Have you ever received an out-of-the-blue text saying you won a new car in some contest that you had never signed up for? Or has a supposed real estate company ever approached you with a limited-time offer to buy a plot at extremely cheap rates because won some random lucky draw? Such messages are always followed by a demand to transfer some money into an unknown bank account so your product can be delivered to you. Unfortunately, these are some of the most common investment scams in Pakistan and a large number of people fall for these fraudulent calls and emails on a daily basis.
Although scammers use different and often quite innovative ways to defraud people, their mode of operation and overall format is pretty much the same.
Before we discuss tips on avoiding investment scams, let’s take a look at some of the most common methods scammers use to trick people into giving them their hard-earned money.
Most Common Types of Investment Scams in Pakistan
Here are some of the most common types of investment scams you should know about:
- Pyramid and Ponzi schemes
- Real estate investment scams
- Pump-and-dump scams
So, why do people fall for these types of fake investment schemes in Pakistan? Let’s take a look at how these fraudsters mislead innocent victims by using these scams.
Pyramid and Ponzi schemes
These are easily the most popular fraudulent schemes scammers use to trick people not just in Pakistan but all over the world. These investment scams most often include a scammer telling you they can turn your small investment into a substantial profit within a few days.
A pyramid scheme essentially asks investors aka the victims to recruit new members for the program and pays you a small profit for each participant you bring in. Although it might appear to be a legitimate business on the surface, those who run these fraudulent schemes take people’s money and run off as soon as they realize the members aren’t able to recruit new participants anymore. This usually takes a few weeks or a couple of months, at most.
On the other hand, a Ponzi scheme does not ask investors to recruit new members. Named after an infamous con man from 1920s, Charles Ponzi, the fraudsters running this investment scam propose multi-level marketing schemes. They basically lure people into investing in a project and in order to appear legitimate, pay substantial profits to early-stage investors. However, this money comes from the newer investors and the cycle goes on until the stream of investments slow down.
Real estate investment scams
One of the most common real estate investment scams involves fake developers calling up unsuspecting people and telling them about some new commercial or residential project that has just launched – most probably in another city. They then offer you to buy a plot, shop or a home in their project on very low rates or instalments. Sometimes, these people might even have an office and a website, but they always work independently instead of partnering up with any renowned marketing agencies or real estate portals.
These fraudsters usually implore people to make a payment on an urgent basis to reserve their slot. They also won’t give you enough time to see where the plot or the house is located. Unfortunately, a lot of people fall for such scams. Once they make a payment, they find out the project never existed and all of their money is gone.
You should also take a look at some other common property investment scams and learn how to avoid them.
Pump-and-dump scams
This is also one of the most common investment scams one needs to avoid.
Pump-and-dump schemes are basically securities fraud where scammers reach out to potential investors and encourage them to buy low-priced stocks in some business you have never heard of. The thing is, these fraudsters already own a large amount of these worthless stocks. For a short time, the value of these stocks rise sharply, but that’s only because a lot of unsuspecting investors keep buying them.
However, once they have sold all the stocks and the price hits a peak, the scammers sell all their shares, fold the business and vanish. The victims, on the other hand, don’t get anything except some stocks that have no value at all.
Tips on How to Identify Common Investment Scams
No matter how legitimate they might try to appear, these fraudulent businesses have a few tells. Here are a few tips to identify some common investment scams that everyone should know about.
- Scammers are unknown entities that contact you out of the blue. They will most likely pretend to be a new or an offshore company.
- They might know your personal contact information and other details, even though you have never provided it to them.
- These people promise you risk-free-investment that will make you rich in a very short period. The amount of investment can vary from thousands to millions, depending on the scale of the scam.
- They pressure you into making a quick decision by claiming it’s a limited-time offer.
- The scammers either ask you to be on the line while you make a decision or constantly call you until you give them an answer.
- The offer simply seems too good to be true.
- They will most likely ask you to keep this once-in-a-lifetime opportunity to get rich a secret from others.
- Fraudsters always ask people to make a payment without filling out the requisite paperwork.
How to Protect Yourself against Investment Scams
Now that you know some tips on how to identify them, here are a few steps you can take to avoid common investment scams and money frauds.
- Protect your identity
- Don’t give out your contact information to strangers
- Be wary of unsolicited offers
- Ask questions
- Do some research
- Don’t attend any free seminars or workshops
Let’s discuss these tips in detail.
Protect your identity
Identity theft is no joke, a lot of people become its victim every year.
Also known an identity fraud, it takes place when someone intentionally uses your personal information to commit an illegal activity – like starting an investment scam and accessing your bank account, among others.
In order to protect your identity, you need to be very careful about your personal details and important documents. Some of the main things that can lead to identity theft include losing your wallet, getting your mobile phone stolen, ATM skimming, someone accessing your mail, online phishing, bank data breaches and most importantly, someone else using your credit card.
If you want to make sure you never become victim, take a look at some tips on how to prevent identity theft.
Don’t give out your personal information to strangers
This one is a no-brainer.
Never give out your contact details to strangers. You might find people distributing surveys on random topics and asking your personal details or collecting information as a part of some sort of marketing drive. It’s usually a trick to collect data, which can then be sold to multiple scam businesses.
It is also important to mention that you should be very careful while using phone banking services, as someone can overhear the conversation or even intercept your call.
Be wary of unsolicited offers
Always be on your guard while answering calls from unknown numbers. If someone tells you that you’ve won a prize in some contest or if your application for a loan has been approved by the bank, ask them for their details. If someone’s pretending to be calling you from the bank, put the phone down and contact the bank for verification.
Ask questions
Ask as many questions as you can, with the first one being ‘How did you get this number?’ You can also ask them about their website, office address, other clients and most importantly, their National Tax Number (NTN) or Sales Tax Registration Number (STRN).
Do some research
Never make any payments without doing some research. If you feel as if a real estate listing is fake, visit the location yourself and call some local real estate agents for more information. In case of seemingly shady business, their name and details on social media and ask people if they’ve recently been contacted by any such company.
You can also reach out to local authorities to check if the business is registered.
Don’t attend any free seminars or workshops
A lot of times, in order to establish themselves as a legitimate business, scammers hold free seminars and workshops. This is one of the most common investment scams to lure people in. In these workshops, they persuade participants to invest in their project (whatever it might be) and promise instant results.
More often than not, these fraudsters ask the attendees to pay a percentage of the total amount at the end of the scam investment seminars – don’t fall for it.
If anyone ever offers you a free investment seminar, please say no and put the phone down. If possible, warn others as well. Moreover, if needed, you can also contact local authorities for help.
Although scammers might go the extra mile in an attempt to fool for you, remember that taking a few preventive measures can save you from losing your money.
Meanwhile, for more information on how to avoid common real estate investment mistakes, stay connected to Zameen Blog – the leading property blog in Pakistan. You can also subscribe to our newsletter to receive the latest updates about the real estate sector in the country. In addition to that, if you can any questions or are hoping to share your suggestions with us, please send us an email on blog@zameen.com.
