Trading Scams

What is a trading scam?

It might sound funny but some people are really desperate for money. The easy money route is to make money quickly by selling fake stock shares to unsuspecting investors. Sometimes investors will be asked to pay an upfront fee to buy a share, and when they realize they are getting scammed, they try to get their money back. Unfortunately, the scammer might not have enough money to refund them. If the victim is willing to take further losses by selling their fake stock shares to buy back their stock, the scammer might be forced to sell the fake stock shares to make up for his losses. This means the person who gave out the bogus share details will also end up losing all of their hard-earned money.

How do I avoid trading scams?

You must be really careful before you make any purchase of stocks. Scammers will take advantage of the desperation of you and your family members and friends by peddling securities to them for a song. For instance, you could be contacted by a distant relative who claims that he has bought in a certain stock at a bargain price. You are a sucker. To avoid falling for such tricks, you must research the stock company before making any purchase.

There are online portals that have been specially designed to help you invest in the stock market. You must have heard of the Stock Exchange or NASDAQ. Most online stock trading portals have a section that explains the purpose of the stock market and how to become a successful investor.

What to do if I’ve been scammed?

The first thing you should do is report the trader to the SEC or your local Securities and Exchange Commission (SEC). You will get a contact number which you should dial immediately. The next step is to make sure that you keep a close eye on the trade details. If the transaction is not as the seller promised, make a police report. Here are some signs that you may have fallen prey to a trading scam.

Bought bogus stocks: A financial trading scheme that involves phony stocks is the most common form of trading scam in Nigeria. The buyer is usually promised huge profits for a tiny initial investment. The fraudsters will create bogus stocks that will be repackaged and resold. You can almost immediately discover that the stock is a scam.

How can we identify a trading scam?

Trading scams tend to operate on the basis of trust. The perpetrators use small, insignificant businesses to perpetrate the scam and get people to sell their shares.

Vendors of such firms who are not authorised or licenced to sell or trade securities and do not have the required licences and authorisations;

Business owners that do not have the capacity or willingness to bear the cost of protecting customer’s money and investing, and

Business owners that are not financially sound or truthful in their dealings.

Generally, trading scams follow three easy steps. The first is by suggesting that the investor can buy shares in these businesses on low-cost or even free. They also start with limited upfront capital or minimum purchase requirement.

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