It’s a unique opportunity to make outsized returns trading cryptocurrency.

Opinion

It’s a unique opportunity to make outsized returns trading cryptocurrency.

All you have to do is invest $500 — never mind the advisor offering the investment is not registered in Manitoba to do so.

<p>WAYNE GLOWACKI / FREE PRESS FILES</p><p>Jason Roy, senior investigator with the Manitoba Securities Commission (MSC).</p>

WAYNE GLOWACKI / FREE PRESS FILES

Jason Roy, senior investigator with the Manitoba Securities Commission (MSC).

After all, she represents a global company with operations in New Zealand and the UK, right?

Heck if you invest right now, the company will add in $500 of its own money to your account… just because.

Sound familiar?

If so, you’ve likely been contacted by fraudsters looking to steal your money.

And the Manitoba Securities Commission (MSC) aims to raise awareness about this growing scourge of investment fraud this November — which is Financial Literacy Month.

Called Time to Call out Fraud, the campaign involves releasing actual audio recordings of fraudsters attempting to separate Manitobans from their money (hear them all at moneysmartmanitoba.ca).

The initiative aims to address "the rise in investment scams that have occurred during the pandemic," says Jason Roy, senior investigator with the Manitoba Securities Commission (MSC).

"This is a chance to do some outreach where Manitobans can hear actual attempts."

Roy adds the audio clips are from an overseas call centre leveraging high-pressure sales tactics to push and individual putting money into a fraudulent investment.

"We have victims that range from putting in the initial $250 or $500 all the way up to $600,000." –Jason Roy

In the past scams typically revolved around foreign currency trading, but more recently they are based around cryptocurrencies like bitcoin. And they are increasingly sophisticated, he says.

Many involve fake, but highly convincing websites. They can even create accounts for victims to check their investments that often appear to double, or even quadruple in value quickly. In turn victims invest more money.

"At a certain point you try to withdraw, and that’s when you get pushback," Roy says, adding scammers will tell you foreign taxes and fees are owing to get your money released.

"Next thing you know, you’ve thrown in even more money."

Of course, victims never get their money back, and looking for the outside in, you probably wonder how anyone would fall for such malarky.

Yet many Manitobans do.

"We have victims that range from putting in the initial $250 or $500 all the way up to $600,000."

Roy adds cases annually range in the dozens in Manitoba, but it’s likely much higher.

"It’s hard to put a number on it because there is shame in reporting it, so people tend not report."

Supervisor at the Canadian Anti-fraud Centre Sue Labine says, "it’s estimated only five per cent of victims report scams," which have become more common during the pandemic "due to increased online activity with people staying home more."

Canadians lost about $15.5 million in 2020 to fraud, based on reports, but in 2021 (as of September 30) losses have surged to more than $61 million, she adds.

What investigators often hear from the victims, ranging from young adults to seniors, is how they cannot believe they were taken.

"Nobody is immune to fraud." –Sue Labine

That’s not surprising, Labine adds.

"Nobody is immune to fraud."

Fraudsters are "good at what they do" with honed scripts countering suspicions and allaying concerns, says Bill Francavilla, author of book The Madoffs Among Us, about Bernie Madoff—perpetrator of one of the largest investment frauds in history.

Madoff defrauded professionally managed endowment funds and financially sophisticated individuals of billions in part because they trusted Madoff, who was at one time the NASDAQ stock exchange chair.

Why did they blindly trust him?

Like all successful scammers, Madoff knew how to push the right buttons, stroking egos and appealing to their desire to make large returns, which in turn disarm their sense of caution.

Yet he also relied on the misconception of most people thinking they’re too smart to be scammed.

Francavilla says further points to a statement by an infamous fraud artist named Simon Lovell, now a renowned scam prevention expert.

"He’s quoted as saying, ‘I love it when people tell me that they can’t be conned, because in my mind, they’re already halfway to being conned.’"

Dr. Chi Liao, assistant professor of behavioural finance at the Asper School of Business at the University of Manitoba, says this speaks to how over-confidence can lead to bad decision-making.

"We can all over-estimate our abilities at times, and consequently our thinking may be (falling for scams) happens to uneducated people, and ‘this won’t happen to me.’"

Yet scammers use tactics designed to appeal to our intellectual ego, and a propensity to think we know more than we really do about, for example, investments.

"We can all over–estimate our abilities at times, and consequently our thinking may be (falling for scams) happens to uneducated people, and 'this won’t happen to me.'" –Dr. Chi Liao

Central to this strategy is getting us to make fast decisions.

Liao points to research by Nobel Prize winning economist Daniel Kahneman who distinguishes between fast and slow thinking.

"If we’re forced to do something very quickly, we use reflexive decision making." She adds that often is based on many unconscious assumptions, which may be false—like we’re too smart to be scammed or we are more knowledgeable about investing than we truly are.

Yet if we slow down, we’re more likely to challenge our thinking and recognize red flags (i.e. high returns with little or no risk).

In other instances it’s our ego hooking us. It’s a yearning to get off the phone.

But the social norm of reciprocating kindness and politeness to someone who is being kind and polite to us often prevents us from saying ‘no’ and hanging up, Liao says.

That norm also applies when scammers announce they will add their money to your account if you invest, she adds.

In turn, some victims have invested a small amount just to get off the call, Roy says.

"Most people don’t want to disappoint others."

But don’t be so, well, Canadian: just say no, and do hang up.

Before you do, however, Roy does have one request.

"If you’re in that situation, you can help us by getting as much detail as you can" (albeit without getting sucked into the scam).

Then call 1-855-FRAUD-MB, Roy says.

"The only way we can combat this is by people reporting it."