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Online trading fraud is becoming a global scourge

Online trading fraud is a rapidly growing global problem. The Federal Bureau of Investigation estimates that such scams stole about US$6 billion (S$8 billion) in the United States and rich European nations alone in 2022. Tackling the gangs is difficult because they work across borders and change the forms of their deceptions frequently to evade detection.

In these types of crimes, victims are lured to click on enticing Internet advertisements, which often borrow credibility from a well-known figure. A recent example targeted at Germany used fake news about investor Elon Musk quitting Tesla to run an artificial intelligence investment firm. 

They are then pressured by phone and e-mail by syndicate workers to make an initial modest investment – around €250 (S$365) or so – and increasing amounts after that. While investors may think they are earning profits day by day, when they go to cash out, there is no money.

One of the biggest centres uncovered by German prosecutors had more than 400 operatives in Kosovo. It scammed German victims out of some €32 million in less than three years.

For mainstream finance, online trading scams are becoming a reputational risk that is no longer confined to the sidelines. Scammers have mimicked Deutsche Bank’s trading platform X-markets, borrowing the name and its solid appeal to middle-class investors.

The brains behind the network of gangs running the scams have, in the past, picked on some very high-profile targets. One culprit is Gery Shalon, the mastermind of one of the biggest-ever hacks on the US financial system. He had to return over US$400 million as part of a deal with the US.

Shalon’s partners include fellow Israeli citizen Gal Barak, dubbed the “Wolf of Sofia” for building a scammer empire from the Bulgarian capital. 

Employed to scam

Their call centres are run with multi-layered management, processes and accounting. They can have shiny offices, pay local taxes and offer seemingly legitimate jobs. The one run by Barak used to have a big recruitment banner at Sofia airport.

The job of the operatives is to contact customers who log on to one of the many websites – with names like “Zoomtrader” or “Option888” – and talk them into investing a relatively small amount of cash, with the promise of quick and easy profits. Clients are then handed over to other agents, who act as “investment advisers” and are trained to use techniques of psychological manipulation.

Customers are led to believe, through fake online software and the advisers, that their cash is invested in financial products ranging from currencies to stocks, bonds, crypto and even derivatives. Wins or losses can be generated on the website as needed, regardless of what the “real” markets are doing.

But their money is already gone. Some of the artifices are so convincing that some investors thought they lost money due to market downturns.

Other than online trades, scammers also target vulnerable people in Europe through dating apps, such as a woman from Berlin who lost her life savings. When the 45-year-old was diagnosed with breast cancer in 2022, she signed up with an online dating platform to ease her mind from her illness.

She soon got to know what seemed to be a nice man of Asian descent and they started an intense chat relationship which comforted her. She did not question his explanation as to why the two could not meet. He said he was in the wine business and had to be in New York frequently.

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When, at some point, they discussed a common future, he mentioned owning a house and suggested they invest in cryptocurrencies. He introduced her to a trading platform, where she put in €100. She was soon rewarded with a payout of €200 – real money that landed in her bank account. Convinced by this success, she invested more and more, eventually borrowing €60,000.

In January, when her account showed more than €900,000, she asked to get the money. First she had to pay a fee, and after that she was told there was a backlog. Then she could not reach her friend and the platform was down. All in all, she lost €159,000.

Earlier this year, seven men and women were convicted in Germany for a cyber-trading scam that involved about 60 victims. One victim, a bank manager of Deutsche Bank, lost more than €500,000. Judge Thomas Metzger concluded: “Greed eats your brains.”

Top German senior prosecutor Nino Goldbeck is working to prevent more people from falling victim. “We get new complaints every day,” he said. “This area is booming and will remain a major threat in the coming years.”

“The perpetrators don’t know borders,” he said recently when he received the Bul le Merite, an award from Germany’s association of criminal investigators, to honour his achievements in fighting cyber trading. “They are simply ignoring them.” BLOOMBERG

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