Social media has become a virtual marketplace where netizens can trade everything — from household items to investment opportunities. Of late, it has evolved from a platform for social interaction into a hub for scammers, particularly in stock and cryptocurrency.
Fake investing groups have spread across platforms, preying on unwary investors. Khaleej Times had reported about an Indian businessman who lost of $20,000 (Dh73,461) in a well-executed cryptocurrency scam.
Recently, UAE investors were urged to verify the identity of entities they are dealing with before signing any agreements or transferring money. People were warned against scammers using a licensed company’s name and other details to dupe investors.
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Therefore it is important to understand the forms of cryptocurrency scams, the reasons behind their prevalence, the damage they cause to potential investors, and strategies for prevention.
Form of fraud
1. Fraudsters create groups specialised in trading stocks and cryptocurrencies on social media.
2. Fraudsters advertise their fake groups via emails and social media sites promising unreal profits.
3. Fraudsters enhance the confidence of victims by advertising these groups through social media celebrities.
4. Fraudsters generate fervour among victim investors with the initial profitable returns.
5. Victims are affected by the initial profitable returns, which prompts them to top up their investment in the hope of making quick profits.
6. Upon transferring larger amounts of money to personal accounts, after that neither profits are realised, nor communication from the group members is received, the investor discovers that they fell victim to an electronic fraud.
Reasons behind their prevalence
1. Desire for rapid financial success.
2. Being duped by claims of unrealised profits.
3. People’s obliviousness about the significance of doing due diligence and research before making any online investments.
Damages caused to potential investors
1. Loss of money and financial distress.
2. Difficulty in prosecuting the perpetrators.
3. The deposited profits may have been transferred by other victims, which exposes the deceived investor to legal accountability.
4. The victim may be subject to legal accountability for the sources of these funds.
Prevention from fraud
Investors bear the responsibility of protecting themselves against fraud. Always verify the credibility of the investing group or individual offering advice. Look for well-established, reputable sources and check for any regulatory licenses or registrations.
UAE authorities have offered the following preventive measures to avoid falling victim to fake investing groups:
1. Avoid being misled by claims of fictitious profits and proceed with extreme caution when dealing with such claims. Stick to well-known and regulated investment platforms and exchanges. Avoid using unverified platforms or those with dubious backgrounds.
2. Avoid engaging in dubious transactions. Never share personal or financial information unless you are certain of the recipient’s legitimacy.
3. Before making any investments, undertake thorough investigations and confirm that the businesses have the required licenses from the relevant authorities. Look for reviews, testimonials, and any red flags that could indicate fraudulent activity.
4. Invest in opportunities where the expected returns and the method of using funds are reliable, truthful and transparent. Be wary of any group promising guaranteed high returns with little risk. High returns often come with high risks.
Report any suspected fraud to social media platforms, regulatory authorities, and relevant financial institutions to help prevent others from falling victim.