Here’s How to Stay One Step Ahead-Top 5 Red Flags of Online Scams

An increasing number of senior citizens are engaging with social media platforms daily; even as they utilize these platforms to aid in their investment decisions, they need to be cautious of scams. From researching specific stocks to obtaining background details about financial experts, staying updated with the latest news, or engaging in market discussions, social media tools such as Facebook, YouTube, X (formerly Twitter), LinkedIn, bulletin boards, and chat rooms have evolved into essential resources for investing. However, while social media offers numerous advantages, seniors must be cautious due to the potential for fraud. To navigate these platforms effectively for investing purposes, here are some valuable tips:

#1 Watch for Warning Signs

Exercise caution when encountering investment recommendations online that display these warning signs:

  • If an investment opportunity appears too good to be true, it’s likely not legitimate. Be wary of claims promising “INCREDIBLE GAINS” or a “BREAKOUT STOCK PICK,” as these often indicate high-risk or fraudulent activities.
  • Be cautious of investments that promise “guaranteed” returns with minimal risk. All investments carry some risk, and claims of guaranteed or foolproof returns should be met with skepticism.
  • Be wary of offers to invest outside the United States, as fraudsters may utilize foreign operations to avoid regulatory oversight.
  • Avoid succumbing to high-pressure sales tactics that urge immediate investment. Genuine opportunities don’t require rushed decisions.

#2 Exercise Caution with Unsolicited Offers

Be extremely cautious when receiving unsolicited investment offers through posts, tweets, emails, or messages. Such unrequested communications might be part of a fraudulent scheme.

#3 Beware of “Affinity Fraud”:

Be cautious of investment pitches that arise within online groups you belong to or in chat rooms catering to your interests. Affinity fraud targets identifiable groups, including seniors, and involves scams disguised within trusted communities.

#4 Prioritize Privacy and Security Settings:

Seniors using social media for investing should be mindful of privacy settings to safeguard personal information. Remember that inadequate privacy measures could expose your information to friends and potential fraudsters.

#5 Inquire and Verify

Adopt a skeptical approach and conduct thorough research before making investment decisions. Investigate both the investment opportunity and the individuals promoting it. For verification, utilize resources like the SEC’s EDGAR filing system, FINRA’s BrokerCheck website, and the SEC’s Investment Adviser Public Disclosure website.

Common Investment Scams on Social Media and the Internet

While the methods used by fraudsters evolve, certain common scams persist. 

Stay vigilant and be aware of the following types of schemes when utilizing social media:

#1 “Pump-and-dump” Schemes 

Schemes that involve promoting a company’s stock through false statements to inflate its price, followed by selling the stock at a profit. Be cautious of misleading claims on platforms like Facebook, Twitter, and bulletin boards.

#2 Fraud via Online Newsletters and Spam:

Exercise caution with online newsletters that recommend stocks, as they might be tools for fraud. Some newsletters receive payment for promoting stocks, and fraudsters can falsify their track records.

#3 High-Yield Investment Programs (HYIPs):

It is important to exercise caution when presented with offers that promise high returns with minimal risk. These unregistered investment programs are often fraudulent and target unsuspecting investors.

#4 Internet-Based Offering

There are various types of offering frauds that you should be aware of. In essence, an offering fraud is a situation where a security is presented to the public, but the details of the offer are not accurately represented, such as the possibility of a return on investment.

#5 Professional Designations Awareness

Some financial professionals leverage social media to attract clients, using designations like “senior specialist” to imply expertise in assisting seniors with financial matters. However, seniors should know that some designations might lack substantial training or education requirements. Research thoroughly to understand the legitimacy of these titles.

Where to Seek Assistance

Never hesitate to ask questions or report suspicious activities. If you encounter questionable investment opportunities on social media, be on guard for fraud. If you suspect fraudulent behavior or have concerns about an investment, contact the SEC, FINRA, or your state securities regulator for support and to report potential fraud. Your vigilance can help safeguard your investments and financial well-being.