Online investing has become increasingly popular in recent years, as more and more people seek to grow their wealth by investing in stocks, cryptocurrencies, and other assets. Unfortunately, this has also led to a rise in online investing scams, as unscrupulous individuals seek to take advantage of inexperienced investors.
In this article, we will explore the different types of online investing scams, how they work, and provide some tips on how to stay safe.
Types of Online Investing Scams:
Ponzi Schemes: A Ponzi scheme is an investment scam where returns are paid to earlier investors using the capital invested by new investors. This creates a pyramid-like structure, where earlier investors are paid with money from new investors. Eventually, the scheme collapses, and many investors lose their money.
Pump and Dump: A pump and dump scheme is a type of investment scam where fraudsters inflate the price of a stock by spreading false information, and then sell their shares once the price has gone up. This leaves other investors holding overvalued shares, which are likely to plummet in value once the fraudsters sell their shares.
Binary Options Scams: Binary options scams are a type of investment fraud where investors are promised high returns for making a correct prediction about whether the price of an asset will go up or down. In reality, the fraudsters manipulate the software to ensure that investors lose money, often by refusing to pay out when investors make a correct prediction.
Forex Scams: Forex scams are a type of investment fraud where investors are promised high returns for investing in foreign currencies. These scams often involve fraudulent brokers who manipulate the markets to ensure that investors lose money.
Cryptocurrency Scams: Cryptocurrency scams are a type of investment fraud where investors are promised high returns for investing in cryptocurrencies. These scams often involve fraudulent Initial Coin Offerings (ICOs) or fraudulent cryptocurrency exchanges.
Examples of Online Investing Scams:
OneCoin: OneCoin was a cryptocurrency scam that promised investors high returns for investing in its own cryptocurrency. However, the cryptocurrency did not exist, and investors were encouraged to recruit new members to the scheme to earn commissions. The scheme collapsed in 2018, and the founders were arrested and charged with fraud.
BitConnect: BitConnect was a cryptocurrency Ponzi scheme that promised investors high returns for investing in its own cryptocurrency. Investors were encouraged to invest their money in BitConnect, which would then be lent out to other investors. The scheme collapsed in 2018, and the founders were charged with fraud.
CWM FX: CWM FX was a forex scam that promised investors high returns for investing in foreign currencies. However, the company was not registered with the Financial Conduct Authority, and many investors lost their money when the company collapsed.
BinaryBook: BinaryBook was a binary options scam that promised investors high returns for making correct predictions about whether the price of an asset would go up or down. However, the company refused to pay out when investors made correct predictions, and many investors lost their money.
TelexFree: TelexFree was a Ponzi scheme that promised investors high returns for investing in a voice over internet protocol (VoIP) service. However, the company was using the money from new investors to pay out returns to earlier investors, and the scheme eventually collapsed.
How to Stay Safe from Online Investing Scams:
Do your research: Before investing your money in any scheme or product, do your research to ensure that it is legitimate. Check the company's registration with the relevant regulatory authority, and look for reviews and feedback from other investors.
Beware of high returns: Be wary of any scheme or product that promises high returns with little or no risk. Remember, if it sounds too good to be true