In accordance with the SEC, Ponzi applications and different funding fraud circumstances are growing in the course of the pandemic

Peter Dazeley | Getty Images

Criminals are cheating on investors in increasing numbers as they try to take advantage of the chaos created by the Covid pandemic, the Securities and Exchange Commission said Monday.

Investors should be on high alert when it comes to Ponzi schemes, fake certificates of deposit, fake stock promotions and community-based financial scams, the SEC warned in an investor alert.

“The SEC has recently seen a significant increase in tips, complaints and recommendations related to investment fraud,” the agency said.

More from Personal Finance:
Watch out for this $ 1,200 Stimulus Check Scam
Additional unemployment benefits can even be delayed by weeks with a relief invoice
Second $ 1,200 stimulus checks not included in new $ 908 billion auxiliary bill

“Scammers are using times of uncertainty and change, such as the current Covid-19 pandemic, to lure victims into investment fraud,” she continued.

The extent of the increase in fraud documented by the SEC is unclear. An agency spokesman did not return a request for comment.

Loss of $ 16,000

High return investment fraud is a type of “income fraud” in which, according to the Federal Trade Commission, scammers target victims who are trying to generate additional income. Other examples include work-from-home and employment fraud and pyramid schemes.

According to an FTC analysis of consumer complaint data released Thursday, there was a 70% increase in income fraud in the second quarter of this year compared to the same period last year.

Millions of Americans remain jobless due to the Covid pandemic, crippling the finances of many households.

The typical American loses more money on investment fraud than any other type of income fraud, according to FTC analysis. Individuals report an average loss of more than $ 16,000, the agency said.

People in their fifties and sixties are more likely than others to report losing money to investment fraud, with a typical loss of $ 24,000.

Ponzi plans

In a Ponzi scheme, criminals use money from new investors to pay for existing ones. “Investment returns” paid to investors consist of funds from other deceived persons.

Some tell-tale signs of a Ponzi program are guaranteed high investment returns, unlicensed and unregistered brokers, and overly consistent returns, according to the SEC.

Counterfeit CDs

Certificates of deposit offer a fixed rate of return that investors can seek out during times of volatile markets.

But scammers sometimes direct investors to “fake” websites similar to those of legitimate financial firms and soliciting investments in counterfeit CDs.

Consumers should look out for companies that offer high interest rates with no early withdrawal penalty, do not offer financial services beyond CDs, or encourage investors to transfer money overseas or to an account with a name that is different from the institution the S.

Stocks that hyped Covid claims

Encoder86 | E + | Getty Images

Investors should beware of companies that overdo their stocks by making high claims regarding the coronavirus, according to the SEC.

For example, some companies say they are developing a product or service that can help prevent or cure Covid and that their inventories will grow significantly as a result.

These companies could be part of a pump-and-dump system that could cause huge losses to investors, especially if a company makes unreliable claims and eventually ceases stock trading, the SEC said.

Community based scams

Community-based fraud is also known as “affinity fraud”. These drawbacks stem from close trust within communities and, according to the SEC, are often directed at people with shared attachments based on ethnicity, nationality, religion, sexual orientation, military service, and age.

Criminals can be part of the target group or pretend to be. Investors should read up on an investment broker’s background, including licensing and registration status, according to the SEC.

Other tell-tale signs

According to the FTC, there are a few other ways to avoid investing and other income scams:

  • Avoid high pressure sales pitches that require your engagement now, or risk a loss.
  • Be skeptical of success stories and testimonials. They can be fake. Online reviews may come from made-up profiles.
  • Search online for the name of the company (or person) and words like “review”, “fraud” or “complaint”.

Comments are closed.