What Red Flags Should You Watch Out For to Spot an Imposter?
Often, these fraudsters lure investors into scams by claiming that they are registered with national or state securities regulators. There are various tricks they use to prove they are registered that you should watch out for, including, but not limited to:
- Fake social media profiles
The current social media infrastructure lacks appropriate measures to verify details provided when creating a social media profile. This creates a loophole that allows scammers to impersonate honest brokers and scam people online.
- Misrepresentation and falsification of documents
Scammers often falsify documents such as the Form D filings, public reports, and CRD numbers to prove their registration.
- Website Spoofing
This tactic involves creating a replica of the trusted website by using names and URLs similar to that of the registered organization or professional.
- Incorrect contact information, service area, or physical location
Since it is an imposter agent, the contact information provided in the firm’s official registration documents will not match the details the broker offers. You should compare critical information such as services offered, charges, conflict of interests, and contact information, including phone numbers and physical location. Comparing the information shared by the broker versus what is available on the government platforms or firm’s official websites or social media can help identify any inconstancies.
- Use of boiler rooms
Boiler rooms are large-scale schemes that involve teams of people cold calling investors or soliciting them through emails, text messages, or social media. Look out for aggressive threats, unsolicited offers, promises of high returns with no or minimal risks, and pressure to buy or invest quickly.
What Are the Best Practices to Avoid Brokerage Imposter Scams?
In addition to looking out for the red flags identified above, there are various practices you can engage in to avoid imposter scams.
- Do not solely rely on social media to gather information about a broker
Combining online and offline strategies can help ensure that you deal with the registered broker and not an imposter. For example, gather information online but conduct the actual transaction offline from the physical location identified in the firm’s registration information.
- Compare contact information across platforms
Verify the contact information provided by looking for business addresses, emails, and phone numbers in multiple sources, including the websites, social media pages, or any other business listings, to ensure that the details match.
- Call the brokerage firm to confirm
If you notice something suspicious or in doubt, call the agency the brokers claim to represent using the official contact information provided on the firm’s website or government sites.
- Always request the official license number
Honest brokers with nothing to hide will give their license numbers for verification. Do not engage in any transaction until you confirm working with a licensed agent or firm.
The internet and social media platforms are critical communication tools. However, always ensure a thorough review of a broker’s information before completing any transaction to avoid falling victim to these brokerage imposter scams.
Now that you have learned about various red flags and best protection practices keep an eye on our Medium blog for more financial tips and all things crypto-related. For a safe experience trading cryptocurrencies, join Your Friendly Crypto Exchange.
Disclaimer: The content of this article is not investment advice and does not constitute an offer or solicitation to offer or recommendation of any investment product. It is for general purposes only and does not take into account your individual needs, investment objectives and specific financial and fiscal circumstances.
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