Published September 23, 2024 • 4 Min Read
In recent years, people around the world have been faced with inflation, stressed bank balances and shrinking retirement funds. So, if you are promised an easy way to boost profits through a new investment, the appeal is hard to resist. Unfortunately, investment and crypto scams can drain your savings, instead of growing them.
Investment and crypto scams are rising
Today’s digital environment is the perfect setting for investment and crypto scams. The internet makes it easy to connect with potential investors, online payment apps are increasingly popular, and financial advice and information – including misinformation – is everywhere. It’s no surprise that financial crime is growing. According to INTERPOL, investment scammers stole over $1 trillion from victims around the world in 2023.
Avoid being a victim of investment and crypto scams! Here are 6 ways to protect yourself and your savings.
Be mindful of the promise of high or quick returns
While investment fraud, including cryptocurrency fraud, can take many forms, they have one thing in common – they promise fast cash. If an investment claims to deliver unrealistically high profits in a short amount of time, it’s likely a scam.
Be skeptical of ‘no risk’ promises
Another giveaway of investment scams is the promise of no risk to you as the investor. When paired with high rewards, there’s no such thing as a no risk investment – so it’s best to stay away. Remember, if something sounds too good to be true, it probably is!
Beware of unsolicited contact
Investment scams are often tied to romance scams, where an online connection presents an “exciting investment opportunity.” I you are dating online, and a romantic interest suddenly turns into an investment opportunity, chances are you are dealing with a fraudster. A good rule of thumb is to avoid mixing online dating with online investing advice.
In other instances, investment scams start with an email, text or message via social media channels about a great investment opportunity. Typically, these messages come out of the blue from someone you don’t know – or a “friend” you haven’t heard from in years. Scammers often share testimonials of fake customers or fake screenshots of a victim’s portfolio to make their scam more convincing.
Be wary of investing with a third party
Whenever and wherever you invest, you want to have direct access to your investment account – so you can track your balance and the performance of your assets. Investing via a third party removes this level of control and can be a warning sign that the investment isn’t legitimate. It’s important to note that there is no such thing as a crypto-investment broker in Canada.
Take the time to do your research
Many investment scams are successful because they pressure the investor into acting with urgency, citing a ‘now or never opportunity’ that’s related to current events or market performance. Legitimate companies will let you take the time to research the opportunity before investing any money.
If you come across an interesting investment opportunity that does look legitimate, here’s how you can research the firm and/or the advisor that’s involved.
In Canada:
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Look up an investment advisor or firm at the Canadian Investment Regulatory Organization (CIRO)
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Check to see if a crypto asset platform is registered in Canada. Registered platforms are subject to regulatory oversight that helps protect investors.
In the U.S.
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Investors can check registrations and backgrounds at the Commodity Futures Trade Commission.
Learn how to spot a crypto scam
Of the investment scams out there, scams involving cryptocurrency are one of the most prevalent. In the U.S. so far this year, scammers have collected $679M in cryptocurrency.
So, how do you spot a crypto scam? Here are some tell-tale signs:
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Send money to get more money: The scammer asks you to send money upfront to protect the money you’ve invested or unlock the proceeds you’ve earned.
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Celebrity endorsement: Crypto scammers often use celebrities and/or influencers to recommend a cryptocurrency – but that does not mean that person is knowledgeable or actually endorses the company.
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High rates of return with no risk: This is not realistic and a clear sign it is a fake investment opportunity.
Investment scams can be devastating to individuals who put their trust – and their savings – into the hands of scammers. Knowing what red flags to look for can help you keep your money safe. Keep in mind, while earning fast money at no risk is an ideal scenario, it’s not realistic – and therefore the clearest sign that an exciting investment opportunity is fake.
This article is intended as general information only and is not to be relied upon as constituting legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. Information presented is believed to be factual and up-to-date but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or any of its affiliates.
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