The DC Department of Insurance, Securities and Banking (DISB) cautions residents to be on guard against other people’s money investment scams. Securities regulators have seen a rise in schemes where scammers target victims, often online, with the promise of making big returns by trading “other people’s money.”
How Are The Scams Perpetrated?
Scammers offer the opportunity to make lots of money by trading stocks, foreign currencies, or cryptocurrencies, frequently through a “proprietary trading platform” that supposedly uses special artificial intelligence or some other computer algorithm to make trading decisions. But there is no proprietary trading platform or algorithm directing trades. This part of the scam is designed to lure people who may not have any trading or investing experience. The scam also targets those who may not have any disposable cash to invest by offering the opportunity to use other people’s money on the fictitious trading platform.
The scammer pretends to offer access to other people’s money to trade in exchange for a small up-front fee. This is accompanied by the promise that the investor will get a percentage of the profits generated from the trading platform. The scammer may also ask the investor to fill out an “application” for access to the funds, which requests personal and financial account information. Once the scammer has this information, they may steal the identity of, or additional funds from, the investor.
These scams may use a multi-level marketing angle by offering additional compensation if an investor recruits other people to join the fictitious trading program. Investors may get small payments at the beginning to entice them to pay for more access to other people’s money or to recruit other investors. As the scheme progresses, communications break down and eventually the scammers disappear, leaving the investors with lost money and lots of questions.
Red Flags
- A stranger contacts you or posts an online advertisement about opportunities to make money through proprietary trading in stocks, forex, or cryptocurrency;
- The message comes from a number you do not recognize or contains more than 10 digits (i.e., originates from outside North America);
- The person offers you access to trades using other people’s money in exchange for an up-front fee; and
- The person requests that the up-front fee be made in cryptocurrency or on a mobile cash transfer app. These transfers can be difficult for regulators and law enforcement to trace, especially if the money is transferred outside of the country or the cryptocurrency wallet is anonymized.
How To Protect Yourself
- Do not use investment strategies or programs that you do not understand.
- Do not respond to unsolicited messages you receive offering “too good to be true” investment opportunities.
- Do not provide any personal or financial account information to anyone you do not know or whose identity you cannot verify.
- Before you send any money, contact your state or provincial securities regulator to verify whether the person offering the investment opportunity is registered to offer securities or provide investment advice.
Report Fraud
If you believe you have been the victim of an investment adviser scam or other financial fraud, contact the DISB Enforcement and Consumer Protection Division at (202) 727-8000. You may also file a report with the Federal Trade Commission (FTC) at reportfraud.ftc.gov or call the FTC Consumer Response Center at 877-382-4357.
About DISB
The mission of the Department of Insurance, Securities, and Banking (DISB) is three-fold: (1) cultivate a regulatory environment that protects consumers and attracts and retains financial services firms to the District; (2) empower and educate residents on financial matters; and (3) provide financing for District small businesses.
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