There seems to be many more news articles and cases involving investment scams this year, and an article that I read recently about the number of such cases doubling from 200 yearly to more than 400 cases annually from 2015 to 2017 filled me with growing alarm.
The problem is compounded by the fact that there are many unlicensed and unregulated trading platforms popping up. These purportedly promise huge profits to investors with low or no risk, but end up being a front for an elaborate scam to rip people off. This article looks at why people fall so easily for such scams, and what you can do to protect yourself.
Significant Sums Lost
A total of S$7.8 million has been lost from trading on unlicensed platforms in 2017, says a report from MAS (Monetary Authority of Singapore) and SPF (Singapore Police Force). Aside from money lost through such platforms, there have also been cases where scam artistes promised high rates of return on dubious investment schemes, and people who responded to online advertisements and transferred money to the scammer ended up losing significant amounts of money.
These numerous scams prey on people’s greed, and this is the chief reason why so many people continue to get cheated. Greed blinds them and suspends their disbelief. Why would such high returns be offered to the general public when the person responsible should just keep the secret to himself and make a lot of money? Scammers are also very aware that everyone loves to make a quick buck with minimal effort, and they exploit this human weakness.
Another key reason for people falling victim to scams is ignorance. People who do not invest may not be aware of what a realistic return entails, and scammers take full advantage of this when they advertise their unrealistically high returns.
Tagging On To Hype
Such scams usually sprout up like mushrooms when there is hype surrounding specific types of investment assets.
Back when gold prices were soaring in 2011-2012, scams popped up promising high returns on gold buyback schemes. When Bitcoin (a type of cryptocurrency) was soaring to levels above US$19,000 per coin back in December 2017, there were also many unregulated schemes popping up to take advantage of people’s greed and demand for quick profits.
Low Barriers To Entry
The internet allows for the rapid setting up of scam websites to target gullible members of the public. The government is stepping in to control such sites, but their persistent proliferation shows how difficult a task this is.
Staying Away from Scams
To prevent yourself from falling victim to such scams, one should not be greedy and should also educate oneself appropriately to recognise scams for what they are – ridiculous claims to wealth built on flimsy logic. Be sceptical of deals which seem too good to be true and do not hesitate to probe further if unsure.
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice.