Investment scams are infiltrating Facebook and Instagram

Risky investment adverts are being shown to UK consumers on Facebook and Instagram, according to the latest data from Which? These findings come as there’s a surge in losses linked to investment scams.

Ads without a risk warning, or promising “sensational, life-changing returns”, were found on both platforms. These could lead consumers towards “poor and risky investment choices”, or even fraud.

According to Action Fraud, victims can lose over £45,000 on average to “clone” firm investment scams. In its last quarterly data publication for the three months to June, the Financial Ombudsman Service said investment scams were the fastest growing type of “authorised” scam.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up

Facebook investment scams

Which’s investigation was carried out in partnership with Demos Consulting and took place between October 2021 and August 2022.

It found 1,064 adverts on platforms owned by Meta (the parent of Facebook and Instagram), which is more transparent than other online platforms about the ads placed on its network.

Some 484 of which were investment related. Half of these were for investment products, while the rest offered investment tips, training or advice.

One in four of these was property related, while one in five were about cryptocurrency and non-fungible tokens. One in ten investment products offered high returns without clarifying how these would be obtained. The investigation found 89 adverts without a risk warning and claims of guaranteed returns.

Rocio Concha, director of policy and advocacy at Which, highlighted the need for the government to pass the Online Safety Bill into law to protect consumers from the risk of “immense financial and emotional harm”.

“Otherwise we could be waiting even longer for alternative action to tackle online fraud infiltrating one of the world’s biggest search engines and social media sites,” Concha said.

Beware one repeat offender

The FCA has previously issued a warning about a scam investment company under the brand name “Tesler”, impersonating a regulated trading company based in the UK.

Which found 20 adverts for Tesler which raised eight different serious risk flags. These included being pressured to set up a trading account and promising an 87% success rate.

“The use of the name ‘Tesler’, with its similarities to automotive brand ‘Tesla’, and other language used may be reinforcing this potentially misleading reference to attempt to draw in victims,” said Which?.

Instagram investment scams

These adverts, on platforms like Instagram and Facebook often play on investors’ fear of missing out on potentially lucrative returns, especially as the cost of living crisis continues to worsen in the face of rising inflation.

The City watchdog, the Financial Conduct Authority (FCA) has proposed new measures to help social media platforms from allowing “illegal, unfair or misleading financial marketing”.

The measures will require firms to demonstrate they have the expertise for the promotions they want to approve. They will also be required to report back to the FCA on financial promotions they have approved so that the watchdog can “crack down on rogue adverts”.

“Social media and online advertising mean that consumers are taking less time between seeing a promotion and making a financial decision,” said Sarah Pritchard, executive markets director at the FCA.

“It is, therefore, essential that they are equipped with the right information at the right time so that they can make good financial decisions. This is especially important as we face the rising cost of living.”

Red flags for investment scams

Here are some things to keep in mind when looking at an investment ad.

1. Be sceptical of heavy marketing and promotional offers

Fraudulent adverts are “designed to lure in people fast”, says Susannah Streeter, senior investments and market analyst at Hargreaves Lansdown. “Make sure you are not rushed into making any investment.”

2. Avoid unnamed or non-existent team members

“It pays to do your research and check out the team behind any company,” says Streeter. “If there are unnamed or non-existent team members it could be a warning sign.”

3. Avoid “unusual” ways to invest

Weekly and monthly investments could be “suspicious ploys”.

4. Check out reviews

“It’s also very important to check out reviews of crypto trading platforms or brokers to try and spot any signs of past fraudulent behaviour,” says Streeter.

5. Be aware of scam websites

“Criminals will target shoppers by offering unmissable deals on the most popular items. They don’t have these items to sell, they just take payments from people and scarper,” says Streeter.

“Other fraudsters will set up sites to sell fakes, while others will sell on auction websites or social media. These can be poor quality and dangerous.”

Scam-detector’s search function allows you to check whether a website is legitimate.

6. Be particularly mindful of cryptocurrency adverts

One in five of the adverts looked at by Which were related to crypto assets. The Financial Ombudsman Service also said around a fifth of the 1,900 complaints it received involved cryptocurrencies. The Ombudsman saw consumers being scammed out of tens or even hundreds of thousands of pounds.

“Crypto currency fraud is rife with scammers spinning complex webs of deceit and an increasing number of younger people are being lured in with promises of high returns,” says Streeter. “The fear of missing out on the huge gains we saw in crypto assets over the pandemic, has meant more people have dropped their guard in recent years.

“If you are tempted to dabble in crypto assets you should only do so with money you are prepared to lose.”