The SEC’s Office of Investor Education and Advocacy (OIEA) and Retail Strategy Task Force (RSTF) want Main Street investors to be aware of tactics fraudsters use to lure investors into scams. This Alert presents actual videos that defendants in SEC enforcement actions allegedly used as part of their investment frauds.
Two simple steps can help protect you from being swindled in an investment scam:
- Check the background of anyone selling or offering you an investment and confirm that the person is currently registered or licensed. It only takes a few minutes using the free and simple search tools on Investor.gov. Before you hand over any money or share your contact information, verify that the person is currently registered or licensed and find out if he or she has a disciplinary history. Investors can also use SALI to find information about certain people who have had judgments or orders issued against them in SEC court actions or administrative proceedings.
- Look out for common tricks that con artists use to attract investors. Fraudsters use different means, including through promotional videos, social media, email, phone conversations, and in-person meetings, to lure victims into scams. If it seems too good to be true, it probably is. Here are a few examples of actual videos used to cheat investors out of millions of dollars (as alleged in SEC v. Atkinson and SEC v. Montano):
- Get Rich Quickly and Easily. One of the most common gimmicks con artists use is to promise investors that they will make a lot of money in a short period of time – that they will “get rich quick.” Con artists may trick investors into believing that they will make tons of money with little or no effort (for example, for purchasing products or for performing trivial tasks, such as clicking on digital ads each day). This tactic often uses images of lavish lifestyles and luxury items to create the illusion of future riches (for example, wealth, fancy cars, mansions, yachts, vacations, etc.).
In this deceptive video, people claim they made extraordinary amounts of money that made their dreams come true by simply clicking a button on an app every day.
Viewers of this deceptive video are invited to become a member of a "Secret Millionaire Society" complete with mansions and luxury cars.
- Urgency. Con artists often claim an investment opportunity will be gone tomorrow. They create a false sense of urgency so investors turn over money “right now,” without researching the investment. They may trick investors into believing that the investment “opportunity” is limited to a certain number of investors who can get in on it or has a deadline triggered by an event that will soon occur. Some promotional videos may impose a deadline or feature a fake countdown (for example, “only 12 spots left…11…10…9….”).
An actor in this deceptive video claims, "We give a short window of just 10 minutes…between the time the links are clicked…until we remove the buy button. And we accept only 10 people per day. If those slots are gone, you will know that because you will see NO button below. But if you DO see a button below…It’s available…but you may just have seconds left to get it."
In this deceptive video, viewers are enticed to cash in before the opportunity goes away.
- Fake Testimonials. Con artists may pay people to post fake online reviews or appear in videos falsely claiming to have gotten rich from some investment opportunity. Even testimonials that appear to be independent and unbiased reviews – for example on a website purporting to “review” products and investment opportunities – may be part of the scam.
The narrator in this deceptive video claims he is "for real" and his bank account grew by $8,500 the first day.
This deceptive video includes purportedly ordinary people who claim that they became millionaires in just 3 months. The SEC’s complaint in SEC v. Atkinson alleges that the narrator and purported millionaires in this video are paid actors.
Never rely solely on testimonials in making an investment decision. Also, depictions of skyrocketing investment accounts often are fake. The potential for high investment returns usually involves high risk. Promises of high investment returns, with little or no risk, are classic warning signs of fraud.
Don’t be hoodwinked if someone tries to use these lines on you. If you suspect that someone is trying to rip you off with an investment scam, protect yourself and others – report it to the SEC.
Visit Investor.gov, the SEC’s website for individual investors.
The Office of Investor Education and Advocacy has provided this information as a service to investors. It is neither a legal interpretation nor a statement of SEC policy. If you have questions concerning the meaning or application of a particular law or rule, please consult with an attorney who specializes in securities law.