Protect yourself from investment fraud

If you are searching the internet for a lucrative investment opportunity, it pays to be cautious. People often promise high returns for only a small investment. But while these promises may seem tempting at first glance, they might just be a great way to lose money fast!

Lured by ads or e-mails

This type of fraud often runs through a series of phases. The first phase involves luring in victims by making attractive offers: the fraudster’s goal is to get you to register your personal data, particularly your telephone number, on a counterfeit website.

The scammers pay for ads – for example in well-known online magazines or social media – to attract their victims. They often name public figures or popular television shows in these ads as a means of promoting the ‘investment opportunity’. It goes without saying that the person or property is being used without their permission or knowledge. If you click on the link, you will generally be taken to a professionally designed, reputable looking website.

Of course, e-mails can also be used as bait. These e-mails make use of tricks that can fool common spam filters, such as shortening key words like Bitcoin or adding special characters to them. They often sound legitimate, with phrases such as “your Swiss financial partner”.

Initial contact over the phone

Once you have entered your data into the website, phase 2 begins. You will receive a call from an ‘advisor’ or ‘broker’. As you were the one who registered for the ‘service’, you have no reason to find this suspicious.

You will then receive advice on a variety of investment opportunities, such as cryptocurrency, gold, or specialised financial instruments, known as options and derivatives, that allow you to bet on market developments for currencies or commodities. In the beginning, you are only asked to agree to smaller investment amounts, such as 250 or 500 euros.

Once you transfer this money, you will receive an ‘online banking login’ that supposedly grants you access to your securities portfolio (phase 3). There, you can view how much money you have invested. Each time you log in, you will see that the money is apparently growing, often quite quickly. Of course, in reality, the money is long gone.

The initial deception is just the beginning

In order to gain you trust and give you a false sense of security, some scammers even pay out small amounts of money from your ‘portfolio’. The goal is to ensure that you are truly hooked. Over time, the ‘financial advisor’ will attempt to convince you to transfer even more money, usually several thousand euros. After all, it's obvious that the investment is worth it. You might not even notice that there is anything wrong until you attempt to have some of your ‘returns’ paid out.

But even then, the scam is not over: the scammers appear to be willing to pay out the money. However, they will claim they cannot do so until you transfer even more money to them. The reasons for this extra payment are often given as taxes, bonuses, additional funding commitments or insurance payments. The criminals may even attempt to convince you to authorise a transaction in your online banking account, supposedly to allow the money to be paid into said account. In truth, of course, they want access to your account so that they can steal even more of your money.

Now, at the latest, when you demand that they return the money they stole, you realise you are a victim of fraud and the money you have spent is gone forever.

Of course, there is no sure-fire way to protect yourself from criminal activities. But there are some things you can do to limit your risk:

1. Never click on sensational sounding advertisements

Pay attention to whether what you are reading is just as ad in disguise. Ads can sometimes look identical to articles in serious online magazines. Never click on these sorts of dubious ads. If the ad contains promises such as “small investment, large returns”, it is most likely a scam.

2. Protect your personal information

Never give your personal details to third parties. This includes never giving third parties any authorization to log into your computer or smartphone, even if they claim they simply want to help you access a website. If you let them log in to your computer remotely, you are allowing criminals to access your private information. Remain suspicious, even if this offer is sold as a generous attempt to help you.

Pay close attention to websites that claim to be for investing money: can you share the link with friends? If you can't, then it is most likely a fraudulent website. Sharing the link reveals the exact address of the website.

3. Pay attention to keywords, layout and spelling

Be wary of keywords designed to engender trust, such as “your Swiss financial partner” or “top story”. If you receive an e-mail purporting to be from a well-known TV series, look at the spelling to see if it is correct, or if it is spelt slightly differently or, as an example, if individual letters have been replaced by numbers. Do not open any such emails.

If you have been the victim of online fraud, or suspect you might have been, file a police report. A healthy dose of scepticism helps both you and others: be sure you to discuss these types of fraud with your family and friends.

4. Research the company

Doing some research can help you to discover whether or not the company in question is legitimate. In particular, check that the business is registered and licensed and find out where it is located.

It’s best to use a variety of sources to research data on the business and the investment product. In addition to supervisory authorities – in Germany the Federal Financial Supervisory Authority (BaFin) – consumer protection organisations or expert law firms can also provide reliable information.

You can also search for independent reviews from other investors. And it never hurts to speak to your family or friends to get a second or third opinion.

As a general rule, you should not decide to invest in a product until you have a good understanding of what the product does and the risks involved.