The number of whistleblower reports to FinTelegram has steadily increased in recent months of the COVID-19 crisis. The U.S. Securities and Exchange Commission (SEC) reports a significant increase in complaints since the beginning of the COVID-19 crisis. Those frauds include Ponzi schemes, fake certificates of deposit, bogus stock promotions, and community-based financial scams. Scammers evidently use the current COVID-19 pandemic to lure victims into investment scams. Most broker and investment scams and MLMs are designed as Ponzi schemes using money from new investors to pay existing investors’ fake profits. Often no payouts or withdrawals are happening at all.
In a Ponzi scheme like a forex or crypto broker scam, as well as in Multi-Level-Marketing (MLM) schemes, what appears to be a return on your investment is actually money from other investors who have been swindled before. Typically, there is no trading or investment activity. It’s all fake. In the initial phase, new client-victims of scams actually are paid out small amounts to motivate them for additional deposits.
The SEC provides some tips to help you recognize and avoid frauds like Ponzi schemes, fake CD scams, bogus stock promotions, and community-based financial scams.
- Guaranteed High Investment Returns. Promises of high investment returns – often accompanied by a guarantee of little or no risk – is a classic sign of a scam. Every investment has risk, and the potential for high returns usually comes with high risk. If it sounds too good to be true, it probably is.
- Unlicensed and Unregistered Sellers. Most scams involve individuals or firms that are not licensed or registered. You should verify whether a seller is currently registered or licensed using the free and simple search tools on Investor.gov.
- Overly Consistent Returns. Investment values tend to fluctuate over time. Be skeptical of an investment that generates steady positive returns regardless of market conditions.
Stay super-suspicious and do not fall for cold calls or messages from boiler room agents. Even in the COVID-19 crisis, with its decentralized and viral home-office environment, there are no risk-free investments and free lunches. Neither in the FIAT sector nor in the new crypto world.
