The worst thing about scam artists is that they prey on people at the worst times. Not that it’s ever a good time for fraudulent behavior to flourish, but exploiting weaknesses and the desperation to make money investing is the favorite method of broker scam artists. Fortunately, services such as Scam Survivor can help victims of scam brokers get their money back.
If you feel like you’ve seen more phony-looking ads for scam brokers in the past year, you are probably not imagining it. According to CNBC, fake brokers, ponzi schemes and other investment scams are on the rise since the pandemic began.
Store closings, unemployment and lack of revenues for bricks and mortar stores due to COVID-19 restrictions have created desperation to make money fast. Many people associate fast money with trading Forex, CFDs, and Bitcoin and turn to online traders to so they can cover their day-to-day expenses.
These traders need money fast. They are not saving for retirement or a college fund. They need to cover their rent and their utility bills. Unfortunately, trading even in the best of times is not the way to make money for necessities, and desperation attracts broker scams like a magnet.
How many more investment scams are there than before? The SEC has seen a rapid increase in complaints about fraudulent brokers. Losses due to investment scams jumped 70% in the first quarter of 2020, and the money lost to frauds continues to increase.
Types of Broker Scams
One way to stay safe from broker scams is to know what to watch out for. Here is a list of common broker scams:
1. Fake Brokers
The most important first step to signing up with a broker is to not only ensure they are regulated but to look carefully at their credentials. Is the license from a regulatory agency that has high standards? Could the license be counterfeit? Read reviews about the broker in addition to believing their information about licensing.
2. Fake Platforms
A broker may seek to impress with advanced platforms complete with bells, whistles, and state-of-the-art technology, but what you are looking at may be nothing more than a video game. The platform may not be representing actual trades. Also, beware of fake trading apps too.
3. Pump and Dump
A broker must disclose his or her investments. That prevents them from pumping and dumping stocks. This illegal practice refers to touting an undervalued investment so the price goes higher and selling it at a high point, causing the clients to lose money.
4. Ponzi Schemes
Ponzi schemes involve the fake broker circulating money from one client to the other. They can go on for years without detection because clients receive withdrawals on time. However, the money does not come from returns, but other clients. Meanwhile, the broker charges high commissions for shuffling money around or if they are greedy could disappear with all of it eventually.
Broker Scam Red Flags
Here are some signs that your investment is not safe with your broker:
- The broker is unregulated
- They are uncommunicative
- You notice unauthorized transactions
- You are not given monthly statements
- Fees seem to pop up without documentation
- The broker pressures you to invest in something despite your wishes
- The broker will not allow you to withdraw your money and pushes additional trades
You Can Get Your Money Back
If any of the behavior described in this article sounds like your broker, withdraw your funds immediately. If the broker refuses to refund the money, consult with Scam Survivor experts who can locate the broker scam and make sure you get your money back.