TDCI Raises Awareness About “Other People’s Money” Investment Scams
NASHVILLE – Securities regulators have seen a rise in schemes where scammers target victims with the promise of making big returns by trading “other people’s money.”
To help raise awareness of these scams and protect Tennessee investors, the Tennessee Department of Commerce & Insurance (“TDCI”) Securities Division is cautioning investors about this growing online scam and encouraging them to learn the red flags of these schemes.
“Scammers who claim to be offering an opportunity to invest with ‘other people’s money’ are, in fact, after their victims' money, private information, and identities,” said TDCI Assistant Commissioner for Securities Elizabeth Bowling. “Investors should always be extremely cautious when approached with unsolicited investment opportunities from strangers. If Tennessee investors have questions about an investment, I urge them to contact our team online at tn.gov/securities or by calling 800-863-9117.”
How Other People’s Money Scams Work
This scam frequently occurs online, with the scammer posting an investment opportunity on a social media platform or reaching out to recipients via a messaging application.
Scammers offer the opportunity to make lots of money by trading stocks, foreign currencies (commonly called “forex”), or cryptocurrencies, frequently through a “proprietary trading platform” that supposedly uses special artificial intelligence or some other computer algorithm to make all of the trading decisions. In reality, there is no proprietary trading platform or algorithm directing trades. This part of the scam is designed to lure people who may not have any trading or investing experience.
Then the scammer pretends to offer access to other people’s money to trade in exchange for a small up-front fee, usually ranging from a few hundred to several thousand dollars. This is accompanied by the promise that the investor will get a percentage of the profits generated from the trading platform, which are always projected to be exponentially more than the up-front fee. The scammer may also
ask the investor to fill out an “application” which requests personal and financial account information. Once the scammer has this information, they may steal the identity of, or additional funds from, the investor.
As the scheme progresses, communications break down and eventually the scammers disappear, leaving the investors with lost money and lots of questions.
A link to a blog post about these scams can be found here.
Learn the Red Flags
- A stranger contacts you or posts an online advertisement about opportunities to make money through proprietary trading in stocks, forex, or cryptocurrency;
- The message comes from a number you do not recognize or contains more than ten digits (i.e., originates from outside the U.S.);
- The person offers you access to trades using other people’s money in exchange for an up-front fee;
- The person asks you to complete an application requesting your personal and financial account information; and,
- The person requests that the up-front fee be made in cryptocurrency or on a mobile cash transfer app. These transfers can be difficult for regulators and law enforcement to trace, especially if the money is transferred outside of the country or the cryptocurrency wallet is anonymized.
How to Protect Yourself
- Do not use investment strategies or programs that you do not understand.
- Do not respond to unsolicited messages you receive offering too-good-to-be-true investment opportunities.
- Do not provide any personal or financial account information to anyone you do not know or whose identity you cannot verify.
- Before you send any money, contact your state or provincial securities regulator to verify whether the person offering the investment opportunity is registered to offer securities or provide investment advice. In Tennessee, investors can contact TDCI’s Securities Division at tn.gov/securities or 800-863-9117 for more information or if you suspect a securities fraud has occurred.
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