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 cryptocurrency market is under fresh headwinds as the United States Securities and Exchange Commission (SEC) accused Binance and its Chief Executive Officer, Mr Changpeng Zhao, of mishandling customer funds, misleading investors and regulators, as well as breaking securities rules.
Bitcoin (BTC), Ethereum (ETH), and a host of other digital coins are now trading at their lowest in almost three months.
The US SEC complaint filed in a federal court in Washington, D.C., listed 13 charges against Binance, Mr Zhao, and the operator of its purportedly independent US exchange.
The agency laid out a range of alleged violations against the world’s biggest crypto exchange and its leader and warned that “The public should beware of investing any of their hard-earned assets with or on these unlawful platforms.”
The SEC alleged that Binance artificially inflated its trading volumes, diverted customer funds, failed to restrict US customers from its platform and misled investors about its market surveillance controls.
The SEC also claimed that Binance and its billionaire founder and one of the crypto industry’s highest-profile moguls, secretly controlled customers’ assets, allowing them to commingle and divert investor funds “as they please.”
Binance created separate US entities “as part of an elaborate scheme to evade U.S. federal securities laws,” the SEC also alleged, citing a number of practices first reported by Reuters in a series of investigations into the exchange published this year and in 2022.
From almost three years ago until June 2022, the SEC also alleged that a trading firm owned and controlled by Mr Zhao, Sigma Chain, engaged in so-called wash trading that artificially inflated the trading volume of crypto asset securities on the Binance.US platform. The SEC said Sigma Chain spent $11 million from an account on a yacht.
SEC Chair Gary Gensler said, “We allege that Zhao and Binance entities engaged in an extensive web of deception, conflicts of interest, lack of disclosure, and calculated evasion of the law.”
In a blog post, Binance, in its defence, said: “We intend to defend our platform vigorously,” adding that “because Binance is not a US exchange, the SEC’s actions are limited in reach.”
“All user assets on Binance and Binance affiliate platforms, including Binance.US, are safe and secure,” the blog post said.
In the statement, Binance said it had “actively cooperated” with the SEC from the start and respectfully disagreed with the SEC’s allegations.
Binance said it had been trying to find a “reasonable resolution” with the SEC, but the agency “at the eleventh hour” issued new requests and went to court, adding the SEC’s actions appeared to be an effort to “claim jurisdictional ground from other regulators.”
As the events continue to unfold, the market is reacting negatively as BTC has lost over 4.1 per cent in the last 24 hours to trade at $25,721.67 while ETH has lost 3.00 per cent to $1,817.01 while Binance Coin (BNB), Binance’s token, has lost nearly 8 per cent of its value as it trades at $277.33.
Other tokens like Cardano (ADA), Solana (SOL), Litecon (LTC), Polygon (MATIC), and Dogecoin (DOGE) have also lost more than 6-7 per cent of their respective values.
By Adedapo Adesanya
Nigeria’s second-largest cement producer, BUA Cement, has gotten a $500 million financing package from the International Finance Corporation (IFC) to develop two new production lines in Sokoto State.
In what is IFC’s largest-ever investment in northern Nigeria, the financing package, which saw input from African and European partners to BUA Cement Plc, will help the company part-finance and develop two new, energy-efficient cement production lines that will create up to 12,000 direct and indirect jobs.
The funding includes a $160.5 million loan from IFC’s account, a $94.5 million loan through the Managed Co-Lending Portfolio Program (MCPP), and $245 million in parallel loans from syndication partners; the African Development Bank (AfDB) – $100 million, the Africa Finance Corporation (AFC) – $100 million, and the German Investment Corporation, Deutsche Investitions- und Entwicklungsgesellschaft (DEG) – $45 million.
The financing was announced during the Africa CEO Forum in Abidjan, Cote d’Ivoire.
It was disclosed that the plants would run partly on alternative fuels derived from waste and solar power. Each will produce about three million tons of cement annually when complete, serving markets in Nigeria, Niger, and Burkina Faso.
Speaking on this, Mr Abdul Samad Rabiu, Chairman and Founder of BUA Group, said that “BUA is delighted to partner with IFC and other esteemed institutions in securing this $500 million facility to develop energy-efficient cement production capacity and strengthen our equipment and logistics capabilities in northern Nigeria.
“In line with our commitment to sustainability and ESG principles, this investment will create jobs and contribute to economic and infrastructural development within Nigeria and the greater Sahel region.
“We are particularly pleased to have successfully gone through the rigorous process with IFC, AfDB, AFC, and DEG, which validates our responsible business practices. By focusing on greener fuels and enhancing our equipment and logistics platform, BUA Cement is building a foundation for sustainable infrastructure growth and a more inclusive society,” he said.
“We are pleased to join with our partners to support BUA with an investment that will boost industrialization, create jobs and deliver economic growth in northern Nigeria, a region with significant economic potential,” said Mr Makhtar Diop, IFC’s Managing Director.
Investing in northern Nigeria is integral to IFC’s strategy to promote sustainable development in underserved regions. This includes areas with limited opportunities and a need for increased private-sector engagement.
The new plants will provide local developers with a reliable and affordable source of cement, and bolster the construction of essential infrastructure, fostering economic growth and prosperity for the region.
The project is expected to create about 1,000 direct jobs and 10,800 indirect jobs. Direct jobs include those in manufacturing, engineering, and advanced automation systems. Indirect jobs include those in the cleaning, maintenance, mining, and transportation sectors.
The financing package will also allow BUA to replace some of its diesel trucks with vehicles that are run partly on natural gas, over time producing fewer emissions. As part of the project, IFC will also advise BUA on developing a gender-inclusive workplace strategy that creates more opportunities for women across its operations.
“Following an initial $200 million investment in BUA Group in 2021, we are proud to play another key role in this landmark manufacturing project to transform northern Nigeria’s construction sector and the entire country. Investing in this project will sustainably build Nigeria’s local manufacturing capacity, empower local communities, and create employment opportunities. AFC is committed to working with our partners to accelerate development impact through infrastructure solutions that support value addition, industrialization, and job creation throughout Africa,” added Mr Samaila Zubairu, CEO & President of Africa Finance Corporation (AFC).
“The African Development Bank is pleased to be partnering with IFC and BUA on this expansion project as it is aligned with our priority strategies of industrializing Africa and improving the quality of lives of Africans through the increase in cement production, which will lead to the development of additional affordable housing and critical infrastructure in Nigeria and neighbouring West African countries while supporting the use of cleaner energy at BUA’s Sokoto facility,” said Mr Solomon Quaynor, Vice President of AfDB’s Private Sector, Infrastructure and Industrialization arm.
“DEG’s mission is to be a reliable partner to private sector enterprises as drivers of development and creators of qualified jobs. We are pleased to contribute to this transaction together with our development finance partner institutions. Together we support BUA in its transformation towards a more sustainable production by implementing innovative technology. The significant reduction of CO2 emissions and the creation of decent jobs in a region with many vulnerable households are key factors for DEG’s financing,” said Mr Gunnar Stork, Senior Director at DEG.
The investment in BUA is part of IFC’s strategy to promote diversified, inclusive growth and job creation in Nigeria, where IFC supports the manufacturing agribusiness, healthcare, infrastructure, technology, and financial services sectors. IFC has an active investment portfolio of $2.3 billion in Nigeria.
By Adedapo Adesanya
The NASD Over-the-Counter (OTC) Securities Exchange opened the week in the negative territory as the bourse witnessed a 1.40 per cent loss on Monday, June 5.
This was influenced by the sole price loser, FrieslandCampina Wamco Nigeria Plc, which fell by N4.00 to sell at N71.00 per unit compared with the preceding session’s N75.00 per unit.
The milk-producing firm pushed down the efforts of Niger Delta Exploration and Production (NDEP) Plc and Industrial and General Insurance (IGI) Plc to lift the OTC stock market.
NDEP gained N1.16 during the session to finish at N246.21 per share versus N245.05 per share, and IGI Plc appreciated by 1 Kobo to 8 Kobo from 7 Kobo.
At the close of business, the market capitalisation of the bourse decreased by N14.30 billion to N1.008 trillion from N1.022 trillion, and the NASD Unlisted Securities Index (NSI) recorded a 10.35 points decline to wrap the session at 728.86 points compared with 739.21 points of the previous session.
Amid the weak sentiment, there was a 1,768.8 per cent rise in the volume of securities traded at the bourse yesterday to 22.7 million units from the previous trading session’s N1.2 million, the value of shares transacted by investors rose by 151.0 per cent to N142.9 million from the N56.9 million reported last Friday, as the number of deals surged by 500.0 per cent to 48 deals from eight deals.
Geo-Fluids Plc remained the most traded stock by volume (year-to-date) with 832.1 million units worth N1.3 billion, followed by IGI Plc with 628.3 units valued at N49.5 million, and UBN Property Plc with 395.9 million units valued at N336.6 million.
Similarly, VFD Group Plc was the most traded stock by value (year-to-date) with 11.0 million units valued at N2.5 billion, trailed by Geo-Fluids Plc with 832.1 million units worth N1.3 billion, and FrieslandCampina Wamco Nigeria Plc with the sale of 17.1 million units worth N1.2 billion.
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