The Criminal Intelligence Service of Canada (CISC) released its 2010 Report on Organized Crime. This year, it focuses on securities fraud.  

The report confirms what we have been blogging about extensively.  The increased use of social networking sites to recruit victims and promoters combined with the economic downturn has produced more Ponzi and fraudulent investment schemes than ever. 

According to the report, Canadian losses amount to $320 million to date. This reflects the amount of losses that are reported. We know that many are not reported, so the amount of money Canadians have lost is probably much higher.

The report uses the statistics gathered in a national study undertaken by the Canadian Securities Administrator’s 2009 Investor Index that provides year-over-year information about Canadians’ knowledge about investments and investment fraud.

In the trends section, the writers note, “the size and complexity of these schemes help conceal criminal activity, generate ample profits and facilitate tax evasion and money laundering.” They go on to suggest that these types of operations require a minimum level of organization, (just like we have seen with high yield investment programs HYIPs), and are able to involve lots of people through the use of social media.

Clearly, the message to consumers is written in bold here – fraudsters are using sites like MySpace, Facebook, Craigslist, and YouTube to provide professional-looking, but false, information to part people from their money. These sites also allow the perpetrators to trade lists of potential victims and recruit intermediaries who promote these schemes for a commission.

Be sceptical, ask questions. Don’t fall for schemes that are promoted through social media sites.  When in doubt report any suspicious activity to your securities regulator.

Suggested Reading

Pt. 2 Record-High Penalties: Kim, Castiglioni, and IFC

CSA Issues Investor Watch Regarding Foreign Currency Exchange (Forex/FX) Trading

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