The Canadian Securities Administrators (CSA) has issued a warning about fraudulent “investment groups” being promoted on social media such as Facebook and Instagram. These groups could be running a scam called “pump and dump”.
How the scam works:
- Scammers use social media to advertise investment groups that promise high returns to would-be investors.
- They artificially inflate the price of a stock in which they own shares by promoting it.
- Once enough people buy at the high price, the scammers sell their shares causing the price to crash.
- Investors who bought at the high price suffer significant losses and investor damage.
How they try to trick you:
- Private WhatsApp chat: Fraudsters promote the groups on social media platforms. They then invite would-be investors to encrypted WhatsApp group chats.
- Fake credentials: They may claim to be a registered professional or affiliated with a legitimate company or celebrity.
- Shifting targets: They may start by promoting a known stock and then, through WhatsApp chats, push you to riskier, unknown ones. These are often reported overseas in places like Hong Kong.
- Pressure tactics: They will try to convince you to invest as much money as possible, even from friends and relatives.
The CSA has warned retail investors to protect themselves and be wary of unsolicited investment advice, especially on social media. Be careful when interacting in “investment group” WhatsApp chats that claim to provide investment advice. Some are scams designed to take advantage of potential investors.
Check the background, qualifications and disciplinary record of investment advisers before you invest. You can use the CSA National Registration Search. Check the CSA Investor Alerts page for a list of companies to avoid. You can sign up for updates from the CSA to know when new notices are issued.
If you believe you have been the victim of this or a similar scam, contact your bank, local police, your local provincial securities regulator and the Canadian Fraud Center immediately.
About CSA
The CSA, the board of securities regulators of Canada’s provinces and territories, coordinates and harmonizes regulation of the Canadian capital markets.