According to Action Fraud, £87,000 was lost to fraudsters every day in 2017 through online scams, with many taking advantage of the freedom afforded by social media to conduct their fraudulent activity.
Instagram, in particular, has a significant issue with many young people being targeted as they look to improve their wealth. One of the most popular scams has seen thousands of fake profiles set up, all displaying lavish lifestyles earned through ‘Forex trading’, to encourage people to follow their advice on how to trade, and later conning them out of huge sums of money.
Lack of regulation
With over 1 billion users, Instagram allows anyone to create a profile and pose as a ‘trader’ who trades in Forex (FX). Providing ‘proof’ of their wealth by flaunting pictures of a lavish lifestyle, these fake traders boast about the get-rich-quick schemes they have used to make their money and offer to help anyone else looking to improve their finances.
Since Instagram centres on captivating visuals and has created a culture of lifestyle marketing, it is easy for scammers to fake pictures of wealth with fancy cars and luxury holidays. Users then struggle to differentiate between fake and legitimate profiles. Since these fraudsters operate on a platform that doesn’t have any regulation, the Financial Conduct Authority (FCA) struggles to eliminate these scams.
With an ability to create unlimited profiles, many fraudsters set up sophisticated scams that include pretending to be a trader or cloning a legitimate FX trader or FX trading firm. Tactics include engaging users who are following official banks, financial institutions and FX traders on Instagram and offering to introduce them to ‘trading’.
These ‘trading’ guides often include being sold binary options, now banned by the EU, or signal providers that are unreliable, under the ruse that these are the quickest methods to make money. Once the victim has invested an initial amount, they are told they have received some returns and their trading has been a success and are encouraged to invest more. Once more money has been given to the ‘trader’, all contact is ceased and the victim is unable to reclaim their money.
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Young people as targets
Social media’s biggest audience is, naturally, teenagers and young adults. By using platforms such as Facebook, Twitter and Instagram, fake traders can prey on these vulnerable users who often lack the awareness or knowledge on trading but have aspirations of improving their financial situation. Get-rich-quick schemes appeal to a young audience who lack wealth or already have debt from loans and student fees and who hope to amass wealth as easily and as quickly as possible.
Capitalising on the rising popularity of influencers and groups such as the Rich Kids of Instagram, fake traders can easily amass thousands of followers on social media and trick them into believing it is simple to make a fortune through trading.
Fake vs. legitimate
Using social media’s freedom, thousands of fake profiles have been set up and it is difficult to distinguish between fraudsters and the profiles of legitimate FX traders or firms. Often, when scammers clone legitimate traders and go on to con users out of money, it is the legitimate trader who must deal with the negative fallout. Not only does this mean a struggle for legitimate traders and FX firms to prove their authenticity, but it paints a bad name for the trading industry on the whole. Many young people interested in trading are put off by negative experience and miss out on the opportunity to properly learn how to trade and make money.
To stop the increase in social media fraud, the industry needs to clamp down on illegal activity and the concept of trading signals so people can become more aware of how to legitimately trade in Forex.