Fraudsters are using fake celebrity endorsements on social media to target consumers with investment scams on bogus online trading platforms, the financial regulator has warned.
Cryptocurrency and foreign exchange scams have more than tripled in last year to over 1,800, according to the Financial Conduct Authority (FCA).
More than £27 million was lost in cryptocurrency and foreign exchange scams last year, with victims losing on average £14,600.
The financial watchdog and Action Fraud - the national fraud and cyber-crime reporting centre - are warning the public to be wary of these scams which are typically carried out on online trading platforms.
How do the scams work?
Fraudsters often use social media to promote their get rich quick online trading platforms.
Posts often using fake celebrity endorsements and images of luxury items like expensive watches and cars which link to professional-looking websites where consumers are persuaded to invest.
Investors will often be led to believe that their first investment has successfully made a profit.
The fraudster then contacts the victim to invest more money or introduce friends and family with the false promise of greater profits. However, eventually the returns stop, the customer account is closed and the scammer disappears with no further contact.
Laura Suter, personal finance analyst at investment platform AJ Bell, says: “Anyone who is thinking about investing in something should carry out a few simple checks before parting with their money. If someone calls you out of the blue – hang up, and if the returns sound too good to be true, they probably are.
“Don’t be lured in by an impressive-looking website or any celebrity endorsements, and if your friend recommends something to you, don’t assume that they’ve done all the research for you. You can check on the regulator’s register to see if the company is legitimate.”
Director of Action Fraud, Pauline Smith, says: “These figures are startling and provide a stark warning that people need to be wary of fake investments on online trading platforms. It’s vital that people carry out the necessary checks to ensure that an investment they’re considering is legitimate.”
How to protect yourself
Professional-looking websites, adverts or social media posts don’t always mean that an investment opportunity is genuine. Criminals can use the names of well-known brands or individuals to make their scams appear legitimate.
Avoid uninvited investment offers whether made on social media or over the phone.
Before investing it is always a good idea to get financial advice or at least searching for information on the firm online. If you are thinking of investing in cryptocurrency make sure you thoroughly research the company you are choosing to invest with.
Not only is it extremely risky to invest in, but it is not regulated by the FCA, so you won’t be covered by the Financial Services Compensation Scheme.
FCA registered firms are unlikely to contact you out of the blue with an offer to buy or sell shares. The regulator advises investors to reject unsolicited investment offers whether made online, on social media or over the phone.