3 common financial scams on social media

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There is no shortage of people on social media who want to separate you from your money.

the main points

  • MLM often recruit people on social media for supposed job opportunities, but only those at the top make money.
  • Fake teachers use social media to find buyers for low quality, overpriced courses and mentoring sessions.
  • Social networks also have their fair share of investment scams, including Ponzi, Pump, and Dump schemes.

Social media makes it easier for people to connect, and that has its pros and cons, to be clear. One of the dark sides of social media is how shady characters use it to make money. There are questionable business ventures, pump-and-dump investment schemes, and a whole lot of other money.

If you’re not familiar with these schemes and how they work, it’s easy to get sucked into the poor personal financing decisions. After all, the people who run it know exactly what to say. To know what to look out for, here are the most common financial scams you’ll see on social media.

1. MLM

Multi-level marketing (MLM) is a business model where you sign up to sell a company’s products directly to consumers and earn commissions on sales. You can also recruit other people to do the same. Anyone who signs up under your name is your downline, and you get a commission from their sales too.

People involved in MLM often use social media to find potential recruits. Their shows usually include claims about how to start making money on social media, become your own boss, and take control of your financial future. Examples of popular MLM companies include:

  • Amway
  • Avon
  • herbalife
  • Primerica
  • Mary Kay

The problem is that for all the talk about how great these supposed job opportunities are, Hardly anyone makes money. seriously. the The Federal Trade Commission (FTC) has researched it It concluded that “less than 1% of MLM participants win.”

If you ever get an MLM promotion and want to make sure you don’t miss out, search online for the company name and the words “income disclosure.” What you’ll find is that the only people getting paid anywhere close to a full-time salary are the top 0.5% to 1%. Take Amway, for example. the The average income was $766 in 2021before expenses, such as the $76 annual registration fee.

2. Fake teachers

Spend enough time on social media or YouTube, and chances are you will encounter ads by fake teachers. The star of the video shows some obvious signs of affluence, such as a flashy car or a fancy apartment. They talk about how they used to be totally broke, but now they’re so successful they want to teach you how to live the life of your dreams. There are also a lot of talking points that they all seem to be echoing, such as:

  • 9 to 5 jobs for losers.
  • College is a waste of time (and you can bet they’ll cite Steve Jobs and Bill Gates for proof of this theory).
  • You can be a billionaire. In fact, anyone can! Never mind that the people saying this in their videos are not billionaires themselves.

The whole point is to get you to click a link and work your way down their sales funnel. It might start with an e-book, then an expensive course, then private mentoring sessions that cost $10,000 or more. They will make it sound like this is an investment in yourself to convince you to make the most out of it credit cards and drain your bank account.

Although there are fake teachers in many industries, most of them gravitate towards the field of “how to make money”. They will prepare courses with information you could have gotten for free on topics like selling on Amazon, dropshipping, real estate investing, or forex trading, to give a few examples. But make no mistake about it — What they are really selling is a dream.

After all, if someone had a great way to make money, they wouldn’t just do it instead of courses. The truth is, these fake experts didn’t make it because of real estate investing, day trading, or dropshipping. Their real business is the get-rich-quick schemes they sell.

3. Investment scams

For as long as people have been investing money, there have been investment scams. These come in many forms, but they all lure victims with promises of great returns. One well-known example is a Ponzi scheme, in which a fraudster uses money from new investors to pay off older investors (after taking a significant portion of it). In the end, there is not enough money to pay everyone.

Another investment scam that happens all the time on social media is the pump and dump. Here’s how it works:

  • A friend, acquaintance, or complete stranger posts about an incredible investment opportunity in a small business. They didn’t mention that they actually own a big part of the company.
  • People buy the stocks recommended by the fraudster, driving up the prices.
  • The scammer dumps (sells) all of his shares at the now higher price, making a tidy sum.
  • The share price drops due to the sale, leaving new investors with a dry run.

newly, Cryptocurrency scams gained fame. These are easier for scammers, because anyone can create cryptocurrency and start pumping it out. that they were particularly prevalent During the cryptocurrency bull market in 2020 and 2021, but it still happens today.

Nobody deserves to lose their money to a scammer. Unfortunately, financial scams are all over social media, so be very suspicious of anything that seems too good to be true. For example, making five figures a month from the comfort of your home, with no experience or skills required, is not going to happen.

If you are not sure about a supposed financial opportunity, go for it. Look it up online, and try adding the keyword “scam” too. If it is a scam, you will likely find a lot of stories from previous victims. Most importantly, always err on the side of caution.

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