The Rise of Financial ‘Finfluencers’ and Investment Fraud

The allure of quick profits and expert advice has made economic YouTube channels a popular source of investment information. However, this popularity has also attracted scammers who exploit the platform to promote fraudulent schemes. These schemes frequently enough use compelling videos and testimonials to entice viewers into investing in bogus funds.

One such case involved a YouTube channel with nearly 90,000 subscribers. The channel uploaded videos featuring various pieces of economic information. Last month,a 30-year-old office worker,identified only as amo,watched a video on this channel promoting a hedge fund “sold by US securities firms.” The video claimed investors could earn 2.4% per month, “along with the exchange gains.”

Red Flags and Deceptive Tactics

The YouTube channel wasn’t alone in recommending the investment. Several other channels also promoted the same fund.

One YouTube creator stated, “현재 환율이 금융위기 이후 15년 만에 최고치이기 때문에 (달러 외환펀드를) 최대한 많이 모으는 게 올바른 선택인 거죠.” (As the current exchange rate is the highest in 15 years as the financial crisis,it is indeed the right choice to collect as much of the dollar foreign exchange fund as possible.)

Another added, “1997년 아시아 금융위기 당시 아시아 국가들의 통화가 폭락하는 상황에서도 8억달러 이상의 수익을 기록하며 안전 자산으로서의 달러 투자전략을 입증했습니다.” (During the Asian financial crisis in 1997, even when the currencies of Asian countries plummeted, it recorded profits of more than $800 million, proving the dollar investment strategy as a safe asset.)

Clicking the link in the comments led to a website, purportedly belonging to a legitimate securities firm, claiming it was “founded in 1994.” The website also claimed “the headquarters is also in Greenwich, new York.”

The Trap: Initial Gains and Sudden Disappearance

Enticed by the promise of high returns, one victim, identified as Lee, “invested 100 million won in the fund and received a profit of 100,000 won for two days.” This small initial profit created a false sense of security and legitimacy.

Though, just “five days after the investment, the homepage banner was changed to a securities company with a different name.” Lee “couldn’t log in, and all the recommended videos of the YouTuber were gone.”

Lee, a victim of the YouTube scam, said, “똑같은 (홈페이지) 레이아웃에 아래 주소가 그리니치에서 월스트리트로 바뀌고, 메일 주소, 고객센터 메일 주소도 살짝 달라져 있고.” (The layout of the (homepage) is the same,but the address below has changed from Greenwich to Wall Street,and the e-mail address and customer center e-mail address are also slightly different.)

when Lee contacted the customer service email to request termination, the only response was: “I’ll return it in three days.” The promise was never fulfilled.

This case illustrates a common tactic used by scammers: creating a sense of legitimacy by impersonating established firms and offering initial payouts to build trust. Once they have collected a significant amount of money,they disappear,leaving investors empty-handed.

Emerging Threats: Fake bonds and Impersonation

The problem extends beyond fake funds. Scammers are constantly evolving their tactics, with recent cases involving the promotion of “fake bond products by impersonating Mongolian banks.”

One YouTube creator said, “몽골에서 꽤 오래된 금융기관이고, S&P 기준 BBB+ 등급을 보유하고 있다고 합니다. 달러 기반으로 이자를 준다는 사실을 알게 되면서 흥미가 확 생겼어요.” (It is indeed a fairly old financial institution in Mongolia, and it is said to have a BBB+ rating based on S&P. I became very interested when I learned that they give interest on a dollar basis.)

The Role of Law Enforcement and Regulatory Bodies

Victims of these scams, including Lee, have reported the incidents to the police. However, tracking down these digital fraudsters can be challenging, as they often operate across borders and use sophisticated techniques to conceal their identities.

the Securities and Exchange Commission (SEC) has been actively working to combat investment fraud on social media. In a recent statement, SEC Chairman Gary Gensler emphasized the agencyS commitment to protecting investors from online scams. “We are seeing a rise in investment schemes promoted through social media, and we are taking aggressive action to hold these scammers accountable,” Gensler said.

In April 2024, the SEC issued an investor alert specifically addressing the risks of investment advice found on social media platforms. The alert advises investors to be wary of unsolicited offers, promises of guaranteed returns, and pressure to invest quickly.

Counterargument: Are All Financial YouTube Channels Bad?

While this article focuses on fraudulent schemes, it’s important to acknowledge that not all financial YouTube channels are scams. Many legitimate financial experts and educators use the platform to provide valuable information and insights.

The key is to differentiate between reliable sources and those promoting get-rich-quick schemes. look for channels that offer sound financial advice, disclose any potential conflicts of interest, and have a proven track record of accuracy and integrity. A recent study by the American Association of Individual Investors (AAII) found that investors who consult multiple independent sources of information are less likely to fall victim to fraud.

Protecting Yourself from Investment Scams

the rise of investment scams on YouTube highlights the need for increased vigilance and investor education. Before investing in any chance promoted online, it is crucial to conduct thorough due diligence.

• Verify credentials: Check the background and registration status of any financial professional or firm with the SEC or FINRA.
• Be wary of promises: Be skeptical of guaranteed returns or overly consistent high investment returns,as all investments carry risk.
• Do not feel pressured: Never feel pressured to invest quickly. Take your time to research and understand the opportunity.
• Seek independent advice: Consult with a qualified financial advisor before making any investment decisions.
• Report suspicious activity: If you suspect you have been targeted by a scam, report it to the SEC or the FTC.

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