Economy
What You Need to Know About Online Trading Scams
Even before the advent of the internet, traders were getting scammed. Today, these scammers reach a wider audience because of the internet and do so with more anonymity.
Nigeria is witnessing an upsurge in online payment usage, and according to CBN e-Payment Statistics, Nigerians executed about 16 billion online transactions in 2021, and it increased to 22 billion in 2022.
As more Nigerians embrace online trading and use e-payments as ways to fund their trading accounts; scammers are also perpetrating scams online which target these traders relying on the speed & anonymity of the internet; where they can pose as a fake brokerage company or an expert trader using a fake social media persona, professional looking website & email to take away money using fast & anonymous online payment methods.
Unregulated Entities and Scammers Posing as Brokers
Among the most common trading scams is the unregulated persons and entities posing as brokers. The legality of a broker is based on its regulatory status with the appropriate government authorities.
In Nigeria, the Securities and Exchange Commission (SEC) is responsible for registering and regulating capital market operators, which includes online brokers and securities and commodity exchanges.
You can confirm whether an investment provider is registered by SEC by visiting the SEC website and clicking on “Capital Market Operator Search”. Additionally, for stockbrokers, you can visit the NGX stock exchange website and click on ‘Find a Broker’.
An online broker that is not registered by SEC or is not a member of the SEC-authorized exchange is most likely a scam or is unregulated or unsafe.
Reports have shown that many Nigerians still engage in alternative and unconventional investments such as cryptocurrency, CFDs forex trading, which are still unregulated, leaving a grey area to be exploited by bad players.
Cryptocurrency investments had recently been banned in Nigeria while Forex trading is still unregulated by SEC but is not illegal; this poses investment risks for traders as these instruments lack regulatory oversight.
SEC had issued a Public Warning on Retail Online Forex Trading in Nigeria, saying forex trading is not regulated by them, and you do so at your own risk.
Due to this absence of regulation in CFD and Forex Trading space, Nigerian traders need to ensure that the foreign forex brokers they deal with are under relevant regulations in their home countries.
When dealing with foreign brokers, it is important to note that not all foreign regulators are of the same calibre. The regulators in developed economies, such as the Financial Conduct Authority (FCA) of the UK, and ASIC of Australia, are often regarded as Tier-1; and are considered safest due to their strong investor protection, regulation and oversight. Many brokers have faced harsh penalties from FCA and ASIC for not following rules. So, traders can be sure that the tier-1 regulated broker will not engage in bad practices and will offer services as per the directives of the regulators.
But if you see brokers regulated in Island nations like the Bahamas, Saint Vincent & The Grenadines, Mauritius, etc. You need to beware as these countries have weaker regulatory laws and are not Tier-1 or Tier-2 regulators. So, there is a high possibility brokers under these regulations will likely engage in fraudulent activities flouting rules, and you would have no regulatory discourse or action to recover your funds in case of wrongdoing by the broker. So, any broker below tier-1 or tier-2 regulation must be avoided.
Africa too has reputed tier-2 regulators like FCSA of South Africa and CMA of Kenya that offer similar investor protection, regulations at par with FCA, ASIC to CFD & Forex Traders. According to this research into forex brokers in South Africa, there are 8 forex brokers that accept traders from the African continent and hold multiple regulatory licenses, including Tier-1 & Tier-2 licenses.
These days foreign brokers get multiple regulators across the globe to license them, and the more regulators, the safer these brokers are.
You still need to confirm their regulatory status by visiting the foreign regulators’ website and viewing the list of licensed financial service providers.
In summary, a broker that is not registered by the Nigerian SEC or is not a member of an authorized exchange like NGX and also is not registered by multiple international regulators is operating illegally and is most likely a scam. You should avoid trading with such online brokers.
Many Scams Originate from Social Media & Dating Sites
Online trading scams through social media take different forms. Fraudsters can impersonate legitimate brokers or pose as legitimate investment advisors and create a fake profile and webpage to accompany it.
They then convince unsuspecting online traders to trade via their platforms or invest in markets via them; if you send money to them, it is gone.
Sometimes, you can be asked to keep sending money to them until you realize it is a scam. You can prevent this by only following verified company handles on social media and carrying out proper background checks on the website before investing. You can also verify Broker’s genuine website from Regulator or Exchange’s website. Most regulators and exchanges list the official websites and contact details of their licensed brokers.
Trading scams on social media can also take the form of romance. Here, the scammer creates a fake profile on dating apps, seeking a romantic relationship with you.
At some point in the relationship, you are introduced to a fake investment scheme with the promise of high returns. It could be forex, stocks, crypto, etc.
You will be encouraged to keep investing funds, but when you ask to withdraw your winnings, you will be met with excuses such as you need to pay taxes, you need to invest for a certain number of years before you can withdraw, etc. This goes on till you give up trying.
Online trading scams via social media can also take the form of a pump and dump scheme, where the scammers create a social media frenzy on platforms like Twitter, Facebook, Youtube, ticktok or Reddit about a particular stock (usually penny stock), falsely claiming its price is about to explode. A scammer would usually pose as a market expert offering legitimate research, investment calls, insight or some insider information, causing mass sharing viral effects on social media.
This frenzy makes a lot of people buy the stock, thereby increasing its price. The scammers would then immediately sell off huge volumes of the stock, causing its price to fall and leaving other buyers with worthless stock.
You can prevent this by avoiding securities with unusual social media buzz.
Scams Can Hide Behind Celebrity Endorsements
Celebrities, community leaders, influencers, or even religious leaders can unknowingly promote online trading scams.
Scammers understand that you hold these figures in high esteem, and most likely believe any information from them.
Today with the trend of brand ambassadors, some online influencers promote suspicious brands in order to get a paycheck. Celebrities, influencers, & skit makers are not qualified to give investment advice. Always confirm all investment offers from the SEC website before you deal.
Scammers May Pay You Initial Returns to Win Your Trust
Scammers sometimes pay your profits for your first investment. This gives you the illusion that they are legit and prompts you to commit more funds.
This is the classic Ponzi scheme style where the earlier investors get paid with the money of the later investors. Once you commit substantial funds, you are blocked from withdrawing any more money, and when you insist, the scammers cut off communication.
Scams Downplay Risks and Emphasize High Rewards
Online trading comes with risks of losing, and no matter how knowledgeable you are, you cannot avoid them. Even the best traders in the world only have a 6 out of 10 win rate. It is, therefore, important that your broker keeps you informed of the risks in online trading.
If your broker sugarcoats online trading and downplays or completely ignores the risks, you should be suspicious.
Also, if a broker lays great emphasis on huge returns to be made via online trading, he is likely to be a scam too.
Scams May Send You Malicious Links to Download Trading Apps
You risk downloading the fake version of a trading app if you download it from unknown sources.
Google Play Store and Apple Store are the safest places to download because they scrutinize the apps for any malware and carry out regular scans to ensure the apps are not infected.
A reputable online broker will host his trading app on either the Google Play store or the iOS app store. This is not to say Google Play store or the iOS app store are immune to fake apps, but the chances are lower.
Scammers may also send you Android Package Kit (APK) executable files to download the app, and this too is dangerous as it can contain hidden malware.
Request to Deposit Funds Via Malicious Payment Links
A payment link enables the creator to receive payments from others without the hassle of building a website and integrating a payment gateway.
They usually exist as URLs, QR codes, etc. It is common for businesses to send payment links via apps and SMS.
Scammers could impersonate a legitimate broker, but at the point of payment, a link is sent to you, and the money goes to the scammer instead.
Things to Remember
Online scammers can be very professional and build good-looking websites. They are part of a global organized crime ring, hence their sophistication.
They have even gone as far as using deep fake technology for video calls so that they can impersonate even people close to you.
They target everyone, even you in Nigeria, as far as there are gains to be made. This is why you must ensure you carry out a background check on the broker and ensure there is no red flag before trading with an online broker.
By Adedapo Adesanya
The NASD Over-the-Counter (OTC) Securities Exchange closed flat on Wednesday, August 5, as the market witnessed weaker trading activity with only two deals executed.
In the midweek session, the volume of securities exchanged by investors dropped 99.9 per cent to 802 units from the 1.6 million units recorded on Tuesday. The value of securities further decreased by 99.6 per cent to N208,240 from the preceding session’s N47.6 million, and the number of deals significantly went down by 93.9 per cent to two deals from the 33 deals recorded a day earlier.
Great Nigeria Insurance (GNI) Plc remained the most traded stock by value on a year-to-date basis, with 3.4 billion units worth N8.4 billion, followed by Infrastructure Credit Guarantee (Infracredit) Plc with 2.3 billion units sold for N6.5 billion, and Central Securities Clearing System (CSCS) Plc with 76.9 million units transacted for N5.5 billion.
GNI Plc was also the most active stock by volume on a year-to-date basis, with 3.4 billion units exchanged for N8.4 billion, followed by Infracredit Plc with 2.3 billion units traded for N6.5 billion, and Resourcery Plc with 1.1 billion units valued at N415.7 million.
There were no price gainers or losers yesterday.
As a result, the market capitalisation stood unmoving at N2.739 trillion, while the NASD Security Index (NSI) remained unchanged at 4,563.96 points.
By Adedapo Adesanya
The Naira slid against the US Dollar by N2.28 or 0.17 per cent in the Nigerian Autonomous Foreign Exchange Market (NAFEX) on Wednesday, August 5, to N1,363.85/$1 from N1,362.55/$1.
The local currency also declined against the Pound Sterling in the official market during the session by N5.97 to close at N1,837.38/£1 compared with Tuesday’s closing rate of N1,831.41/£1, and against the Euro, it crashed by N6.54 to quote at N1,575.25/€1 versus the preceding session’s N1,568.71/€1.
But at the black market, the Nigerian Naira traded flat against the greenback yesterday at N1,400/$1, and also remained unchanged at the GTBank FX desk at N1,373/$1.
The Central Bank of Nigeria (CBN) says rates have narrowed to below two per cent, while the country’s external reserves have risen above $52.5 billion, reflecting the impact of its ongoing monetary and foreign exchange reforms.
CBN Governor Yemi Cardoso, represented by the Acting Director of Corporate Communications and Investor Relations, Mrs Hakama Sidi-Ali, disclosed this on Tuesday during the CBN Fair in Gombe. He noted that reforms introduced since 2023 had significantly reduced the disparity between the official FX market and the parallel market.
“The Naira continues to strengthen, with the spread between official and Bureau de Change rates now below two per cent,” he said, adding that reserves at $52.5 billion were supported by sustained inflows and renewed investor confidence in the economy.
Interbank FX transactions slid as weaker market activities dropped total Dollar volume exchanged to $75.35 million, a 51.8 per cent decline from $156.23 million in turnover quoted at the previous close.
The deals at the NFEM window also fell as data from the central bank put Wednesday’s quote at 82 from 139.
In the cryptocurrency market, major were down as global risk sentiment softened as a key world equity index slipped and chipmakers fell.
The MSCI All Country World Index snapped a five-day run to fall 0.2 per cent as chipmakers retreated on both sides of the Pacific. South Korea’s Kospi, a bellwether for the AI trade, dropped 4.4 per cent.
Ripple (XRP) depleted by 1.7 per cent to $1.05, Binance Coin (BNB) decreased by 1.0 per cent to $594.87, Cardano (ADA) depreciated by 0.9 per cent to $0.1884, TRON (TRX) shrank by 0.2 per cent to $0.3261, Solana (SOL) crumbled by 0.1 per cent to $74.00, and Dogecoin (DOGE) went down by 0.1 per cent to $0.0697.
On the flip side, Ethereum (ETH) gained 2.3 per cent to trade at $1,911.41, and Bitcoin (BTC) rose by 0.8 per cent to $64,759.28, while the US Dollar Tether (USDT) and the US Dollar Coin (USDC) remained unchanged at $1.00 apiece.
By Dipo Olowookere
The domestic stock exchange rebounded by 0.05 per cent on Wednesday on the back of renewed bargain-hunting by investors, though the level of activity waned.
After bleeding for a few days, the Nigerian Exchange (NGX) Limited heaved a sigh of relief yesterday, as the All-Share Index (ASI) gained 109.41 points to close at 244,912.24 points compared with the previous day’s 244,802.83 points, and the market capitalisation garnered N71 billion to settle at N158.087 trillion versus Tuesday’s N158.016 trillion.
Business Post reports that despite the rebound recorded by Customs Street at midweek, the market breadth index remained negative, as there were 20 price advancers and 29 price decliners, implying bearish investor sentiment.
Linkage Assurance appreciated by 9.94 per cent to N1.77, AVA Capital rose by 9.55 per cent to N10.90, Fortis Global Insurance advanced by 7.69 per cent to N2.80, McNichols gained 7.34 per cent to finish at N5.85, and Coronation Insurance surged by 5.51 per cent to N2.49.
Conversely, Honeywell Flour depreciated by 9.94 per cent to N16.30, PZ Cussons gave up 9.94 per cent to trade at N74.75, Zichis crashed by 9.74 per cent to N20.76, Learn Africa slipped by 9.62 per cent to N9.40, and Neimeth tumbled by 8.33 per cent to N8.25.
The busiest equity was FCMB, with a turnover of 369.2 million units valued at N4.1 billion. Chams transacted 46.7 million units worth N201.8 million, First Holdco transacted 43.5 million units for N5.7 billion, Access Holdings sold 29.8 million units worth N778.0 million, and Linkage Assurance exchanged 19.6 million units valued at N33.5 million.
At the close of transactions, market participants bought and sold 824.1 million units worth N25.5 billion in 48,114 deals, in contrast to the 1.6 billion units sold for N28.7 billion in 54,160 deals a day earlier, showing a shortfall in the trading volume, value, and number of deals by 48.49 per cent, 11.15 per cent, and 11.16 per cent, respectively.
1 Comment