'Money-flipping' and other financial frauds are currently sweeping South Africa.

Since the beginning of 2022, there has been plenty of news about an invasion of investment scams, from famous Netflix movies praising the brazen exploits of “swindlers” to local reports about opportunists defrauding individuals and companies.

South Africans lost more than R1.5 billion in banking and card fraud alone in 2020, according to the South African Banking Risk Information Centre (SABRIC) (the latest available data). When you include in additional frauds and victims who are too embarrassed to acknowledge being targeted, the figure is sure to rise dramatically.

The Financial Sector Conduct Authority (FSCA) recently received information on a South African individual who allegedly scammed over 600 investors, some of whom lost more than R1 million, by claiming that they could double their money in three months by trading foreign exchange.

“With stunning gasoline price hikes and food price hikes, consumers have been hammered hard financially. ”These elements, along with our need for immediate gratification, make us more vulnerable to bogus “special offers” and get-rich-quick scams, according to Phiko Peter, a customer relationship manager at Allan Gray.

“On top of that, technological advancements have made immediate investment more accessible.” Unfortunately, old-fashioned scams are getting a digital facelift, and fraudsters are leveraging online channels to defraud their victims.

Below, Peter has highlighted some of the most frequent investment frauds now operating in South Africa.

The pyramid system of the twenty-first century

The emergence of social media has made it simpler for con artists to reach social networks, but the scam remains the same: a charming con artist presents a fantastic financial opportunity that offers incredible profits to a limited number of investors.

After that, each investor is urged to join and solicit additional investors (friends, family, acquaintances, and colleagues). As a result, these new investors attract other new investors, forming a multi-level pyramid system with the fraudster at the top.

Investors may see high profits at first, and they may confidently guarantee prospective recruits that their investment will pay off. These initiatives, however, are unsustainable. The plan is unable to offer returns to its investors once the pool of new investors and fresh investments has dried up, and it ultimately collapses, leaving investors with irreversible financial losses.

These scams are being carried out in the digital era via messaging systems like as WhatsApp, which has proven advantageous for con artists who can now communicate quickly and recruit with relative secrecy. These systems run well thanks to the use of digital payments. It's too late by the time the plot unravels and the truth is revealed.

The money-laundering ruse

Through social media sites like as Facebook, Twitter, and Instagram, money-flipping frauds have defrauded numerous local investors. These schemes claim to be able to double or treble your money in a short amount of time.

Victims are persuaded to submit money to a con artist who promises high profits in exchange for a little fee. These investment opportunities are frequently presented in South Africa as FX trading, binary options, or offshore property prospects.

A fraudster will establish a legitimate-looking social media profile exhibiting exotic trip places, luxury automobiles, and designer apparel to carry off this social media scam.

The fraudster uses these rich lifestyle photographs to portray himself as a successful and trustworthy investment. To sell investors the dream and appeal into our need for rapid satisfaction, others would tout about working for less than an hour every day.

Once a victim has been duped, fraudsters may provide thorough investment reports to show investors how their money is increasing and persuade them to make greater investments. When an investor wants a withdrawal, they are confronted with a series of delays, and they may be requested to pay even more money to get the cash released.

This continues until the fraudster deletes their account and stops communicating.

Keep an eye out for these warning signs.

While many of us assume we would never be fooled by these obviously blatant con artists, the truth is that it may happen to anybody. You are not alone if you have been duped out of money in South Africa by a con artist. According to studies, even the most financially aware people may be deceived in difficult times.

So, how can you make your investment strategy scam-proof？ The fact is that there are no quick fixes for long-term wealth creation. When evaluating a new investment, keep the following red signals in mind:

A pyramid scheme is an investment that needs you to attract new investors in order to see a return on your investment. Be aware of ventures with several levels or tiers that categorise investors (e.g., bronze, silver, gold, platinum and diamond).

You should be careful if you don't comprehend how an investment product earns its profits and there are no obvious underlying assets.

Fraudsters try to generate a sense of urgency so that you spend less time researching and considering the possible investment. Avoid anything that is advertised as a “once-in-a-lifetime chance.”

Though previous success is no guarantee of future results, you should look into financial service providers who have a good track record. The majority of con artists will make big promises without a track record to back them up.

It is not regulated if the investment is not registered with a mainstream financial organization such as the FSCA. You should also call financial organizations to double-check the registration of any new or inexperienced financial business.

The old saying still holds true: if something appears too good to be true, it generally is. A con artist is someone who manipulates your emotions in order to obtain money. Trust your instincts; they'll save you money in the long run.