Online fraud comes in many types and varieties. Whether you are a first-time investor or have been investing for many years, here are some basic facts you should know about the different types of fraud.
Advance Fee Fraud
Advance fee frauds ask for payment up front before the deal can go through. The advance payment may be described as a fee, tax, commission, or incidental expense that will be repaid later. Some advance fee schemes target investors who already purchased underperforming securities and offer to sell those securities if an “advance fee” is paid.
High Yield Investment Programs
The Internet is full of so-called “high-yield investment programs” or “HYIPs.” These are unregistered investments typically run by unlicensed individuals – and they are often frauds. The hallmark of an HYIP scam is the promise of incredible returns at little or no risk to the investor.
Foreign Currency Trading (Forex) Fraud
The Forex market is volatile and carries substantial risks. It is not the place to put any money that you cannot afford to lose, such as retirement funds, as you can lose most or all it very quickly.
A Ponzi scheme is an investment fraud that pays existing investors with funds collected from new investors. Ponzi scheme organizers often promise to invest your money and generate high returns with little or no risk. But in many Ponzi schemes, the fraudsters do not invest the money. Instead, they use it to pay those who invested earlier and may keep some for themselves.
Internet and Social Media Fraud
Many investors use the Internet and social media to help them with investment decisions. While these online tools can provide many benefits for investors, these same tools can make attractive targets for criminals. Criminals are quick to adapt to new technologies – and the Internet is no exception. Social media offers a number of features that criminals may find attractive. Fraudsters can use social media in their efforts to appear legitimate, to hide behind anonymity, and to reach many people at low cost.