Want to Learn to Invest? Beware of Fraud

What is Fraud?

The definition of fraud is “wrongful deception intended to result in financial or personal gain.” Deception is “deliberately causing someone to believe something untrue.” Unfortunately, financial services and online entities are rife with individuals that try to make you believe something that is not true for their financial gain.

As you start investing, you’ll likely begin to receive targeted online advertisements, much of which are highly fraudulent. The most common types of online investment fraud involve schemes suggesting you can get rich quickly through purchasing training courses or software, subscribing to stock tip services, or persuading you to invest in the next ”big thing.” These schemes are not limited to just one asset class but target many asset types. These include; stocks, bonds, Forex, property, and cryptocurrencies, among others.

A lot of fraud is not easily prosecutable as there is a degree of deniability and insufficient public resources available to combat the problem. But it’s still fraud. It is deceit intended for financial gain. Just because these people can operate without prosecution does not mean they’re not fraudsters. As someone is looking to accumulate investment knowledge, it is crucial to find reliable resources and scrutinise very carefully whether it is worth paying someone for their assistance or making an investment on someone else’s direction.

Varying Levels of Deception:

The extent of the deceit varies. There is blatant fraud, using a very high level of deception. For example, a scam may deceive you into believing you can become rich quickly by trading Forex a few hours a day using their training course. But there is also more subtle fraud, whereby a financial advisor or financial planner will deceive you into believing that you need them and that they have higher levels of expertise than they do. Another example of subtle fraud is when a private equity firm presents its past performance deceptively to make its track record of returns seem more impressive than the truth. The level of deception is changeable, and practical legality varies, but it is still fraud. It is commonplace in finance.

Fraudulent Sales & Marketing Tactics:

Given the objective of a fraudster is deception, with little or no ethical boundaries, it opens up certain types of sales & marketing tactics that moral people would not consider. Consequently, people are not familiar with scrutinising certain types of messaging. One example is fake reviews, especially TrustPilot reviews. A fraudster or fraudulent scheme is perfectly happy to create a large number of fake email addresses and post a large number of glowing 5-star reviews. They will market these reviews as evidence of their credibility as part of their deception. They will also pay or employ people to pretend to be satisfied clients or success stories, much like a pyramid scheme. Many people do not consider these possibilities, as most have a morality that would prevent them from undertaking such extreme deceit.

Wealth flaunting is another tactic. Fraudsters will show their wealth by presenting expensive cars or possessions as evidence of their strategies’ success or credibility. In truth, if they have wealth, it is from the proceeds of the fraud. But these sales tactics prey on people’s insecurities and desperation. It is not a sales tactic with which people are familiar, as ethical people or businesses do not utilise these tactics.

There are many other examples, but the last one I will give is edited videos. Their objective is to show proof their strategy or scheme is effective. It’s perfectly straightforward for people to edit videos in such a way that it looks credible or to record a series of videos and only publish the success without disclosing the other unsuccessful attempts. A fraudster could make a series of videos attempting trading strategies, lose a large amount of money, and then eventually make a video in which they profit, only publishing the successful video. The fraudster may have lost a lot of money making the videos but could make much more from the victims they sign up to the fraud from having published the video.

Summary:

As a person initially considers their investment objectives, strategies, and knowledge for the first time, they are at their most vulnerable. There is a large number of fraudulent schemes that will look to exploit your excitement and lack of experience and expertise. Finding credible, reliable, and trustworthy sources is crucial so that your investment endeavours are fruitful and safe.