despite the advantages, scam artists have been using the space for scams.

Beginner investors are targeted because of their limited knowledge, and high risk appetite. Investing is not a get rich quick scheme as it takes time to build generational wealth. The earlier you start investing, the better for you as the best time to plant a tree is now.

The Economic & Financial Crimes Commission has also warned about scams in Nigeria and advises you to take precaution. These are the ways how social media artists dupe new investors.

Investment Scams 

1. Forex Scam

Forex trading is seen as an easy path to wealth and many don’t take time to learn how it operates before diving in.

Many unregulated forex scammers have social media handles where they advertise with promises of huge rewards and zero risk, to stoke curiosity.

Once you register with them and deposit funds, they let you download an app but the money you see in the app is fake- just like a video game!

When you finally want to withdraw your earnings, you are given excuses and told to deposit more funds, and this goes on till you get tired, and forfeit your money.

In Nigeria retail forex trading is not regulated by the Securities & Exchange Commission (SEC), so Nigerian traders mostly trade via South African forex brokers who are regulated by the FSCA, to get access to trading platforms.

Scam artists take advantage of this absence of regulation to advertise unlicensed brokerages on social media.

Some scam artists might even refer you to authentic forex brokers, but ask you to click on a link they send you to enable you fund your trading account, so you can qualify for a bonus. This malicious link redirects you to scammer controlled websites, and your payment goes straight to the scammer.

2. Bond Scam

When you buy a bond, you lend your money to the government or a company for a period, and you will be paid interest annually. At the end of the bond lifecycle, your principal is refunded to you.

Bond scammers may take your money and pay you interest annually, but at the end of the cycle which could be many in several years, your principal is not refunded to you.

You can fall victim to these scammers through fake advertisements on social media platforms while searching online for business opportunities.

They also offer higher interest rate than what the Nigerian government is willing to offer, so as to attract you. For information on Nigerian government bond auctions, the Debt Management Office (DMO) has all the information you need.

3. Ponzi Schemes/Crowd Funding Scam

First, Ponzi schemes are fraudulent ventures that pay existing investors with money collected from new investors.

You may come across them through advertisement on your social media, promising you returns that are suspiciously high like up to 50 % monthly without a loss. Nigerians have lost over N300 billion to Ponzi schemes and online speculation in the past years.

Modern day Ponzi schemes rely on social media for propagation, as they reach a wider audience and also enjoy anonymity that social media offers them.

Ponzi scheme beneficiaries are usually the early investors, and the scheme depends largely on a steady influx of new investors and when this is no longer sustainable, they scam artists close shop and disappear.

Law enforcement may also go after older investors who benefitted from initial payments, to retrieve the money in an operation called a ‘clawback’. 

Secondly, Crowd funding refers to many people contributing money online to start a business. SEC has directed how crowd funding should be carried out but most social media scam artists just raise money from people and disappear. This has prompted SEC to warn investors about patronizing unregistered crowd funding investments.

4. Pump and Pump Scam

This is a fraudulent scheme where the prices of stocks are artificially inflated through false or exaggerated information

Social media platforms like Reddit, whatsapp, etc. are used to create and spread memes about a stock. These memes end up going viral, and they usually say the stock is ‘going to the moon’ or is the next big thing.

This causes a frenzy and people start buying out of fear of missing out. The scam artists also buy huge volumes of shares.

Once the price has risen considerably, the scammers suddenly offload or sell their huge volumes causing other observers to follow suit and the price crashes.

Those who get in late on the trend, and those who don’t sell off quickly are left with huge losses when prices tank. An example is the GameStop saga where even renowned hedge funds lost billions to the short squeeze.

Account Take Over/Hostage-Styled Videos

Social media users are now falling victims to hackers who hijack and hold social media accounts of thousands of users to ransom around the globe, forcing them to stage hostage-styled videos, advertising fake get-rich-quick schemes.

The hacker, posing as your friend would send you a link, appearing like an Instagram login windows. After you click and fill all your login details, the scammer is now in possession of your username and password.

You could be asked to do a video promoting a fraudulent online scheme, offering fantastic returns without any risk or loss.

Having done the video clip, he would still not give you access back to your account, instead, the video would be advertised through an Instagram story.

The story could be more excruciating if you have thousands of followers on your Instagram page or if you operate a business account. Your friends and followers may be tempted to invest in the scam, not knowing you made the video under duress.

Responding on the development, Meta said:  “We encourage our community to pick strong and unique passwords, to never share them with anyone, and to turn on 2 Factor Authentication in their Settings to protect their account.

Signal Selling Scams

This is when a scammer claims to be an expert online trader who can be giving you the best information about the capital market, and professional forecast about future trade, if you subscribe to their signals.

The scams are associated with social trading where you can use information and ideas from experienced investors, and use them to form your own Investment decisions and strategies.

Also, social trading follows the principles of social media communications, as investors are mostly connected through social media platforms. Subscribing to fake signals means you pay money for signals that don’t work.

Fake Investment Gurus

“We decided to float this blog to enlighten you guys about the nitty-gritty of entrepreneurship and how to start a fantastic business. This guide will reveal to you hidden means on how you can easily make $500,000 monthly if you just buy my $500 course material”

The statement above may not be new to you on your social media platforms. The promoters of such social media scams are known as Fake investment Gurus.

They promise you outrageous results, with the condition that you pay for a course, skills, lecture books, training sessions etc.

They usually back up their dubious services by flaunting fake material possessions like posh cars, beautiful mansions, and false profit numbers, telling you how the same information has been working for them.

Online Romance Scams

Scammers posing as potential love seekers have now infiltrated genuine dating sites and social media platforms.

In order to easily get your attention and emotion, the scammer may use a fake profile, claiming to be a military officer, health worker or any professional who is a citizen of your country, but residing abroad.

As time goes, he would now begin to show you strong emotions that would take the relationship to a higher degree where two of you would be communicating via private means such as phone and Whatsapp.

Having gained your trust through months of ceaseless communications, the scammer would now introduce a fraudulent investment plan to you. Beclouded by your emotions, you could throw caution to the wind, and part with cash.

Gift Card Scams

Online gift cards are only used for gifts, and are not meant for mode of payments for goods or services. They can only be redeemed. However, Gift Card Scam occurs if someone calls you, mandating you to pay for a service or products through gift cards, just know that they are attempting to defraud you. If the scammer receives your card PIN or number, your money is gone.

One thing you should know is that the security mechanism of gift card is low, making it an attractive and popular way of duping people.

Be Careful

Ensure you take your time and be careful when dealing with strangers on your social media pages or while carrying out financial transactions.

If you need to confirm if an investment is legitimate, visit the SEC website but don’t take advice from public forums or online chatter. As an investor you should always think long term and not short term rewards.

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  1. Pingback: How Social Media Scam Artists Prey On Beginner Investors – TechEconomy.ng — Fight Scams Now
  2. Pingback: How Social Media Scam Artists Prey On Beginner Investors – TechEconomy.ng - Heal Security
  3. Pingback: How Social Media Scam Artists Prey On Beginner Investors – TechEconomy.ng — Red Flag Scammers
  4. Pingback: How Social Media Scam Artists Prey On Beginner Investors – TechEconomy.ng – Sharecaster Network
  5. Pingback: How Social Media Scam Artists Prey On Beginner Investors – TechEconomy.ng – TechEconomy.ng – 152news
  6. Pingback: How Social Media Scam Artists Prey On Beginner Investors – TechEconomy.ng » Scammer News
  7. Pingback: How Social Media Scam Artists Prey On Beginner Investors – TechEconomy.ng —
  8. Pingback: How Social Media Scam Artists Prey On Beginner Investors – TechEconomy.ng - TechEconomy.ng
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