BOW VALLEY – Online investment scams among young Albertans are on the rise, according to the Alberta Securities Commission (ASC).
Statistics from the ASC – the regulatory agency responsible for administering the province's securities laws – show incidents of fraud are decreasing among older Albertans, but on the rise for people under 35.
During the pandemic, more Albertans are working from home than ever before. The novel coronavirus has created economic and market volatility around the world, resulting in uncertainty and vulnerability leading many to search for alternative incomes such as day-trading in financial markets and cryptocurrency exchange.
Because of this, an environment has been created in which scam artists can intensify their efforts and target Albertans.
“We know there is a desire to make money quickly, especially given the higher rates of unemployment throughout Alberta,” said Hilary McMeekin, the director of communications and investor education with ASC, in a media release.
Statistics Canada’s February 2021 Labour Force Survey saw Alberta’s unemployment rate drop to 9.9 per cent, the lowest since March 2020.
The ASC's Take Some Time campaign encourages young investors to do their research before parting with their hard-earned money. It has also developed an Excuse Bot, a response generator that provides tongue-in-cheek explanations for those trying to get out of pressing situations they’re unsure of, since many fraudsters use “now or never” urgency to trick people into investing funds.
“We wanted to create a campaign that was about leading with humour and empowering young people to do their research before they jumped into investment opportunities,” said McMeekin in an interview.
The CheckFirst website additionally connects investors with unbiased resources to make informed investment decisions.
“Whether it's online or in-person scams, oftentimes there's lots of pressure because they don't want you to take the step to do your research because then you might find out that it's not a legitimate investment opportunity,” she said.
The Alberta Provincial Rural Crime Watch Association indicated there were 69,411 reports of fraud by Canadians, 41,007 victims, and over $107 million lost to fraudulent scams in 2020.
Many aggressive stock promotions have been done through unsolicited email or social media, but marketing delivered through the mail also carries similar risks. False investment ads claim to offer training on trading stocks or forex (foreign exchange) for a fee. They state traders can keep a large percentage of the profits, get high return rates with little or no risk, and no experience or licence is needed.
“Neither day trading or foreign exchange are that simple, they're complicated, and they do take experience and they do take training,” said McMeekin, adding people offering investments in Alberta must be registered with the ASC.
Classic "plays" by fraudsters include connecting through social media or claiming to be contacts through friends, associates, or family members, also known as affinity fraud. They might entice others to invest by flaunting wealth and success while talking about how it was achieved, or create a sense of urgency to make the offer more attractive.
Fraudsters might followup or cease communication – what’s known as “ghosting” – after they’ve promised payment at a later date. They may followup with a “recovery act," offering to reclaim the investment for a fee before disappearing yet again.
Fraudsters take advantage of global events and breaking news to lure potential investors, building on the hype with expectations of significant returns.
A common way is through pump-and-dump schemes involving publicly traded small "shell" companies. They "pump" up the investment to get investors to buy in, then "dump" stock before the hype ends, resulting in a substantial payout for themselves while remaining investors lose their money.
“There are lots of legitimate businesses doing good work in this area, but this is why taking the time to do the research [is] so important because you'll start to see the ones that are legitimate,” said McMeekin.
“One of the habits is really understanding yourself, what you're investing in [and] what's driving you to invest. So, are you saving for something in particular? What's your time horizon and what's your risk threshold?”
Three in five Albertans never checked the background of their financial advisor, according to a 2018 Alberta Investor Study by ASC.
The commission also raises awareness about “do it yourself” investment sites, which can make it easy and affordable for young people to enter the stock market and are often promoted on social media.
“Our observation would be lots of people consider research to be reading chat room discussion. Certainly, there's lots of commentary on those, but we encourage taking the step to actually look into the company, or whatever it is that's being marketed,” said McMeekin.
The 2020 Canadian Securities Administrators Investment Index Report lists 48 per cent of Canadians exhibiting low knowledge of investing, and only 38 per cent could recognize warning signs of fraud.
Roughly one in five Canadians say they’ve been approached with a potentially fraudulent investment, per the report’s 2017 findings.
When asked if they’ve been approached about a possibly fraudulent scam, 23 per cent of Albertans between 18 and 30 said yes and almost half saw investment opportunities advertised on social media.
“We're excited to see young people getting interested in investing earlier in their lives. It's about learning the right habits and the right steps to take, no matter what age you're at. But if you're younger, learn those important steps now so that you can practice it throughout your life,” said McMeekin
More than two-thirds of respondents did not report to the authorities when they realized an investment opportunity was fraudulent. One in five respondents felt reporting a fraud is not worth it.
McMeekin noted in the past, the ASC has collaborated with online platforms such as Kijiji to remove suspicious ads.
In June 2020, the Banff RCMP experienced increased reports from residents concerning phone calls from individuals claiming to represent the Canada Emergency Response Benefit, Service Canada, and other government groups.
Canmore RCMP Sgt. Stanton Andronyk said phone-based scams remain prevalent, but there has not been a noticeable increase in online fraud reported in the Bow Valley, nor any to do with cryptocurrency as a factor.
Andronyk gave similar recommendations to those of the ASC that anyone should verify their investments and be extremely protective of their resources and information online.
Additional safe measures include the use of strong and unique passwords for different online accounts, using multi-factor authentication to secure accounts and authorize transactions, and understanding the difference between "hot" and "cold" wallets. Hot wallets are connected to the Internet and cold wallets are not.
“On the one hand, you are in control of your virtual assets where on the other hand, you may be exposing your cryptocurrency to the risk of theft and/or relying on a third-party exchange to manage your virtual assets,” per a release by Canadian Anti-Fraud Centre (CAFC).
People who believe they've been a victim of fraud can contact the CAFC at www.antifraudcentre-centreantifraude.ca or at 1-888-495-8501. Suspicious investments can be reported to the ASC at firstname.lastname@example.org or 1-877-355-4488.