Red Flags and Common Scams

It’s scary the number of ways fraud can come at you. Online, over the phone, even at your doorstep – fraud can be anywhere. Stay out of fraud’s reach. Learn to spot these red flags:


Where they find you:



On the Phone – Frausters will say anything to get your personal information or money. They might pretend to be a family member (often a grandchild) in an emergency. They might tell you that you have won a vacation.  Sometimes they say they have a hot new investment to sell.  They pressure you to make a quick decision.  They don’t give you time to think about the offer or get a second opinion from someone you trust. The scammer does not want to take the chance that someone would warn you about the scam.


A stranger asking you to wire transfer money or tell them personal information is a major red flag of fraud.  If you get a call from someone pressuring you to send money, give out your credit card number, or buy something you don’t want, hang up. If they pressure you to provide personal information like your Social Insurance Number, hang up.


In a Text Message – Scammers send texts about fake job offers, tax refunds, and more. For example, they might offer a chance to be a mystery shopper.  Or, they may promise to pay you a lot of money to  wrap your car with a company logo. Sometimes, they send text messages pretending to be a government agency, bank, or other company, and ask for personal information.  They may sound official, but these organizations won’t text you for information that important. Be careful of any text message from a phone number you don’t recognize.



At your Door – Complaints often have to do with unclear contracts, bad quality products or services, or the customer not receiving the products or services they bought. Some common door-to-door scams include impersonating a charity, a fake investment opportunity or a service scam for home repairs or maintenance. 




In the Mail – If you get a letter out of the blue that says you have received a huge inheritance, won a lottery prize or promotes an investment opportunity – watch out! These scam letters usually come from overseas. Businesses can also be targeted by phony past-due invoices demanding  payment for a service they never requested.


In an Email – Emails are an easy way for fraudsters to reach you. They create email messages with links to fake web pages that look like the real sites.  These scams are also called phishing.  The scammer hopes you will click on the link and enter personal information, like PIN numbers, credit card numbers and bank account details, on the website.  Sometimes these emails look like they came from a friend or someone in your contact list.  If you’re not sure, don’t reply to the email or click on a link.  Contact the company or your friend and ask if they sent you a link before you click on it.




Online scams  – Be careful when you are online. Ads for a free trial or free gift after completing a survey may seem like a good idea.  But you may be signing up for something and not know it.  This can lead to an unexpected bill in the mail.  If you have to provide credit card information to pay for the free trial shipping and handling, be careful.  Read the fine print before signing up for a free sample.


Scammers may post fake online classified ads or impersonate a real online store.  They might sell knock-offs, or ask you to wire money somewhere to pay for an item. Always follow the guidelines and safety tips on the classified site when buying or selling online. 


Don’t click on ads for binary options.  Binary options are illegal in Canada.  The scammers set up fake investment trading websites and tell you how easy it is to make lots of money.  You have to give them your credit card information so you can put money into your trading account.  But no real trading takes place; they just steal your money. 


What they say:


Scammers use lots of tricks to try and catch you off guard.  Be on the look out for these red flags. 


“Keep it a secret!” The scammer doesn’t want you to tell anyone because they might warn you it’s a scam! If you are told to keep it secret, stop.  Don’t give them any money. And report the fraud.


“There’s no risk!” “Double your money fast!” “Make lots of money working from home!”  “This is guaranteed!” These are all warning signs.  If you’re offered a get-rich-quick pitch, walk away. 


“Don’t be left behind!” We all hate missing out on a great deal. Scam artists take advantage of that fear by pressuring you to act fast and not think it through.


“Everyone else is doing it!”  Scam artists might use your friends or family against you.  Affinity fraud (or “fraud among friends”) relies on the trust you place in your friends and the fear of not keeping up with them financially.  Scam artists target religious, ethnic, or close-knit groups by working their way into organizations and gaining the trust of members in order to rip them off. Social media sites are the newest way scam artists are targeting potential victims.




Affinity Fraud


With all the bad news about scams and fraud in the headlines, many people are asking “well who CAN you trust?”  This is especially true when it comes to investing money.   If you don’t take the time to research an investment or the person selling it, you increase your risk of being the victim of scams and fraud.

 

How affinity fraud works
Affinity fraud occurs when a scammer targets tight-knit groups such as associations, unions, social clubs, online social networks, and ethnic or religious communities. The scam artist abuses our instinct to trust the people who are like us.

 

The scam artist might be a member of your group 
"You can trust me," says the con artist, "I’m like you. We share the same background and interests. And, I can help you make money."

 

The scam artist might be an outsider using your trust in group members
“Well it must be ok – my buddies have bought in!  I better hurry so I don’t miss out on this!  It sounds like a great opportunity!”

 

If the scam artist is not a member of your group, they’ll try to pull members into the scam by building relationships with important members of the group to gain acceptance. The scammer will sell first to a few prominent members and then pitch the scam to the rest by using the trust placed in these prominent members. The effect is the same: once the connection to the group is understood, defences go down, and one more name is added to the scam artist’s sales column.

 


How to avoid affinity fraud


  • Always do your homework before handing over money for an investment.  These tips will help you recognize and avoid affinity fraud before your money falls into the wrong hands.

 

  • Beware of the use of names or testimonials from other group members. Scam artists usually pay out high returns to the early investors by using money from later arrivals. Because of the great money they’re supposedly making, early investors may be wildly enthusiastic about a scam that may collapse entirely once you've invested.

 

  • Always get as much written information as possible about the investment.  It should include detail about the risks and costs of the investment, and what you have to do to get your money out.

 

  • Ask a professional outside expert that is not in your group, such as an accountant, lawyer or a financial adviser, to evaluate the investment for scams and fraud.  

 

To avoid scams and fraud don’t take the word of a salesperson no matter who it is. Check out the investment for yourself. You can also contact us before investing any money. We can tell you more about the salesperson and firm including if they are registered to sell investments in the province.  If they are not registered, that is a red flag to inquire further.

 


Binary Options

FRAUD ALERT
All binary options targeting New Brunswickers are illegal. No firms or individuals are registered to sell binary options in the province. In addition, FCNB joined with other participating jurisdictions of the Canadian Securities Administrators in December 2017 to increase investor protection and ban binary options. Many are scams based in foreign countries with little-to-no financial regulation. Once your money leaves Canada, it is virtually impossible to get it back.

These trading platforms are built on the same type of software as online gambling or casino sites. Since the scammers can manipulate the results of the bet behind the scenes any way or any time they want, the house always wins. Even if you appear to make money using a binary option site, actually getting it out is nearly impossible.  Binary options site operators lose if their users win, so it is easy to see why this is the case.

Avoid binary options at all costs. As the saying goes, when you gamble the house always wins, and that is certainly the case in online binary options trading scams.
Click to see full size
 
What is a binary option?
Binary options are similar to bets. An investor “bets” if the value of an asset like stocks or foreign currency will increase or decrease in a very short period of time (as short as a few minutes). If the investor guesses correctly, they get a predetermined payout. But if the investor is incorrect, they lose everything. It is an all-or-nothing situation, like a game of chance.

How do binary options scams work?
Binary options scams find their victims through ads placed on social media, websites, chat programs, or unsolicited text messages or phone calls.  The sales pitch offers an exciting opportunity to invest money easily and earn returns quickly.  
They will tell you binary options are risk free.  This is a lie.  

A so-called “expert trader” works from a script and uses high-pressure sales tactics to get you to set up an account on their website.  Once an account is set up they entice you with “free money” to start trading.  Then they get you to “invest” your own money using a credit card, pre-paid card, or money transfer.  

Binary options are like gambling.  You make a wager on whether you think the value of an asset will increase or decrease in a fixed (and often very short) period of time – sometimes minutes or even seconds.  When the time period is up, you either receive a payout or lose the wager.  But, the vast majority of the time no trading took place at all.  The “broker” or “expert trader” (a.k.a scam artist) has just pocketed your money from the start.  

Binary options are typically traded within extremely small time frames, which increase risk significantly. Even very knowledgeable investors may find it difficult to predict whether the share price of a public company will go up or down in the next few minutes. Binary options trade with such speed that wins and losses happen very quickly.  You will always “win” at first, to build up your trust and confidence.  But in most cases you are never really investing your money and no trading is taking place.  

Even if you “win” the wager, you are unable to withdraw the money from your account, because the scam artist has already taken it.  You will be given excuses as to why you can’t withdraw your money or close your account.  You will be pressured to invest more. But at the end of the day, it is a scam and the money is gone.  Finally, if they think you are on to the scam, the “trader” will stop all communication with you.  They might even use your credit card or personal information you’ve provided to access any remaining funds they can before they disappear for good.  

Victims of binary options have seen their life savings drained, RSPs lost, and money for post-secondary education gone.  Don’t be fooled – selling binary option to New Brunswickers is not allowed, and it is very likely that you will not be able to get your money back.  The impact of fraud on victims and their families is devastating.  Not only do victims suffer financial losses, but the negative impact to mental, physical and emotional health should not be underestimated.

Is binary options trading legal?
In December 2017, FCNB joined with other participating jurisdictions of the Canadian Securities Administrators to increase investor protection and ban binary options. The ban means: 

  • Binary options shorter than 30 days can’t be sold to individuals in Canada.
  • Binary options shorter than 30 days can’t be sold to companies that were set up just for the purposes of buying, selling or trading binary options

Also, binary options fall within the definition of a “derivative” under the New Brunswick Securities Act and parties selling these to New Brunswick residents must be registered.  However, no firms or individuals are registered to sell binary options in New Brunswick. Although New Brunswickers are being targeted by those purporting to sell a legitimate investment opportunity, it is illegal to sell binary options to New Brunswickers without being registered to do so with FCNB.  Learn more about licence and registration rules in New Brunswick.

What should I do?
  • Avoid binary options at all costs.   Selling unregistered binary options to New Brunswickers is illegal. You will lose your money.  Many of the “trading platforms” operate from servers overseas which means the money goes outside of Canada. This makes it virtually impossible to get your money back.
  • If you suspect you are a victim of a binary options scam, contact your bank and cancel the credit card immediately and report the scam to FCNB .
  • Never give out sensitive personal information online or over the phone to a company or individual you do not know.



Remember – these fake trading platforms are just a dressed up gambling system manipulated by the scammer.  These scammers are not legitimate traders or brokers.  

Legitimate investment opportunities come with documentation about the potential risks and costs, and other important information that investors need in order to make an informed decision.  You are able to see historical trading activity and information about a legitimate investment.  They are regulated and overseen by bodies in place to protect investors and ensure they’re dealt with in a fair manner.  Binary options scams come with none of these protections.

Every investment involves some amount of risk.  Don’t be fooled by these tempting pitches to get rich quick and easily – you will lose in the end.  



Boiler Room Scams


What they are and how to spot them Have you received a phone call from someone you don’t know about an investment opportunity?  It could be a boiler room scam. Here’s what to watch out for and how you can protect yourself.


2017 © Financial and Consumer Services Commission