Investing in stocks and shares is a dangerous and lucrative business, but if you do it wrong, you could face the risk of becoming an investment scam victim. Pump and dump schemes involve fraudulent companies that promise once-in-a-lifetime profits. Scammers lure unsuspecting victims into investing in their stocks by telling them that the stock value will increase dramatically as more investors buy it and sell it. Eventually, the prices crash and the investors are left with worthless shares.
One common trick used by con artists is to contact investors by phone, email, or social network. They may use a mobile phone number or a PO Box address, claim to offer high returns, or even claim to have low risks. The Financial Ombudsman Service and Financial Services Compensation Scheme (FSCS) rules do not cover these scams, as they are unregulated. These regulations only apply to mainstream products like stocks, bonds, and mutual funds. Unlike a regulated company, an investment scam can spread through many people.
A typical investment scam involves contacting potential investors after a period of time. The scam artist may tell the investor that their investment has been lost and offers to recover it for a fee. Then, they ask for money, which usually means losing all of your money. While these scams aren’t entirely illegal, they may seem legitimate at first glance. While they may look legitimate, these investment scams often use celebrity endorsements and testimonials from wealthy investors to convince you to invest in their programs.