Scammers prey on those looking for an additional source of income to augment their earnings or to grow their nest egg and secure their future. They offer investment deals that guarantee huge profits for doing almost nothing. Some may be skeptical or cautious and initially invest just a small amount to test the waters. But once they get a taste of the quick profit, greed kicks in and they invest more or go all-in. In their desire to earn quick money, some investors obtain loans from relatives, friends and other sources, and invest the money loaned in these scams. Greed is contagious so friends and relatives also tend to join in the frenzy and the scammers reel them all in and then disappears. Time and again, the Securities and Exchange Commission issues warnings to the public. “The public must be wary that any promise of massive rates of return with little or no risk is an indication of a Ponzi Scheme where monies from new investors are used in paying fake ‘profits’ to earlier investors and is designed mainly to favor its top recruiters and prior risk takers and is detrimental to subsequent members in case of scarcity of new investors.” The SEC added that, “It must be clear that entities engaged in such activities likely tend to disappear shortly to the prejudice of their stakeholders.” But many choose to ignore this warning, dazzled by these get-rich quick schemes. This is more pronounced during the pandemic when people became more aware of the need for financial security and look for ways to grow their savings while most traditional businesses were struggling or shut down. For 2020, SEC issued a record-high 123 advisories cautioning the public to avoid or stop engaging with certain entities involved in fraudulent investment schemes, almost double the total number of advisories issued in 2019. Of this total, 38 advisories against unauthorized investment scheme were issued during the ECQ period alone. For this year, the SEC has already issued 12 advisories as of this week. The SEC revoked six corporate registrations for serious misrepresentation and issued nine cease and desist orders against unauthorized investment schemes last year. It is also prosecuting 32 individuals charged in seven cases for violations of the Securities Regulation Code, and in two cases for violations of the Cybercrime Prevention Act. Scammers are quick to adapt to changes brought about by the pandemic and most are now being perpetuated online as people stay at home and thus limit the ability to agents to seek out potential victims in public places. Since the scammers have gone digital, their operations are no longer limited to certain cities or provinces as the internet has allowed them to spread further as they are no longer bound by borders. Most, if not all of them, have been promoting their schemes and recruiting people on social media.
The internet, coupled with the accessibility of money transfer and payment services, has allowed investment scammers to target more people across and even outside the country. Tell-tale signs of scams include a promise of high or ridiculously high rates of return, a guarantee of payment at no risk, and the investment scheme is difficult to understand and the investor is mostly in the dark how their investments are supposed to earn. While these will entail good judgment, some signs are easily verifiable such as the fact that the company is not registered with the SEC, it does not have the necessary licenses to sell securities or investment plans, and it has no office so transactions are online and through social media platforms. Investment scams always come with the promise of quick and easy money. Thus, the best way to tell if it is legit or not is to apply an old adage: If it’s too good to be true, it probably is.