Brokers

BBB warning of fake investment brokers

WORCESTER, Mass. (WWLP)– The Better Business Bureau (BBB) of Central New England is warning consumers about scammers posing as investment brokers.

A woman from Worcester recently lost $20,000 after someone claiming to be a broker at a local firm stole her money. The scammer had stolen the identity of a legitimate broker at a well known national financial business, using a copycat website, setting up an account and providing a contract.

The victim was searching for investment opportunities online and found the name and contact information for the broker, and upon investigation found the broker had good reviews and a website that looked real. She deposited $20,000 in an online “wallet” to invest in cryptocurrency.

Ultimately, the scam broker stopped contact with the victim and she no longer can access her money. Additionally, the broker whose identity was stolen now has her reputation tarnished.

The victim contacted the BBB to investigate. The BBB contacted the real company and learned from the security team that registered brokers are required to publish their information making them targets for scammers. The thieves use social media to advertise, including on legitimate online how-to investing videos. The security team said that that the Financial Industry Regulatory Authority (FINRA), the FBI and the U.S. Securities and Exchange Commission are experiencing a rise in investigations of this type of crime.

The BBB says to be aware of the warning signs before investing with someone online including how they communicate. Some are using social media accounts instead of a legitimate company account. There also may be mistakes in spelling and grammar denoting poor English skills, as well as wording that sounds scripted.

The FBI and the U.S. Securities and Exchange Commission’s Office of Investor Education and Advocacy recently put out an investor alert with these warnings to watch for:

  • Guaranteed High Investment Returns. Promises of high investment returns – often accompanied by a guarantee of little or no risk – is a classic sign of fraud. Every investment has risk, and the potential for high returns usually comes with high risk.
  • Unsolicited Offers. Unsolicited offers (you didn’t ask for it and don’t know the sender) to earn investment returns that seem “too good to be true” may be part of a scam.
  • Red flags in Payment Methods for Investments.
  • Credit Cards. Most licensed and registered investment firms do not allow their customers to use credit cards to invest.
  • Digital Asset Wallets and “Cryptocurrencies.” Licensed and registered financial firms typically do not require their customers to use digital asset wallets or digital assets, including so-called “cryptocurrencies,” to invest.
  • Wire Transfers and Checks. If you pay for an investment by wire transfer or check, be suspicious if you’re being asked to send or to make the payment out to a person or to a different firm, the address is suspicious (for example, an online search for the address suggests it is not an office building where the firm operates), or you are told to note that the payment is for a purpose unrelated to the investment (for example, medical expenses or a loan to a family member). If you wire money outside of the United States for an investment that turns out to be a scam, you likely will never see your money again. 

FINRA offers these tips to prevent becoming a victim of broker imposter scams:

1. Go to the source. FINRA encourages investors to “ask and check” by using BrokerCheck before investing with an investment professional. Don’t assume that the information you receive is legitimate. Go directly to the sources that collect the regulatory information to produce these reports, including FINRA’s BrokerCheck, the SEC’s Investment Adviser Public Disclosure, and state registration databases. You can search both professionals and firms not only by name, but also by their registration number—known as a CRD number.

2. Look for things that appear out of place. Compare whatever BrokerCheck report or other documentation you receive from an individual or firm soliciting your business with the real reports you obtain yourself from BrokerCheck or the sources above. Be wary of typos, and look for differences in the reports. For instance, in a recent scam, the doctored information was in fonts that were different from fonts used in other parts of the report, items appeared to be pasted into the document, and the state of the branch office address was not included in the list of states where the individual was licensed.

3. Verify information with an internet search. Take a few moments to use a common search engine to type in the name of the individual who is soliciting your business and the firm name, and see what comes up. Does it match the information provided to you, including the contact information? If something doesn’t look right, do a little more digging, including a map search on the address or a reverse lookup on the phone number. Be sure to check all this information against a reliable source such as BrokerCheck, where you can verify whether the phone number or website listed in the firm’s Client Relationship Summary (Form CRS) matches. When scanning LinkedIn profiles, be aware that scammers often copy select information from a registered person’s LinkedIn profile to create the appearance of legitimacy.

4. Do not send money or personal information without verifying the recipient. Don’t ever send money or personal information, such as your driver’s license, passport, social security number, date of birth, or bank account information, until you verify who contacted you.

5. Beware of the use of personal contact information. Sometimes a scammer will ask you to send money or personal information to a personal (rather than a firm’s) email address or to respond to phone numbers that are not listed as official firm contacts. One general rule all investors should follow: if you invest through an account at a financial firm, use BrokerCheck to verify that the firm is registered and send all deposits directly to the financial firm. If an individual pitches an investment opportunity that requires you to write a check directly to him or to a third party, proceed with caution.

6. Be alert to the red flags of fraud. Be cautious of guarantees, unregistered products, overly consistent or high returns, complex strategies, missing documentation, account discrepancies and pushy salespeople. The vast majority of investment professionals are trustworthy individuals, but there are always exceptions who might look to take advantage of your trust. Practice spotting the persuasion tactics that con artists use, and always exercise healthy skepticism. For instance, be wary of sales pitches that make exaggerated claims about performance. This is a red flag of fraud.

Where to report a scam: 

  • Better Business Bureau — Report a scam online at BBB.org/scamtracker.  
  • Federal Trade Commission (FTC) — file a complaint online at reportfraud.ftc.gov or call 877-FTC-Help.  
  • Internet Crime Complaint Center (IC3) — file a complaint online at ic3.gov/complaint
  • U.S. Securities and Exchange Commission — SEC.gov/tcr 

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