Fake Investments: How You're Tricked into "Stocks" and "Bonds"

The financial market is one of the most dynamic and diverse areas of the economy. However, like any other field, it attracts fraudsters. In recent years, securities fraud, such as with stocks and bonds, has become a real problem. Skillful manipulations and deceptive schemes allow fraudsters to profit from unscrupulous actions, leaving investors with losses and a sense of betrayal.

What are fake stocks and bonds?

Fake stocks and bonds — are counterfeit investment instruments that have no real value. Fraudsters create these securities to deceive investors and make them «invest» their money in non-existent companies or projects. Most often, these securities appear completely legitimate, making them difficult to recognize.

In recent years, there has been an increase in interest in individual investments. Thousands of people have decided to engage in trading and investing in securities. Along with this, the number of fraudulent schemes has also increased. In the era of rapid digitalization, fraudsters use advanced technologies to create fake companies and introduce counterfeit stocks into the market. Investors, often lacking sufficient knowledge, become targets for such manipulations.

How fraudsters create fake stocks and bonds

The creation of fake stocks and bonds is a complex process that requires significant effort and investment from fraudsters. Many of the schemes include advanced disinformation methods to create a sense of legitimacy among investors.

Stage 1: Creating a fake company

The first step in a fraudulent scheme is creating a fake company. Fraudsters may register a business with a plausible name, develop a similar website, and even create fake income reports. This creates the appearance of a successful and stable enterprise, which attracts potential investors.

Stage 2: Issuing fake stocks and bonds

After the company is created, fraudsters begin issuing fake stocks and bonds. These securities can look professionally prepared. Fraudsters may also distribute fake news about their company to generate interest and create hype around their offerings.

Stage 3: Attracting investors

Fraudsters use various methods to attract investors. This can be done through social networks and online advertising, as well as through cold calls. They often promise high returns and minimal risks, which is very appealing to inexperienced investors willing to invest their money.

Stage 4: Receiving money and disappearing

Once fraudsters receive money from investors, they quickly move on to the next victim. Having ordered themselves new fake securities or investments, they easily disappear, leaving investors who are left with fake stocks and significant losses. Such schemes can operate for a long time before the process of exposure begins.

The involvement of government regulatory bodies

Government agencies are actively involved in combating stock market fraud. One of the most important steps in this direction is the creation and development of regulations aimed at protecting investors. For example, in the USA, there is the Securities and Exchange Commission (SEC), which takes measures against fraudulent activities, prosecuting those engaged in financial fraud by law.

Responsibilities of the SEC

The SEC oversees the stock market and ensures that companies comply with disclosure requirements. This allows investors to get a complete picture of the companies in which they are planning to invest. The SEC also provides educational resources to improve the financial literacy of the population.

Examples of successful operations

In 2020, the SEC initiated a number of operations aimed at terminating fraudulent schemes involving fake stocks. For example, actions against several companies offering fake investments in medical companies related to the COVID-19 pandemic led to further investigations and arrests.

How investors can protect themselves

Protecting against stock market fraud requires investors to be vigilant and aware of certain rules. Before investing their funds, it is recommended to thoroughly check the information about the company and its activities.

The first and most important precaution is to check the company. Use official sources of information, such as the registry of legal entities and government regulatory websites. Be sure to check if the company is registered and has licenses to conduct financial operations.

Besides checking the company, it is important to analyze information about its market activities. Pay attention to financial reports, statistics, and other factors that can provide insight into how successfully and stably the enterprise operates.

Financial fraud in the form of selling fake stocks and bonds has become a serious threat in the modern market. Fraudsters use various schemes and technologies to deceive trusting investors. To avoid losses and protect your finances, it is necessary to be vigilant, verify information about companies, and only turn to trusted sources. Hopefully, readers of this article will become more informed and able to protect themselves from such fraudulent tricks in the future.