The COVID-19 pandemic has changed life as we know it.
Not only has it generated a worldwide health crisis, it has also created economic and financial market uncertainty. While the Canadian economy slowly reopens, feelings of uncertainty remain.
Fraudsters are using these conditions, as well as fears surrounding COVID-19, to peddle investment scams. Below are five types of investment fraud to be aware of during the COVID-19 pandemic.
1. Gold Scams
Gold can be an appealing investment when there is economic uncertainty.
It’s seen by many investors as a tangible and secure commodity since the supply of precious metals like gold and silver cannot be arbitrarily pumped up (unlike fiat currencies).
The sense of security that investors may feel with gold can create opportunities for fraudsters to take advantage.
Gold Scams are Circulating During the COVID-19 Pandemic
The BCSC and the ASC are warning the public about the aggressive promotion of Crestview Exploration Inc. Crestview is a BC-based gold mining company.
Mail sent in early April from a “stock analyst and geologist” to residents of BC, Alberta, Manitoba, and Saskatchewan makes exaggerated claims about Crestview, predicting that its stock price “will soar as the recession hits.”
The letter comes in an envelope without a return address, and says in bold red letters “CORONAVIRUS AFFECTING MARKETS: READ NOW.”
In late May, a very similar letter headlined, “A RECESSION IS AROUND THE CORNER,” was sent to Canadian households. The letter refers to the “irreparable financial damage” caused by the lockdown, and then goes on to make the same recommendation of Crestview.
Watch the video below for more details.
Gold scams could also include fraudsters trying to raise funds to re-open a gold mine that is no longer operating. These types of gold mine scams can include fraudsters offering high returns, and exaggerated claims of how much gold has been found within a previously defunct mine. Click here to learn more about how a gold scam works.
Do Your Research Before You Invest
It’s important to vet any type of investment, including gold, when you’re considering investing. Keep in mind that public companies are required to disclose and report material information, according to rules laid out by securities regulators.
You can conduct your own research by:
- using SEDAR+, Canada’s central filing system for public companies, to review documents like annual reports and shareholder’s meeting materials.
- reviewing financial statements.
- running a background check on an individual’s potential past misconduct by searching the BCSC’s Disciplined Persons List and Investment Caution List.
It’s also a good idea to seek independent investment advice. You could run an investment by a registered investment advisor, or another financial professional. If you’ve never worked with a registered advisor, our four-step advisor check can help you do a background check.
If you have questions or concerns about a BC-based investment or company, you can contact us.
2. Work-from-Home Scams
The COVID-19 pandemic has left many British Columbians looking for alternative sources of income as a result of job losses caused by businesses shuttering. Fraudsters prey on this kind of financial uncertainty and fears over job security to lure their victims into scams.
Some of these scams are being offered as work-from-home opportunities.
A Warning to British Columbians About Work-from-Home Scams
The BC Securities Commission (BCSC) is warning the public about potentially fraudulent ads by companies offering opportunities to work from home as securities traders during the COVID-19 pandemic.
The ads state that traders can keep a large percentage of the profits, and they don’t need experience or a license; however, the firms demand payment of fees from would-be traders, and the BCSC believes neither the firms nor fees are legitimate. Watch the video below for more information.
Forex Trading Scams
Foreign exchange, or forex , is traded worldwide in a decentralized market. It’s based on simultaneously buying one currency and selling another. It is mostly traded in the over-the-counter market.
During the COVID-19 pandemic, the Alberta Securities Commission (ASC) says it noticed potentially fraudulent online ads offering to train you on trading stocks or forex, claiming you don’t need a license and can keep a large percentage of the profits.
It’s important to remember that online investment schemes don’t have borders. Because these potentially fraudulent ads are online, they have the potential to make their way to British Columbians as well.
Employment Scams were the BBB’s Top Riskiest Scam in 2019
General employment scams topped the Better Business Bureau (BBB)’s list of riskiest scams in 2019. Data shows that exposure to employment scams, as well as susceptibility and median dollar loss are up from 2018.
The BBB adds that many reported employment scams offered flexible positions that fit within the gig economy. This could include work from home opportunities during the COVID-19 pandemic.
How to Avoid Work-from-Home Scams
Work-from-home scams will often have similar characteristics to other types of investment fraud. Stay fraud aware by learning to recognize the investment fraud warning signs.
These five videos cover the warning signs, and are based on real cases of securities fraud in BC.
3. Companies Claiming to Have the COVID-19 Cure
Scientists in Canada and around the world are working on potential treatments for COVID-19. But at this time, there is no vaccine or any health product that is authorized to treat or protect against COVID-19.
Despite that information, fraudsters try to capitalize on fears about COVID-19 by claiming they have a solution.
Companies Claiming to Detect, Cure, Prevent COVID-19
The BCSC is aware that Revive Therapeutics Inc., a BC reporting issuer, is currently being promoted in North America and Europe.
Germany’s Federal Financial Supervisory Authority has issued an investor alert about Revive, warning that buy recommendations are currently being made on a large scale in the form of market letters and e-mails.
The promotions in Germany make aggressive claims about Revive’s potential success in treating COVID-19 and the prospects of investors receiving large profits.
Be Wary of These Claims
The BCSC reminds investors to exercise caution when considering aggressive promotions as a basis for investment decisions as these promotions may make false claims of large profits.
It’s also important to plug into trusted resources when looking for COVID-19 information and updates. Our COVID-19 information page keeps you informed about the latest investor alerts related to the coronavirus pandemic. It also includes links to trusted sources of information, such as provincial and federal government pages.
4. Pump-and-Dump Schemes
Pump-and-dump schemes have popped up during the COVID-19 pandemic. Let’s take a quick look at how this type of scam operates.
Pump-and-Dump Schemes Explained
A pump-and-dump scheme is a type of investment fraud. Fraudsters will promote the purchase of a publicly-traded stock in order to drive up its price (“pump up” the market), and then sell it into the artificial market they have created (“dump” their shares).
In the end, the fraudsters walk away with a huge profit. Meanwhile, investors who purchased promoted stocks are left with shares that are worth much less than the price they paid. Learn more about how a pump-and-dump scheme works.
Pump-and-Dump Schemes are Surfacing During the COVID-19 Pandemic
The Canadian Securities Administrators (CSA) is warning investors about companies claiming to have products or services that will prevent, detect, or cure COVID-19.
Fraudsters take advantage of global events and breaking news to lure potential investors with the expectation of significant returns. A common way they do this is through pump-and-dump schemes involving publicly-traded, small “shell” companies.
5. Investment Fraud on Social Media
Has social media been instrumental during the COVID-19 pandemic to help you stay connected with your loved ones? Many of us have been turning to online engagement to make up for in-person interactions and social gatherings.
Unfortunately, fraudsters may be using these same platforms to target potential investors.
What Does Social Media Fraud Look Like?
Fraudsters can set up fake accounts, use stock images to create false identities, and create websites to make an investment seem legitimate. They may even try to become romantically involved with you as a tactic to reel you into fraudulent schemes.
Protect Yourself Online
Promoting investment schemes via social media allows fraudsters to maintain a higher level of anonymity making it difficult to track them down to hold them accountable and try to recover your money.
That’s why it’s important to do your due diligence if you’re presented with online investment opportunities. Here are some tips to help you stay vigilant while surfing the web:
- Don’t send money to someone you don’t know or haven’t met.
- Run a Google reverse image search to see if the person is really who they say they are.
- If your questions are not being answered or you don’t understand the investment, walk away.
- There are no risk-free investments. Know your risk tolerance before making an investment.
- Don’t make hasty decisions. Seek independent advice from a registered advisor if you’re not sure about an investment or a company.
How to Report Fraud or Other Investment Concerns
If you have any concerns about a person or company offering an investment opportunity, please contact BCSC Inquiries at 604-899-6854 or 1-800-373-6393, or through e-mail at [email protected]. You can also file a complaint or submit a tip anonymously using the BCSC’s online complaint form.