Inside one of Alberta’s largest Ponzi schemes: How Black Box deceived investors and how to avoid similar scams

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When news of an investment scam breaks, it’s sometimes easy to tell ourselves, “That could never happen to me.” Yet each year, many Albertans, both experienced and new to investing, are defrauded in seemingly real investment opportunities.

In August 2025, the Alberta Securities Commission (ASC) issued a ruling against Craig Michael Thompson and his companies, Black Box Management Corp. and Invader Management Ltd., for carrying out one of the largest Ponzi schemes in Alberta’s history. Over three-and-a-half years, Thompson invested more than $150 million CAD, and defrauded over 1,000 investors across Alberta and the U.S. of at least US$47 million.

 

It can be hard to spot the warning signs of an investment scam

It might be easy to think the victims of Thompson’s fraud were risk-takers willing to make high-risk bets for big rewards. But unlike many investment scams that promise quick riches or unrealistic returns, Thompson’s schemes were disguised as a low-risk, professional operations.

So how did Thompson lure people in and keep them deceived? The answer lies in the psychology of trust and the behavioural biases that scammers use to exploit people.

 

How Ponzi scheme operators use trust to deceive investors

Investment scams aren’t just built on fake documents or false account statements. They are built on stories; stories that feel personal, believable and trustworthy.

In this case, Thompson claimed to have mastered the markets, telling potential investors that he had not experienced a single losing day since 2014. He also used three classic persuasion tactics to draw in investors:

1. Authority: The “expert” who never loses a trade

Thompson positioned himself as an experienced and successful day trader, claiming he had never faced a negative trading day since 2014. He used technical jargon, like “stop-losses”, and produced fake weekly reports detailing his trading wins to make himself sound credible.

Fraudsters often use complex language not only to reinforce expertise and appear knowledgeable, but also to intimidate. This can make investors less likely to ask questions or challenge claims, allowing repeated statements to feel more convincing.

This is called the illusory truth effect: the tendency to accept information as true simply because we hear it repeatedly. Each time Thompson reinforced his “no losing days” story through conversations or weekly updates, it became more credible.

CheckFirst tip: Confident claims and repeated tales of success don’t tell the full story or replace legitimate qualifications and industry registration. Instead of relying on repetition or reputation, do your own research and look for verified information. Always ensure that the person you are working with is registered to sell investments with a provincial securities commission before you invest.

2. Social proof: Everyone else is “making money”

Many Black Box investors heard about the opportunity through friends, colleagues or family members who, based on reports, believed that their own investments were growing. In reality, Thompson generated fake reports for early investors that showed steady returns, which they shared with others, unknowingly helping spread his scheme.

It is human nature to follow the actions of the group. When others around us seem to be having success, it can feel reassuring and safe to follow their lead. Scammers know this and take advantage of psychological biases like herding behaviour or the fear of missing out (FOMO). They use this to manipulate trust between groups to create the illusion of legitimacy.

CheckFirst tip: If someone you know, even a friend or family member, recommends an investment or a person to work with, take a step back and verify the details for yourself. Again, independent research and registration checks are your best defence against fraud.

3. Illusion of control: “Don’t worry, you can withdraw your money anytime”

Thompson also offered investors a sense of control. They were told they could withdraw money at any time, which many investors did, making the opportunity feel flexible and low risk. Supported by fake weekly reports that showed two to three per cent “profits”, Thompson reinforced that illusion of safety.

But real markets don’t work that way. Returns fluctuate. No-risk and consistent positive returns aren’t just unlikely, they are unreal. If you’re being shown a steady gain every week regardless of what’s happening in the economy, that’s a sign that something isn’t real.

CheckFirst tip: Legitimate investing involves volatility. Be cautious of anyone who promises smooth, guaranteed growth or no down weeks. Start by understanding investment risk.

 

How the Black Box Ponzi scheme collapsed

Like all Ponzi schemes, Black Box relied on a steady flow of money from new investors to pay earlier ones, until the scheme eventually unravelled.

By the fall of 2023, the scheme collapsed, leaving more than 1,000 investors with significant losses. Of the roughly $150 million raised, Thompson lost at least US$47 million. The rest was used to pay earlier investors, lost through trading, transferred to other entities, or diverted for Thompson’s personal benefit.

When concerns were raised by investors and their financial institutions, the ASC acted quickly to investigate and freeze accounts.

“When we received a call from a financial institution raising concerns about a potential Ponzi scheme in one of their client accounts, we took immediate action to have those accounts frozen and issue interim orders,” said Cynthia Campbell, the ASC’s Director of Enforcement, speaking to the media. “At that point, only about US$300,000 remained. It appears all of the other funds were gone.”

Thompson and his companies admitted to trading securities and defrauding investors. As part of a settlement agreement in August 2025, they were sanctioned and ordered to pay nearly $9 million to the ASC.

 

How to protect yourself from investment scams

Even the most seasoned investor can be manipulated by a story that feels personal. The best way to protect yourself is to slow down and ask questions before you hand over your hard-earned money:

  • Pause before you invest. Fraudsters rely on urgency. Take your time to evaluate.
  • Check registration. Use CheckFirst.ca to see if the person and/or company is registered to sell investments.
  • Ask questions. If you can’t clearly understand the investment opportunity or identify the risks — it’s time to step back.
  • Expect fluctuations. Legitimate investments rise and fall. Guaranteed or always positive returns don’t exist.
  • Seek a second opinion. Talk to a registered financial professional or a third party before making big investment decisions.

Doubt alone isn’t the only way to keep you and your money secure. Before you invest, do your own thorough research. Ask questions, and verify information against publicly available and trusted sources.  When it comes to your money, the smartest move you can make is to CheckFirst.

 

Enhancing investor protection: What OBSI’s binding authority means for investors

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Imagine you notice unexpected fee charges in your investment account or feel your financial advisor has given you advice that resulted in unexpected losses. You first raise your concerns with your advisor, then escalate to their manager, but your issue remains unresolved. Frustrated, you turn to the Ombudsman for Banking Services and Investments (OBSI), Canada’s independent dispute-resolution service.

After a detailed investigation, OBSI finds adequate reasons for your complaint and finds in your favour. OBSI recommends that your advisor compensate you for the financial loss you have experienced.

However, under the current system, OBSI’s authority is limited. Its recommendations are not legally binding. Firms can choose not to follow OBSI’s recommendations, leaving everyday investors without meaningful recourse.

Change, however, is on the horizon. As part of the initiative to enhance OBSI’s authority in resolving disputes between investors and their firms, the Canadian Securities Administrators (CSA) recently launched a second public consultation on a proposed framework. This would give OBSI the legal authority to make binding decisions in investment-related complaints.

 

What is OBSI, and how does it protect investors?

OBSI is Canada’s independent dispute-resolution service for banking and investment complaints. It reviews complaints from investors who have not been able to resolve their complaints directly with firms. If OBSI finds that financial harm has occurred as a result of a firm’s conduct, it can recommend compensation up to $350,000.

OBSI is not a regulator. It does not set or enforce rules for the conduct of firms or advisors. That responsibility lies with regulatory bodies like the Alberta Securities Commission (ASC), which oversees Alberta’s capital market, or the Canadian Investment Regulatory Organization (CIRO), which regulates dealers and advisors across Canada.

What makes OBSI especially important is its accessibility for retail investors who may not have the means to pursue legal action.

 

Are OBSI’s decisions legally binding?

Currently, firms that participate in the OBSI dispute resolution process are not legally required to follow its recommendations. While many firms comply, some refuse to do so either partially or entirely. When a firm refuses to comply with an OBSI recommendation, the investor is left with a decision in principle, but no way to make it happen.

While OBSI does publish the names of firms that decline to comply, investor advocates and independent reviewers say this “name and shame” approach has not been effective in ensuring compliance with OBSI recommendations.

 

What is the CSA’s proposed framework for OBSI?

In July 2025, the CSA, the umbrella organization of Canada’s provincial and territorial securities regulators, including the ASC, shared proposed enhancements to a framework to improve Canada’s dispute-resolution service for investors. The framework includes details of the proposed oversight of OBSI and it builds on the proposed framework that was initially shared in late 2023. The framework reflects years of dialogue and growing calls for strengthening OBSI’s mandate from investor advocates.

Key elements of the proposed framework include:

  • OBSI decisions would become legally binding: Under the proposed framework, if OBSI finds in favour of an investor, its decision would be enforceable like a court order. Firms would be required to comply.
  • External decision-makers for higher-value cases: In cases where recommended compensation is $75,000 or more, an external decision-maker would be appointed to ensure fairness and transparency.

Together, these changes are intended to give OBSI the authority — not just the mandate — to ensure meaningful and fair outcomes for investors and firms.

 

Why does this matter for investors?

For most Canadian investors, including Albertans, OBSI is one of the few accessible avenues to resolve disputes and seek fair compensation. Without the power to enforce its recommendations, OBSI’s impact has been limited.

Binding authority would help ensure all investors, regardless of resources, are treated fairly. Instead of relying on a firm’s goodwill or accepting less than the recommended amount, investors would have access to a fair and impartial process with enforceable outcomes.

Stronger investor protections, like this framework that has been proposed by the CSA, support the broader mandate of provincial regulators such as the ASC to foster a fair and efficient capital market.

 

Share your feedback: Support stronger Canadian investor protection

The CSA is asking Canadians to share their thoughts on the proposal. Your voice as an Albertan, matters.

If you have ever gone through the complaint process or have comments about the fairness and accountability of the proposed framework, this is your chance to weigh in.

The comment period is open until September 29, 2025.

You can read more about the proposal and find instructions on how to submit your feedback within the consultation notice.

If you have questions, you can reach out to:  Eniko.Molnar@asc.ca

Whether you support the proposal or think it could be strengthened, investor voices like yours can help shape the final framework.

 

Know your rights and protect yourself as an investor

Investor protection begins with knowing your rights. CheckFirst offers unbiased, easy-to-understand resources to help you feel more confident when dealing with your investments — whether you’re making a decision on your own or working with a financial advisor.

Here are some resources to help you with your investment journey:

The more you know, the better prepared you are to protect your investments.

Investing in the age of apps and finfluencers: How to stay safe when finance is trending

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Not long ago, learning the basics of investing felt like picking up a new language — one largely reserved for those with financial advisor. It was a world filled with jargon, confusing acronyms, and complex charts that seemed like they belonged in a boardroom.

Not anymore. Social media and investing apps have changed the landscape. Financial information is now more accessible than ever, with lessons, instructions and tutorials – which even go viral. Today, learning about Management Expense Ratios, jumping into the latest crypto trend, or finding a “stock tip” is just a couple of swipes away.

With DIY investing on the rise, many millennials and Gen Z investors turn to social media for advice. According to the Canadian Securities Administrators’ (CSA) 2024 Investor Index, a growing number of young Canadians rely on these platforms as their primary source of financial information.

Welcome to the era of the finfluencer — where content creators double as financial influencers, offering a steady stream of advice that ranges from helpful to questionable and potentially harmful. The appeal? They are often packaged into short, relatable, and easy-to-digest videos. But here’s the catch: just because the advice is easy to understand and appears simple to implement, does not mean it’s safe to follow or that it’s right for your financial goals. In some cases, this advice could even be breaking investment laws.

Jayconomics case study: How an Albertan finfluencer broke Alberta Securities law

In April 2025, the Alberta Securities Commission (ASC) found that James Domenic Floreani, a Canmore-based content creator known as Jayconomics, had violated Alberta securities laws. He did this by promoting investments without disclosing that he was posting on behalf of those companies.

The case dates back to sometime between 2020 and 2022, shortly after Floreani launched his digital brand, Jayconomics. Marketing himself as specializing in educational finance content, he built a following on YouTube, Twitter (now X), and Patreon, where audiences viewed him as a source of investment insight. However, during that time, he was paid $89,000 in cash and 20,000 restricted shares in promotional fees from four Alberta-based companies, in exchange for featuring them on his channels.

The issue? Floreani failed to clearly disclose that these videos and posts were made on behalf of the companies whose stocks he was promoting. In doing so, Jayconomics wasn’t just breaking securities law. According to comments on his YouTube videos, his followers lost real money acting on his recommendations.

Evidence presented by the ASC included comments from video posts in April and September 2022 that further supported this. In one case, an individual wrote, “Many of your viewers got burnt on your stock recommendations….”

 

How an unregistered finfluencer can put your money at risk

Despite presenting himself as an investing expert, Floreani’s financial education was limited to a single introductory university course and some online learning. During his interview, he admitted that Jayconomics was inspired by other content creators and that he often used clickbait-style titles like “This Stock EXPLODED to the NASDAQ, Dip Expected. Peak Fintech UPDATE & FULL ANALYSIS.”

As Floreani explained, “You have to make your titles pop out, and you have to make your captions pop out; otherwise, people are not going to click.”

With the first phase of the proceeding, which found that Jayconomics broke securities law, now complete and the decision public, the case will move into the next phase: determining the penalties Floreani should face for his actions.

 

5 red flags to watch for when following investing advice online

The next time you’re on FinTok or scrolling investment content, here’s what you should keep in mind:

  1. No mention of credentials or registration: Generally, in Canada, anyone offering investment advice must be registered with a securities regulator — like the Alberta Securities Commission. If a finfluencer never mentions credentials or only references vague experience, proceed with caution.
    If you’re looking for financial advice, speak to a registered financial advisor. They are licensed and regulated, and under the CSA’s Client Focused Reforms, are required to put the client’s interests first. You can verify someone’s registration status anytime at CheckFirst.ca/Check-Reg.
  2. Get-rich-quick promises: Be cautious of content that guarantees fast or unrealistic returns. Clickbait titles like “Double your money in a week” or “This stock will 10x” are designed to lure you.
  3. No disclosure of sponsorships or paid partnerships: In Alberta, anyone, including content creators, who promote the buying or selling of investments must be upfront and disclose if they’re doing so on behalf of a company and if they’re being paid to post. If the content sounds like an ad but doesn’t say it’s sponsored, that’s a warning sign.
  4. Charts with no context or unverifiable claims: Charts and graphs are often used to make content look credible. But without a clear source or explanation, the data could be misleading or cherry-picked to suit the influencer’s message.
    Always do your own research. A great place to start is looking for information beyond what is shared by the finfluencer, like publicly available financial and annual reports.
  5. Urgency tactics like “Act now before it’s too late!”: Creating a sense of FOMO is a common tactic used to pressure you into hasty decisions. Scammers rely on this. A well-developed investment strategy focuses on your goals as an investor, understanding your risk tolerance, time horizon and making informed decisions—not reacting emotionally.

While it may be impossible to avoid investing content online, recognizing red flags and examples like Jayconomics can help you avoid a risky or potentially costly decision in the future.

That is why, last month, the ASC joined other securities regulators for the Global Week of Action Against Unlawful Finfluencers. The initiative combined education for finfluencers on the rules they need to follow, together with public awareness about the risks of online investment content.

 

Before you invest, CheckFirst

Wherever you are in your investing journey, remember: one video or post should never drive a major financial decision. Even well-meaning creators can unknowingly give harmful or illegal advice.

Before following any financial content online:

  • Verify the source and their expertise.
  • Check for registration.
  • Check if it fits your goals and risk tolerance.
  • Ask yourself if there’s a financial motive behind the advice.

Your hard-earned money deserves more than hype. Pause. Ask questions. And always CheckFirst.

From text to pitch: How messaging apps have become a hotbed for investment scams

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A polished social media ad and a friendly invite to an “investors” messaging group might seem like an exciting first step towards a lucrative financial opportunity. But wait, this could be the bait of a well-orchestrated scam. According to the Canadian Anti-Fraud Centre, in 2024, Canadians lost $310 million to investment fraud – with many scams taking place online, including on social media networks.

Fraudsters commonly promote and sell their investment scams to potential victims through advertising on popular social media platforms and apps. These ads commonly promote fake “experts” or “advisors” who offer investment opportunities with high returns and the reassurance of little to no risk.

To connect with potential victims and make communications private and harder to trace or report, fraudsters will direct interested investors to a WhatsApp, Telegram or Facebook Messenger group to receive stock trading tips or guidance. Within these private groups, fraudsters work quickly to establish their fake credentials with the claim of being certified or registered. From here, fraudsters can use various tactics, including:

  • Pump-and-dump schemes that involve guiding investors to invest in stocks that the fraudster is already heavily invested in, using fake information and promotional material to build excitement. As investors put money in, the value of the investment artificially increases. Once the fraudster can no longer pull in any new investors, they sell their shares for considerable profit and tank the value of the investment for everyone else.
  • Providing guidance as an “advisor” and requesting that money be sent to them via wire transfer or crypto for them to invest on your behalf. Once money is sent over, the fraudster may send over fraudulent documents highlighting early but fake returns to establish credibility and incentivize the victim to send more money.
  • Directing investors to a fake trading platform to deposit money and start trading. While the platform looks legitimate with charts and simulated trading, money is not actually invested but taken by the fraudster. The fraudster may use the simulated returns in the investor’s account to push them to invest more for greater returns over time.

No matter what strategy the fraudster deploys, the results are the same for the victim. Investors may:

  • Lose most or all of their “invested” funds.
  • Not be able to access their funds with claims from the fraudster that a tax or fee requires payment, specific forms to be filed or that the investment needs more time to grow.
  • Be unable to contact or receive a reply from the fraudster. This is often followed by the fraudster deleting their account and messages and even shutting down fake trading platforms.

Real investment scam ads advertised to Albertans

Example of facebook investment scam ad Example of social media investment scam ad Example of investment scam ad on facebook example of a whatsapp investment scam ad

 

How can you spot the red flags of social media and messaging app investment scams?

Although it may sound exciting, before you invest in any opportunity promoted online or with someone claiming to be an investment advisor or professional, consider the following:

  • Is the ad promoting unrealistic returns or guaranteed profits? Remember, this is a common tactic to lure in victims. No investment can guarantee you returns, especially those claiming to double or triple your money in a short period of time.
  • Are you being directed to other messaging apps to continue the discussion? This is a red flag that you may be dealing with a fraudster and should be avoided. These messaging apps are used to keep the conversation private and make it easier for the fraudster to disappear and harder to trace.
  • Is the person claiming to be an expert or registered investment professional? Generally, anyone offering investments and all trading platforms dealing with Albertans should be registered with the Alberta Securities Commission. While you can verify the registration of any individual or trading platform, you cannot verify the true identity of a person online. Fraudsters commonly use the names and credentials of registered investment professionals to look legitimate. It is strongly advised that you do not send money to anyone you have not met in person or cannot validate their identity.

 

What should you do if you think you’ve been scammed?

If you are suspicious about an investment opportunity offered to you online through social media or feel like you were the victim of an investment scam, contact the Alberta Securities Commission below.

File a complaint
1-403-355-3888
complaints@asc.ca

 

Recently, the Canadian Securities Administrators launched a national ad campaign, as seen above. This campaign is designed to bring awareness to these kinds of investment scams offered through social media and messaging apps. Knowledge is power when it comes to preventing and reporting investment scams. Take the time to share this article with those you care for so they can be empowered to recognize and avoid this insidious form of investment scam.

Knowledge is power when it comes to preventing and reporting investment scams. Take the time to share this article with those you care for so they can be empowered to recognize and avoid this insidious form of investment scam.

Meme coin frenzy: How viral crypto coins could be pump-and-dump scams

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On December 4, 2024, viral TikTok sensation Hailey Welch launched her crypto coin named after her infamous catchphrase “Hawk Tuah.” Interestingly, Hawk Tuah Coin, or the $HAWK token, was not created with any clearly defined purpose or utility. As noted by Welch’s publicist, it existed solely as a way to bring fans together.

Driven by hype and fan frenzy on social media, the token launched with a 900 per cent spike from its starting price. At its peak, the $HAWK – widely considered a meme coin among fans — reached nearly $500 million in market capitalization. In traditional finance, market capitalization refers to the value of a company traded on the stock market. Within hours though, the coin’s value plummeted, losing almost 95 per cent of its value. According to a subsequent lawsuit filed by 12 investors, they lost more than $151,000 combined after investing in the coin.

The meteoric rise and fall of the Hawk Coin highlights the volatile nature of crypto coins. It also serves as a reminder that meme coins can be created with suspect intent, often lacking any real utility beyond generating hype. Remember, the allure of quick profits and the excitement of buying into a social media frenzy can be tempting, but investing in these assets can be extremely high risk.

 

What are meme coins?

Crypto assets were designed with the aspiration of being part of a wider movement to build the foundations of a new decentralized financial system. In this system, transactions between two parties could take place without the need of a government or financial institution middle man. Although meme coins are a type of cryptocurrency, they do have differences.

Meme coins typically emerge from internet culture, celebrating viral humour, social media trends, or influencers rather than financial fundamentals or real-world use cases. What makes these coins popular is their unique ability to capitalize on a sense of community and belonging through humour. Additionally, in some cases, uninitiated investors believe that the low price of meme coins makes them an easy and accessible investment option.

However, because the value of meme coins is primarily driven by community sentiment — and anyone can create a meme coin with the click of a button — they are particularly vulnerable to manipulation. This includes scams such as pump and dumps schemes, particularly with new Initial Coin Offerings (ICOs).

 

How do crypto coins get pumped and dumped?

A pump and dump scam typically takes place in two phases.

The scheme begins when a group of coordinated actors – often the coin’s creators, early investors, or influencers – artificially inflating the coin’s price through aggressive online marketing campaigns and coordinated buying. They generate buzz through social media, often leveraging influencer partnerships, viral content, and promises of “going to the moon.” This is the “pump” phase.

Once enough unsuspecting investors buy into the scheme and drive up the price, the fraudsters execute the “dump.” In this phase, they sell their holdings en masse for a substantial profit, triggering a massive price collapse. Regular investors, drawn into the scheme by the hype and promises of quick riches, are left holding virtually worthless coins.

 

Red flags: How to spot a pump and dump scam

As with any scam, protecting your money begins with taking time to check first for red flags or warning signs. Remember, meme coins are extremely volatile and a high-risk investment, with the potential for significant loss. Before committing your money to any investment — traditional stocks and bonds, crypto or meme coins — ensure you thoroughly research the investment for its legitimacy and alignment with your financial goals and risk tolerance.

  1. Unregistered individuals or trading platforms
    Generally, in Canada, anyone offering investments or investment advice must be registered with securities regulators in the provinces they do business.While trading crypto is allowed in Canada, not all crypto assets are considered securities or derivatives. To protect investors, the Canadian Securities Administrators (CSA) requires all Crypto Trading Platforms (CTPs) or crypto exchanges to be registered with a provincial securities regulator, such as the Alberta Securities Commission.

    Always verify the registration status of a platform in your province before investing.

  2. Token distribution, ownership and audits
    Just as fundamental analysis is crucial when investing in stocks, it is important you do your own research when investing in crypto.Understanding how the crypto token your interested in is shared or allocated among different user groups, such as the founders, investors, and the community can reveal potential red flags.

    Remember, decentralization is a foundational principle of blockchain. Be wary when a small number of wallets hold most tokens. High wallet concentration — where a few wallets hold most of the tokens — could indicate centralization and make the coin vulnerable to manipulation. It is also worthwhile to explore code audits conducted on the coin by the crypto community to uncover any potential vulnerabilities or red flags of the coin.

  3. Aggressive marketing and social media hype
    Scammers often exploit social media to generate artificial demand and FOMO (Fear of Missing Out). Be cautious of over-the-top marketing and promises that sound too good to be true.

The humour and hype surrounding meme coins may seem harmless, but can expose you to significant losses. The social media frenzy around the $HAWK coin shows how easily manufactured hype can mask a pump-and-dump scheme. Remember, separating hype and celebrity interest from your investing decisions can help you better realize your long-term financial goals.

Real estate crowdfunding: What you need to know before you invest

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Real estate crowdfunding has gained popularity as an easy way to invest in property without committing a large amount of money. While these opportunities can be appealing, it’s important to understand what you’re signing up for and the level of risk you are taking. This article breaks down real estate crowdfunding and key factors to consider when making investment decisions.

What is real estate crowdfunding?

Real estate crowdfunding allows multiple people to pool their money to invest in proposed real estate projects. Instead of owning a property outright, investors own shares in a company involved in the project with potential returns paid out at a later date, often years. These crowdfunded investments fall into two categories:

  • Equity investments: You own equity shares of an entity, which may increase (or decrease) in value over time. When the shares are sold, the value of the shares is returned to you.
  • Debt investments: You lend money to a corporate entity by way of a loan. You earn interest over time and when the shares are sold, the amount you lent should be returned to you. Debt can either be secured against the property or unsecured.

It’s important to know that you won’t own the property directly. Instead, your investment is tied to the expertise of the company developing the project.

Here are some questions to ask before jumping into this type of real estate opportunity:

  1. Who owns the property, and who manages it?
    Confirm whether the property’s title is held by the corporate entity you are purchasing shares in or another entity. Knowing the ownership structure will help you understand the risks tied to your investment.
  2. Are the expected returns realistic based on current market conditions?
    Be wary of overly optimistic projections. Even completed projects can face cost overruns, and actual returns may not align with initial projections. There is no such thing as a guaranteed return; market forces and other unpredictable factors influence investment outcomes, especially for long-term investments.
  3. How much debt is on the property, and what is the repayment plan?
    Projects requiring significant debt can put your investment at risk since debt is repaid before equity. Investigate how much debt the project requires and whether it comes from private lenders, who typically charge higher interest rates than traditional banks. Unsecured debt is riskier than secured debt. When there are multiple lenders, the position of the debt on the property’s title affects the risk level of the loan. Lower-priority debt on the title is riskier because higher-priority debt is repaid first.
  4. How experienced is the developer or project manager?
    A developer’s track record plays a critical role in project success. Developers with experience in completing projects with a history of returning money to investors are typically more reliable. On the other hand, new developers or those with multiple unfinished projects may lack the experience needed to navigate challenges. New developers often face a learning curve and might be overly optimistic about returns and timelines, while seasoned developers may be more realistic and less likely to overpromise.
  5. Is the crowdfunding platform registered with the Alberta Securities Commission or operating under an exemption?
    Some crowdfunding platforms are operated by registered dealers who specialize in assisting private companies to raise capital. Other platforms, whose only business is crowdfunding, operate under an “exemption” from registration. Registration-exempt platforms have been vetted and approved by the Alberta Securities Commission but are not allowed to provide any investment advice or assess whether a particular investment is appropriate for individual investors. These platforms are only allowed to accept a maximum investment of $2,500 per person. Check the platform’s status on CheckFirst.ca to see if it is registered or operating under the crowdfunding exemption.
  6. Is the company raising money transparent about its operations?
    Transparency is essential. If the company raising money for the project cannot explain how funds will be used or refuses to provide supporting documents, treat this as a red flag. Look for details about fees, ownership structure, project management and how the funding is allocated.
  7. What fees and costs will you pay?
    Real estate management often involves multiple fees for property management and administration. These fees can eat into your returns. Ask for a full breakdown of fees, determine who benefits from them, and ensure they are reasonable compared to industry averages.
  8. Are there conflicts of interest?
    Investigate related-party transactions, such as properties purchased from affiliates of the company raising money for the project. Check whether the property was sold at a price that an independent third party assessed as being fair and examine relationships between property developers, property managers and the company raising the money for the real estate project. Close ties could lead to biased decisions that negatively impact investors.

Beyond these considerations, understand that while real estate crowdfunding offers a unique way to invest in property, it’s not without risks. These investments are often illiquid, meaning you are not able to access your money quickly. Returns are also not guaranteed and depend heavily on project management expertise, the success of the project and the broader real estate market.

Before investing, make sure you have a clear picture of how this opportunity fits into your overall financial goals and risk tolerance. Doing your due diligence is key. Take the time to research each opportunity, ask critical questions, and/or consult with a registered financial advisor, if needed. Your investment decisions should empower you to build a strong, diversified portfolio while protecting your financial future.

Is remote access technology safe? How to protect yourself from the makings of an investment scam

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We’ve all received those suspicious messages: a text from your favourite online shopping company claiming your package is stuck or an email seemingly from Canada Post asking you to click a link to reschedule delivery to a package that you never ordered. These tactics might seem cliché now, but these prompts are the beginning of a scam.

But what if the scam was more sophisticated?

Imagine scrolling through your social media feed. You come across an advertisement for a risk-free investment with incredible returns. Intrigued, you click the ad to learn more. Soon, you find yourself on a call with a company representative. They walk you through setting up an “investment” account and since they can’t be there in-person to assist you with investing, they politely ask you to share your screen. This could be the start of a scam.

Earlier this year, the Canadian Anti-Fraud Centre (CAFC) warned Canadians of a rise in investment fraud. According to the agency’s annual report 2022, investment scams were the leading fraud category with the highest dollar loss. In most of the reported cases, the scams were cyber-enabled, with remote access or screen sharing becoming a common element to the scams.

 

What is remote access, and how does it work?

Programs like AnyDesk, Iperius Remote and TeamViewer are legitimate tools that allow a person to access your device from anywhere in the world. Once enabled, the software allows you to share your screen with a third party, granting them complete control over your computer, including private data, files, and passwords. In most cases, legitimate companies use this software to provide services, especially IT support.

But this is where scammers can slip through. Conmen can exploit this technology to steal private information or guide you toward fraudulent investment websites. Many times, the victims don’t even realize that a scheme is in play.

 

What is an AnyDesk or screen-sharing scam?

While all investment scams have similar warning signs, the methods used to engage you can be complex and varied. AnyDesk scams may often begin with social media contact. This first interaction could be in the form of an ad on your social media feed, a direct message or even an unsolicited call promoting a seemingly too-good-to-be-true opportunity.

To establish credibility, the fraudster may even use AI to generate text, manipulate images and videos to  fabricate a investment website that looks genuine.

Once contact is established, they work quickly to build trust, offering to educate and assist you during your investment. This tactic involves social engineering and manipulation, where the scammer is readily available to provide support and answer all your questions. Their next step is usually when they deploy remote access software like AnyDesk to “walk you through the process” of investing with them.

 

How to spot the red flags of a remote access scam

These scams often involve complex investment concepts like crypto or Forex trading. Scammers exploit a lack of knowledge and jurisdictional complexities to craft an elaborate plan. As part of their trust-building scheme, they may fake returns on your money and even allow small withdrawals to entice the victims to invest larger sums.

Here are common red flags:

  • High-pressure tactics: Creating a false sense of urgency is a crucial component of these scams. Pressure and stress tactics are meant to keep victims from questioning the opportunity or thinking critically. Look out for phrases like “no-risk”, “guaranteed returns” and “once-in-a-lifetime opportunity.” Remember, if an investment offer elicits an emotional response, take a step back.
  • Request to share screen: Personal information, including financial details, should always remain private. Never grant access to anyone who contacts you. Share your screen only if you initiated contact and it is with organization you trust, such as your workplace or an authorized service provider for IT support. Legitimate investment platforms, government organizations, or banks will never request remote access to your device.
  • Demands to borrow money to invest: A request to borrow money for investments is suspicious. Borrowing to invest is high-risk, and legitimate registered financial advisors discourage this behaviour. If someone pressures you to borrow funds for an investment opportunity, be wary of a potential scam.

 

Can money or crypto lost to an investment scam be recovered?

Studies have shown that investment scams increasingly involve an element of crypto, making recovery difficult due to its untraceable nature. Recovering traditional money transfers can also be challenging, as scammers often operate in foreign jurisdictions and use multiple fake accounts to wire money.

Are there legitimate crypto recovery companies?

While some legitimate recovery services might help with data or password recovery, many crypto recovery services could be another scam.

In a “recovery room scam,” fraudsters target previous investment scam victims with false promises of recovering lost funds for a fee. If you are someone who has fallen victim to a scam, be wary of bad actors offering to recover your money for a fee.

 

Before you invest:

  • Check the Investment Caution List: The ASC maintains a database of individuals, companies, and websites that may pose a high risk to investors. Firms or individuals mentioned on this list may be involved in fraudulent schemes.

 

How to report an investment scam in Alberta

If you’ve been scammed and lost crypto or money, recovering the funds is difficult. However, there are a few steps you can take.

  • Contact the Alberta Securities Commission: Reporting scams to the ASC as quickly as possible helps us disrupt, stop and prevent future harm. If you suspect you or someone you know has lost money to an investment scam, file a complaint with the Alberta Securities Commission via email complaints@asc.ca or call us at 403-355-3888.

Technological advances like remote access software may make life more convenient, but they can also be exploited by bad actors. By staying informed, you can help protect yourself and your loved from falling victim to deceptive tactics.

Top 3 Scams Seniors should be mindful of in 2024

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June 15 is World Elder Abuse Awareness Day, a time when the Alberta Securities Commission (ASC) is encouraging older Albertans and their friends and family to recognize the signs of elder financial abuse and fraud. Investment fraud continues to be the most prevalent form of fraud across Canada with seniors often targeted due to the perception that they have large retirement nest eggs, are thought to be more trusting and potentially have declining mental faculties. Whether you or an older adult in your life is an experienced investor or have never invested before, be mindful of the following pervasive scams.

 

Romance and pig butchering scams

Romance scams have skyrocketed in Canada in recent years with many fraudsters taking to social media platforms and dating apps to connect with those seeking friendship or love, including seniors who may be lonely or isolated. With the use of artificial intelligence generated imagery and voices, fraudsters are able to create convincing online personas. Once fraudsters are able to find a potential victim, they work quickly to establish trust by sharing fabricated details about their life and showering the target with attention and affection. Fraudsters commonly move the conversation to apps like Facebook, WhatsApp and Telegram to avoid having their accounts being suspended before offering tantalizing investment opportunities or offering to invest on the victim’s behalf. Fraudsters may even incorporate some element of a crypto investment, often referred to as a pig butchering scam, with promises of substantial returns. Regardless of the approach, the end result is the same. When trying to withdraw funds the victim is given excuses, or pressure to send more money or claims the money was lost in the investment. After these tactics, the fraudster stops responding and disappears.
Tip: Be extremely skeptical of any new online acquaintance who takes an immediate interest in your finances and any unrequested investment offers.

 

Fake crypto investment promotions

Crypto continues to be a popular topic for many older Albertans who have the expectation that buying in could be a silver bullet to their financial struggles. In reality, investing in crypto is high risk and offers no guarantees of returns. Older Albertans should be wary that fraudsters use a variety of different schemes to pull in victims, including claims of being a “crypto advisor” in online forums and social media, directing potential victims to fake trading platforms and advertising exciting and unrealistic returns in online and social media ads. If you are interested in investing in crypto, it is strongly advised that you take the time to learn more about this alternative investment and verify that any individual, trading platform or company you plan to invest with is registered with the Alberta Securities Commission or another securities regulator before sending money. You can call the ASC public inquiries line at 1-877-355-4488 to verify registration or by clicking here.
Tip: Crypto is high risk and not recommended for everyone. Avoid any crypto offers or trading platforms promising guaranteed returns and little to no risk.

 

Recovery room scams

If you or an older person in your life has lost money to an investment scam, you may be contacted by someone claiming to be from a recovery agency or law enforcement with a promise of helping victims recover their funds for a fee. Fraudsters retarget recent victims using information from the original scam to make the recovery agency look credible. While legitimate recovery agencies do exist, you should discuss any fund recovery options with a lawyer first. Remember, it is rarely possible for recovery agencies to recover your money or crypto.
Tip: Be mindful that neither law enforcement agencies nor the ASC will ever contact you with an unsolicited offer to recover your money or crypto for a fee.

This June, take some time to focus on financial security for yourself and your loved ones. In addition to learning more about investment scams targeting seniors, empower yourself to make sound investment decisions regardless of age.

CheckFirst’s Investing as You Age is your comprehensive and unbiased resource for information on investing at any life stage. Learn more about assessing your investment goals, choosing the right investing method, and recognizing, avoiding and reporting investment fraud and financial abuse.

Concerned about an investment scam?

If you are suspicious about an investment offer you or your loved ones have received or concerned that you may have lost money to an investment scam, do not hesitate to contact the Alberta Securities Commission.

ASC Public Inquiries
403-355-4151
Toll-free: 1-877-355-4488
inquiries@asc.ca 

Is crypto a good investment? Understanding the risks and rewards of crypto

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After a bleak 2022-2023 marred by controversy and fraud, crypto is back in the spotlight. Driven by news including headlines of the launch of US-based spot ETFs, and evolving regulatory developments, this digital asset has seen a surge in valuation, attracting investors looking for alternative investments.

A recent 2023 study by KPMG highlighted that Canada’s investment sector was warming up to crypto. The report found that 22 per cent more of the surveyed financial services providers in Canada offered crypto-asset services than in 2021.

However, crypto’s potential for higher returns comes with a significant risk of greater losses. Unlike conventional investments, the very features that make crypto appealing also makes it inherently risky. And this risk extends beyond price volatility — including vulnerability to scams.

Understanding the basics of crypto, the associated risks and what makes it an easy target for scammers is crucial for anyone considering entering this fast-changing market.

What’s the idea behind crypto?

Cryptocurrencies are part of a wider movement to create a financial system that is open, borderless, decentralized and immutable. Proponents of crypto believe that the system would foster a culture of financial transparency and collaboration that allows for rapid innovation and development.

While commonly called ‘cryptocurrencies,’ the term can be misleading. In Canada, cryptocurrency is not recognized as legal tender under the Currency Act. The term ‘crypto-asset’ more accurately encompasses the common types of digital assets you might encounter, including utility tokens, payment tokens, virtual assets, digital currencies, or stablecoins.

 

Is crypto trading legal in Canada?

Trading crypto is allowed in Canada, but not all crypto assets are considered securities. But this does not mean that investor protections offered by securities laws do not apply to them.

To safeguard Canadian investors, starting in January 2020, the Canadian Securities Administrators (CSA) asserted jurisdiction over Crypto-Trading Platforms (CTPs), commonly known as crypto exchanges, operating in Canada. As a result, all CTPs in Canada must be registered with the Alberta Securities Commission or another provincial securities regulator.

 

Crypto’s benefits and risks

Over the years, crypto’s rise to prominence can be attributed to several factors. First, its decentralized nature allows for peer-to-peer transactions without the oversight of a trusted third party like a traditional financial institution. Cutting out central authorities overseeing transactions reduces fees and speeds up processing times Secondly, due to its highly speculative nature, investors may be drawn to the potential for higher profits, using it as a way to diversify their portfolio or make quick short-term gains.

But this allure also brings inherent risks.

 

Why is crypto prone to scams?

Decentralization and lack of regulatory oversight: The principle of decentralization is foundational to crypto. However, the lack of oversight can also weaken investor protections.

Investors often use crypto exchanges to buy or trade crypto. In Canada, any platform trading crypto-assets must be registered with the ASC or another provincial Canadian securities regulator. Unregistered platforms might not comply with securities law, including providing false information and lacking investor protections like secure client fund handling, safekeeping of client assets and measures against market manipulation.

Also, given the borderless nature of crypto and the advantage of anonymity, in case of fraud, crypto sent to unregistered platforms located in foreign jurisdictions may never be recovered.

Price volatility: Crypto is known for its frequent and significant price fluctuations. These extreme swings often attract investors hoping for quick, short-term gains. However, the highly speculative nature of the asset class, heavily influenced by market sentiment, also creates opportunities for scammers to deploy their schemes.

While scammers often repurpose traditional investment scams like pump and dump or ponzi schemes by including a crypto element, common crypto scams include:

Rug Pulls: Rug pulls, which get their name from the expression “pulling the rug out,” involve attracting investors with a new crypto project and pulling out all funds before the project is built, leaving the investors with no balance in the pool. These scams can sometimes include elements of a Ponzi scheme, where investors profit by recruiting other users with false financial promises.

Fake Initial Coin Offerings (ICOs): Fraudsters frequently create fake ICOs, where a new crypto product is launched and sold to investors. These fake ICOs may have professional-looking websites and whitepapers, but ultimately offer nothing of value, leaving investors with nothing but empty promises.

 

How to invest in crypto in Canada?

Before committing to putting your hard-earned money into an investment, either traditional stocks and bonds or crypto trading, always Check First.

Check: if the investment suits your risk tolerance; if the crypto asset trading platform you choose to use is registered with the Alberta Securities Commission; and if you understand the business.

As every crypto enthusiast knows, thorough research, referred to as “doing your own research”  DYOR is critical. It can help you understand the risks and opportunities, invest suitably, and avoid scams.

Fraud Prevention Month: 4 steps you can take to safeguard your money from investment scams

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March is Fraud Prevention Month, a national spotlight that seeks to help Canadians recognize, avoid and report fraud. One of the growing and most insidious forms of fraud are investment scams, where fraudsters prey on those looking for worthwhile opportunities or just the answer to challenging financial circumstances. According to data from the Canadian Anti-Fraud Centre, the amount of money reported lost to investment scams has multiplied nearly 20 times from 2019 to 2023.

Fraudsters work hard to repurpose their investment scams and leverage connections they can make online and in person. While it may be hard to know and remember the latest investment scams, there are some great resources and tools provided by the Alberta Securities Commission (ASC) to help you better safeguard your hard-earned money.

Consult the ASC’s Investment Caution List

To help inform and protect investors, the ASC created the Investment Caution List. This list outlines companies and individuals that the ASC has identified as appearing to be engaging in activities that either require registration under Alberta securities laws or may be investment scams. It is worthwhile to check this frequently updated list before working with any individual or firm to ensure that they are not present on the list.

Subscribe to the ASC’s Investor Alerts

Investors wanting to stay ahead of emerging fraud trends and market misconduct can also subscribe to the ASC’s Investor Alerts, which are delivered directly to their inboxes. These alerts provide investors with up-to-date information on unregistered individuals and firms violating Alberta and/or Canadian securities law. ASC’s Investor Alerts also help warn the public of common fraud tactics.

Strengthen your investment literacy with CheckFirst.ca

Whether you’ve just started investing or have been on your investment journey for years, the ASC’s investor education website CheckFirst.ca provides a wealth of important information. You can find resources and tools to help you invest suitably for yourself, recognize the red flags of fraud and conduct registration checks on individuals or firms you plan to work with.

Building your knowledge is an ongoing effort, which is why the ASC shares a new CheckFirst article each month covering an investing concept, misconceptions about investing, investment fraud trends and frequently asked questions. Even better, you can subscribe to the CheckFirst newsletter for the latest articles, investor alerts and upcoming investor education programs in the community.

Explore the ASC’s 31 Days of Investment Fraud throughout March

common investment scamsIn recognition of Fraud Prevention Month, the ASC recently started sharing its new 31 Days of Investment Fraud resources. Every day of the month, the ASC will highlight a common investment fraud scam or red flag and detail how Albertans can safeguard their money.

Alongside this information, found on CheckFirst.ca/Fraud_Prevention, visitors can test their knowledge with the Don’t be fooled by fraud quiz and download or print the complete 31 Common Investment Scams and Red Flags infographic. This infographic gives investors a comprehensive list of what to look out for when it comes to investment scams and how to best avoid them.

Throughout March 2024, visitors who explore the page and subscribe to the CheckFirst newsletter will also be entered in a draw to win one of three pre-paid MasterCards worth $150.

Building your investor knowledge and leveraging the free tools and resources provided by the Alberta Securities Commission can be a strong combination to protect yourself. Remember, if you are suspicious about an investment you were offered or believe you or someone you care for was a victim of an investment scam, contact the Alberta Securities Commission. You can contact the ASC public inquiries at 1-877-355-4488 or email inquiries@asc.ca.