FAIR Focus

During the past few months, we’ve been busy behind the scenes working to improve our communications and visibility with investors. On March 1, we announced our new investor-centric website.

Investing Basics: Improve general awareness on topics, such as choosing an advisor and do-it-yourself investing.

Know Your Rights: Educate investors on knowing their rights when buying or selling investments, receiving investment advice, or when they have a complaint.

Expert Policy Insights: Learn about our advocacy work to promote fair outcomes for investors and their fair treatment.

According to the Canadian Anti-Fraud Centre (CAFC), the number of reported fraud increased in 2021 to more than 106,000 cases, with more than $380 million being lost. In total, 67,533 Canadians were victims of fraud last year. Investment scams topped the CAFC list of fraud types with almost $164 million in reported losses. These numbers are just the tip of the iceberg, since the CAFC estimates that fewer than 5% of victims ever file a fraud report.

This increase in fraud is not surprising as more fraudsters are using social media to find new victims. At the same time, we are seeing a surge in the number of average Canadians that are investing through online channels, and a lot of them are do-it-yourself investors who are relying on social media for advice. Many investors are also buying new and complex products, such as crypto assets, that they do not fully understand but still believe will deliver high returns. These factors create a ripe environment for scammers. 

There are too many types of frauds or scams to list them all, but the more common ones include:

Ponzi Schemes: Investors are offered investments with guaranteed high returns, but are paid with funds received from other investors rather than from real profits. When the scheme collapses, those still invested in the scheme are left with nothing.

Pyramid Schemes: Similar to a ponzi scheme, except investors are rewarded for bringing in new investors into the scheme.

Clone Scams: Fraudsters set up fake websites designed to look like real businesses to trick victims into sending money directly to the fraudsters’ bank accounts.

Pump and Dump: A low-priced stock is promoted to get investors interested in buying it. As more investors get involved, pushing up the stock price, the promoters cash out by selling their own stocks and leaving investors holding stocks in a worthless company. Check out this example of a fraudster using Twitter for their pump and dump scam.

Romance Fraud: Scammers use social media and online dating apps to manipulate victims into virtual relationships. Once you trust them, they ask you for money. One investor described how devastated they felt from losing their entire life savings after falling for a $260,000 cryptocurrency scam. This year on Valentine’s Day, the Canadian authorities sent out a warning about this type of scam. 

Remember the golden rule: If an investment seems too good to be true, then it probably is.

Last month’s Super Bowl commercials provided a sure sign that crypto investing is now mainstream, with no less than four crypto asset platforms running big ads. If you’re thinking about investing in crypto assets, be cautious—there are lots of scammers taking advantage of the interest in crypto investing.

The rising scams caught the eye of regulators in recent months. In January, the North American Securities Administrators Association (NASAA) ranked crypto investments at the top of its annual list of investor threats. Because these products don’t fit easily under existing rules, the regulators noted that it may be easier for fraudsters to “fleece the public.” NASAA provided an advisory on investing in cryptocurrencies and protecting yourself from crypto scams. You can also check out real-life examples of Canadians being exploited by crypto scams from the Ombudsman for Banking Services and Investments bulletin.

The Canadian Securities Administrators (CSA) also issued a warning to investors, and stated that fraudsters are using clone websites to get investors to purchase and transfer crypto assets to fake accounts. In some cases, victims gave fraudsters remote access to their computers. In a similar scenario, an investor lost a $55,000 bitcoin investment.

Here are a few useful tips on how to spot fake websites and protect yourself from crypto frauds:

Board of Directors: We currently have three openings on FAIR Canada’s volunteer Board of Directors. Our Board offers a unique opportunity to make a real difference for Canadian retail investors. Learn more here.

Policy Counsel Role: We are hiring a Policy Counsel at FAIR Canada. The successful candidate will be an integral part of the organization, supporting FAIR Canada’s efforts to advocate for investor rights and be a catalyst for positive change in Canada’s financial services sector. Learn more here.