Beware Cloned Company Scams – Fake Investments

The Growing Trend Of Large Scale Investment Scams

A SCARS Insight

Don’t Fall Victim To Fraudulent Investment Opportunities

Portions courtesy of ActionFraud

Investment scams can be hard to spot. Every year, victims lose thousands of pounds to criminals imitating genuine investment firms by clicking on adverts that lead them to fraudulent websites designed to replicate the page of a real investment firm. These imitation websites are known as “cloned companies”.

We are working with the National Economic Crime Centre to warn the public about the increasing number of bogus investment websites, as new figures reveal:

• In the first six months of 2021, £36.2m was lost to ‘cloned company’ investment scams.
• In the first six months of 2021, 1,100 reports were received, equating to an average loss of £47,000 per victim, when investing money in cloned companies.
• Numbers for the United States are not available.

What is a cloned company? And how do they target your savings?

They are set up by fraudsters using the name, address, and use the registrations numbers of real companies authorized by the country to conduct these types of businesses.

Fraudsters may misappropriate the name, address, registration number, logo, photo, or website likeness of a currently or previously registered firm or investment professional. They try to trick investors into believing that they are registered by using a number of tactics, including the following:

• “Spoofed Websites.” Fraudsters may set up websites using URL addresses or names similar to those of registered firms or investment professionals to trick investors into believing that the fraudsters are registered or that the fraudsters are affiliated with a registered firm or investment professional.
• Fake Profiles on Social Media. Fraudsters may set up profiles impersonating registered investment professionals on popular social media platforms and then message investors to solicit their money.
• Cold Calling. Fraudsters may set up boiler rooms with teams of people cold calling investors to solicit their money while claiming to be employees of registered firms. The fraudsters may use technology to make it appear they are calling from the firm’s location.
• Misrepresenting or Falsifying Documents. Fraudsters may recruit investors by misrepresenting that their firm was registered with the SEC, including pointing to the firm’s Form D filings to support the misrepresentation (to learn more, read this OIEA Investor Alert). Fraudsters may solicit investors by impersonating a registered investment professional and generating a fake version of a public report using the professional’s name and CRD number (to learn more, read this FINRA Investor Alert).

Registrations

• U.S. clone companies: Fraudsters may falsely claim to be registered with the Securities and Exchange Commission (SEC), the Financial Industry Regulatory Authority (FINRA) or a state securities regulator in order to lure investors into scams, or even impersonate real investment professionals who actually are registered with these organizations.
• UK Clone Companies: They are set up by fraudsters using the name, address, and ‘Firm Reference Number’ (FRN) of real companies authorized by the Financial Conduct Authority (FCA).
• Other Countries: they will be likewise stealing the information from real companies in those countries, along with their registration information. But always check for their registration and the legal address and contact information to compare it with what is in front of you.

Registration of Investment Professionals

Many sellers of investment products or services in the U.S. are either brokers, investment advisers, or both. Most brokers must register with the SEC and join FINRA. Investment advisers that provide investment advice to retail investors generally must register with the SEC or the state securities regulator where they have their principal place of business.

To quickly and easily check if someone offering you an investment is currently licensed or registered, use the search tool on Investor.gov. Once you confirm that the seller is licensed or registered, make sure you are not dealing with an imposter. Contact the seller using the contact information you verify independently – for example, by using a phone number or website listed in the firm’s Client Relationship Summary (Form CRS) – rather than relying on contact information the seller provides you. To ensure you are looking at a genuine copy of the firm’s Form CRS, follow these steps:

1. In the “Check Out Your INVESTMENT PROFESSIONAL” search box on Investor.gov, select “Firm” from the drop-down options and type in the name of the firm.
2. In the search results, click on the relevant firm and then click on “Get Details.”
3. Click on “Relationship Summary” or “Part 3 Relationship Summary.”

For additional information about Form CRS, visit investor.gov/CRS.

Remember, that each country has different laws and registration requirements. When in doubt contact your country’s securities and investment regulatory body.

Do your homework and do not rush it! Scammers know how to apply the pressure so you will not verify them!

The criminals running these scams engage with victims through a number of channels.

Often they take out adverts on social media platforms and search engines designed to attract people to click on them by highlighting enticing offers of high returns.  The returns being promised by these criminal gangs are often modest so as not to arouse suspicion, but slightly better than the market rate, therefore appealing to those looking for long-term, ‘safe’ investments.

Once a person clicks on the advert they are taken to an exact replica of a website belonging to a legitimate investment firm. The most sophisticated criminals will even clone the website domain name (i.e. the unique address registered to that site). Once victims have registered their interest, they’ll be contacted by the offenders, who often obtain the names of genuine employees at investment firms and create seemingly legitimate company email addresses, but with very subtle changes such as one substituted letter.

There have also been instances of investors inputting their contact details into popular price comparison websites and then being phoned by criminals claiming to be from a well-known, legitimate investment firm. Another tactic used by these criminals to target investors involves sending victims sales materials linking to websites of legitimate firms.

Eventually, given false confidence by the various tactics used by cloned company scammers, victims will end up transferring their savings directly to criminal gangs under the false belief that they are sending them to a legitimate investment firm. Often, victims will not realize that they’ve been scammed until months later, when they fail to receive quarterly returns or investment reports.

Watch Out for Red Flags

Regardless of whether someone claims to be registered with the SEC, beware if you spot these warning signs of an investment scam:

• Guaranteed High Investment Returns. Promises of high investment returns – often accompanied by a guarantee of little or no risk – are 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 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. 

How to protect yourself

1. Reject unsolicited investment offers whether made online, on social media or over the phone. Be cautious when dealing with large sums of money, even if you initiated the first contact.
2. Always check the Corporations registry for your country, state or province. In the UK it is the FCA Register to confirm the contact details provided to you by the firm. If the website, email, and telephone number don’t match, don’t invest. Look out for subtle differences such as letters replaced with numbers (e.g. S and 5, O and 0), additional words or spelling errors. Make sure you’re dealing with an authorised form, but remember these are public registers which fraudsters can also take information from to sound legitimate.
3. Check the FCA Warning List of firms to avoid.
4. If you have visited a website, you think is suspicious, report it to the National Cyber Security Centre, using their quick and easy referral tool.
5. Consider seeking impartial advice before investing.

Reporting These Scams

Worldwide: you can report all of these scams to the U.S. Federal Trade Commission and they will distribute these reports as needed. Use this link for increased visibility and attention https://reportfraud.ftc.gov/#/?orgcode=SCARS

In the United States: Report possible securities fraud to the SEC at www.sec.gov/tcr. Report online fraud to the FBI’s Internet Crime Complaint Center at https://www.ic3.gov. The SEC maintains a list of Impersonators of Genuine Firms. This list is not exhaustive – firms may be impersonated even if they are not on the list. FINRA staff issued an article about imposter schemes.

In the United Kingdom: If you think you’ve fallen victim to an investment fraud, report it to Action Fraud as soon as possible online at http://www.actionfraud.police.uk or by calling 0300 123 2040.

More Information

More information about online frauds and investment scams can be found at www.fbi.gov or Investor.gov, the SEC’s website for individual investors.

You can contact the SEC’s Office of Investor Education and Advocacy (OIEA) by phone at 1-800-732-0330, using this online form, or via email at Help@SEC.gov.

Receive Investor Alerts and Bulletins from OIEA by email or RSS feed. Follow OIEA on Twitter @SEC_Investor_Ed. Like OIEA on Facebook at facebook.com/secinvestoreducation.

Are you a pensioner in the U.K. looking to invest your pension or lump sum early? Please see our dedicated pension fraud advice page on how to protect yourself from pension fraud.