The following are just some examples of common financial frauds. However, it is important to remember that perpetrators of fraud are constantly designing new ways to target their next victims. For this reason, you should remain vigilant and consider the possibility of fraud, even if the circumstances do not exactly fit one of the below examples. You should also keep an eye out for notices or warnings issued by your local regulator, exchanges or other market participants regarding patterns of fraudulent activity.
Clone Firm Scams:
Scammers may pretend to be from a legitimate firm to get you to transfer money to their account. In some cases, scammers may pretend to represent or be part of a reputable financial services company, including Interactive Brokers. The purpose of a Clone Firm Scam is to get you to transfer your money to an account that appears legitimate but which in fact belongs to the fraudsters.
These scams may involve the fraudster using a reputable firm's logo or letterhead, adopting names that resemble those of the reputable firm, or even using names and addresses of persons who are associated with the real firm.
Be wary of cold calls or emails you receive requesting money from you. Check to make sure all emails use the firm's real domain name (for IB, interactivebrokers.com, interactivebrokers.co.uk or interactivebrokers.ie). Be especially careful of any unprompted interactions through social media platforms; Interactive Brokers may promote its general products and services on social media but it will never interact with you through these channels in relation to your account. If you are unsure whether a communication is legitimate, please contact IB Client Services.
Watch out for Red Flags!
Here are some red flags you should watch out for, if contacted by someone claiming to work for IBKR or otherwise be affiliated with IBKR:
Check and Double Check!
If you are contacted by someone claiming to work for a regulated firm, remember:
Pump-and-Dump or Ramp-and-Dump Schemes: In these schemes, scammers invest in a stock and then spread false or misleading information to create a buying frenzy that will artificially "pump" up the price of a stock. They then "dump" their own shares at the inflated price and stop hyping the stock, leading other investors to lose money as the stock price fails. Those recommendations may be presented as 'hot' information, from people in 'the know' and made available to you due to some privileged or special status.
Scammers often take full advantage of new technologies to spread false or misleading information about a company's stock price. For example, trading "recommendations" are frequently spread through messaging apps, social media platforms and/or web blogs.
Interactive Brokers has published further information relating to the increasing trend of Ramp-and-Dump Scams in this disclosure.
Trash-and-Cash Schemes: These are the opposite of pump and dump schemes. In Trash-and-Cash schemes, scammers circulate false information to encourage people to believe that a relatively illiquid security is likely to plunge in value and should be sold. When those who see this information sell the security, the price plummets and the scammers then swoop in to buy it up at a low price.
Retirement Account Scams: Retirement account disbursements are commonly accessible once a minimum age has been reached. Early access is normally possible but often leads to early withdrawal penalties. With this scam, fraudsters promise "penalty free" early access to retirement benefits through alleged tax loopholes and use complex schemes to erode retirement accounts through commissions, investments, etc.
Affinity Fraud: Scammers who carry out affinity scams frequently are (or pretend to be) members of the group they are trying to defraud. Scammers exploit their victim's age, religious, ethnic, sexual, or professional identity to gain their confidence knowing that it's human nature to trust people who are like you. Affinity fraud almost always involves either a fake investment or an investment where the fraudster lies about important details (such as the risk of loss, the investment's track record, or the scheme promoter's background).
Many affinity frauds are Ponzi or pyramid schemes, in which money given to the promoter by new investors is paid to earlier investors to create the illusion that the so-called investment is successful. Eventually, when the supply of investor money dries up and current investors demand to be paid, the scheme collapses and investors discover that most or all of their money is gone.
To protect yourself against affinity fraud, always carry out your own research and due diligence before entering into arrangements to accept investment advice or services. In particular, you should always verify the credentials of the person or company offering the service and confirm whether they are regulated to carry out that activity by checking the register of your local regulator.
Holy Grail Scams: Scammers are well aware of the attraction of a 'holy grail' trading system that will generate profits 24/7/365 with no risk or losses. One common tactic is to market a secret formula or strategy that promises extraordinary returns. Be aware of extravagant claims and testimonials that seem too good to be true. They usually are!