Be vigilant, investment fraud is on the rise
Don’t believe in false hopes of higher returns in a short period of time
Trust, or rather the breach of trust, is a fundamental characteristic of investment fraud. Creating false hopes of higher returns in a short period of time, combined with the constraints of accessing investment information, is the motivation that drives people to fall prey to false investment patterns. There are many types of investment fraud, such as Ponzi schemes, pump-and-dump schemes, and app-based scam schemes.
There are over a hundred bogus app-based investment firms, many of which originate from Chinese servers. Existing members earn commissions for introducing new users, a typical multilevel marketing pattern. The approach is “you are deceived to deceive others”.
click here for more information on Hyderabad
Reasons why fraud is not detected at an early stage:
- Decreasing moral values
- Bad governance
- Ineffective internal control systems
- Conformity to the letter and not to the spirit
- The securities market is extremely volatile
- Lack of investor awareness
Legislation which regulates the collection activities of the consignments:
- Prohibition of Unregulated Depository Systems Act, 2019
- The Chit Funds Act of 1982
- Prize Tokens and Money Circulation Patterns Act 1978 (Prohibition).
- Companies Act 2013, as amended by Companies (Acceptance of Deposits) Rules 2014.
- Securities and Exchange Board of India Act, 1992 and 1999
This is an investment fraud that typically pays existing investors with money collected from new investors. Scammers promise to invest your money and generate high returns without risk, but in reality, they don’t invest the money. They pay the money to the new investors, which is collected by the old investors, and they keep the majority of the shares to themselves.
Most investment frauds have no legitimate income, and such schemes require a continuous flow of new money to survive. When it becomes difficult to recruit new investors, they disappear into thin air.
Some red flags of Ponzi schemes are (a) high returns with zero risk. (b) High and consistent returns from the start of the investment (c) Purchased from unregistered companies. (d) Purchased from unregistered sellers (e) Inadequate documentation (f) Difficult receipt of payment procedures
Pumping and emptying system
This is an investment fraud where advisers attempt to pump (inflate) the price of stocks by providing misleading information to investors. They are trying to increase the price of cheap stocks by using false propaganda. First, these scammers invest by buying cheap stocks in large volumes and then send fake WhatsApp, SMS or emails to millions of investors recommending them to buy those stocks which they have artificially inflated.
Watching the increase in the number of people buying, the price of that stock starts to rise and as soon as the stock price reaches a good value, these investment advisers sell (empty) their stocks and get good returns and disappear into the air. What happens in the end is these artificially inflated stocks fall and retail investors (victims) lose their money. Most of the time, those who have invested are newbies, and sometimes they even know it is a fraud.
The scammer’s trick for investors is to use bogus websites that look legitimate and also use bogus apps (not in the App Store / Play Store) and often send phishing emails showing fake images of portfolio balances to entice them to invest in cryptocurrencies, stocks or e-commerce. some products.
The modus operandi is namely (a) First, the victims are invited by known friends to join WhatsApp groups. (b) They are required to download apps via links and new members receive a membership bonus which appears on their wallet. (c) Trading takes place (victims are asked to perform tasks) i.e. sale / purchase of e-commerce stocks or products. (d) Victims are invited to introduce new people to the system and they are given an incentive for all the tasks they perform, and the presented person receives an incentive added to their portfolio (e) Based on the tasks performed, the wallet accumulates money. (f) When the victim tries to withdraw their winnings from their wallet, they will not be able to withdraw and will be required to pay income taxes, processing fees, GST fees, etc. (g) Once the requested fees have been paid, the applications will not work and display an error and any effort to reach customer service is in vain.
Common signs to avoid getting trapped
- Promising abnormally high guaranteed returns
- Request a high initial investment
- Complicated and unsustainable business model
- Promise to reimburse losses
- Invest in apps not listed in the App Store or Play Store
Do a little due diligence, instead of blindly believing
- Request appropriate regulatory / compliance approval
- Do not issue checks in advance
- Regularly consult account statements
- Watch the performance “Promised vs Real”
- Do not perform financial transaction on apps downloaded from App Store / Play Store only
- Do not make financial transactions during phone conversations or during screen sharing sessions
Stay tuned to Cyber Talk for more on Internet ethics and digital well-being, presented by Anil Rachamalla of the End Now Foundation (www.endnowfoundation.org)
Now you can get handpicked stories from Telangana today to Telegram everyday. Click on the link to subscribe.
Click to follow the Telangana Today Facebook page and Twitter .