Fraudsters are getting away with more than £87,000 a day from scams advertised on social media, according to financial watchdogs.
Government regulator the Financial Conduct Authority warns that crooks are targeting social media users with promises of unachievable investment returns and a life of luxury to lure unsuspecting victims.
The scams to watch out for typically involve investments in binary options, contracts for difference (CFDs), foreign exchange and cryptocurrencies, such as Bitcoin or Ethereum.
Binary options and CFDs are often bets disguised as investments that involve staking cash against how the value of foreign currency, stocks and shares or gold move in a specific time span.
Criminals are now approaching victims through Facebook, Instagram and Twitter linked to sophisticated web sites.
Risk profile changing
As the number of people responding to online marketing increases, the risk profile of victims is changing, says the FCA.
While historically, the over 55s have been more likely to be victims of investment fraud, now those aged under 25 are six times (13%) more likely to trust an investment offer received via social media, compared with over 55s (2%).
Other statistics show that the under 50s are more likely to fall victim to binary options scams rather than other investment frauds (34% v 21%).
Almost a quarter (23%) said that online customer testimonies and reviews increase their trust in an investment company even though scammers create professional online investment platforms that feature fake customer reviews, logos, and statements, to lure in prospective investors.
Fraudsters moving online
Another one in ten (11%) said they would not carry out a background check before staking any cash with a company.
Mark Steward, the FCA director of enforcement, said: “As people have become more sceptical of investment-related cold calls and consumer habits have changed, we have seen investment fraud moving online and to social media.
“While their websites and profiles appear to be professional, they are all too often run by fraudsters who fix prices and pay-outs, or in some instances don’t really place trades at all, before disappearing with innocent investors’ money.
“Before investing online, check you know who you are really dealing with and check if they are authorised by the FCA.”