Last week, the Securities and Exchange Commission (SEC) charged two individuals in a fake day-trading scheme targeting inexperienced investors.
According to the SEC’s press release, the two men in question scammed investors out of more than $1.4 million through the operation of a false day-trading investment firm.
Luring Investors with Day-Trading
The scammers lured investors with the low-risk nature of day-trading. By exaggerating low costs and fees and high leverage of day-trading, the phony firm managed to entice investors in more than 30 countries.
Targeting Inexperienced Investors
These scammers specifically targeted inexperienced investors in their scheme. Inexperienced investors are typically much more prone to investment scams. While no one should be intimidated by investing their finances, new and inexperienced investors should watch out for signs of fraud. Before making any commitments, investors should:
- Avoid investments promising low-risk/high-returns
- In this case, inexperienced investors were lured by the day-trading firm offering high-leverage and low costs.
- Research the investment firm/broker for past deals
- Two scammers operated a fraudulent firm, Nonko Trading, an unregistered brokerage firm. Investors can search the SEC’s database of registered broker-dealers and firms.
- Confirm Transactions and Investment Returns
- These investors’ funds were never even routed to the market. Instead, they were sent directly to the scammers pockets. For investors who asked to close their accounts, scammers allegedly made “Ponzi-like” forms of repayment.
- Familiarize with Investment platforms and software
- Nonko Trading perpetuated its scam through a false trading platform. Rather than using a live trading platform, the scammers used a training software that simulated securities trading.
Learning From Experience
The fact is, all investors are susceptible to risks. The lesson to be learned is that due-diligence and practical investing goes a long way in minimizing unnecessary investment risks, like fraud.
While one must learn from personal experience, there is a network of resources out there to help inexperienced investors and empower them by learning through shared experience.
Savage Villoch Law, PLLC has more than 20 years of experience defending investors and financial securities consumers. If you need help defending your financial security, contact us today.