Canadian securities regulators say they’re seeing a surge in fraud schemes that use social-media platforms to lure victims into investing in specific stocks.
The schemes are a variation of what’s known as a pump-and-dump scam, a type of securities fraud where the perpetrators artificially inflate, or pump, the price of a low-volume stock with false or misleading information, then dump their shares at a profit. That causes the price to plummet, leaving other investors with losses.
It’s the latest warning as securities watchdogs combat a deluge of fraud in recent years, with victims reporting more than $704-million in losses to the Canadian Anti-Fraud Centre last year.
That’s up from $645-million in 2024, and likely represents just the tip of the iceberg; the centre estimates that only 5 per cent to 10 per cent of fraud is reported.
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The issue has attracted the attention of the federal government, which is consulting on a strategy to deal with it.
The Canadian Securities Administrators, an umbrella organization made up of provincial and territorial securities regulators, says its members are witnessing an increase in what it calls ramp-and-dump schemes.
These scams are similar to pump-and-dump schemes, with one key difference: the perpetrators rely on social-media platforms to connect with prospective victims, inviting them into investment groups on private messaging platforms such as WhatsApp, Discord and Telegram.
Posing as knowledgeable investors, the scammers entice or even pressure the group’s members into buying specific stocks. Typically, they focus on smaller stocks with a limited public float – a low number of shares available to the public – because their prices are easier to manipulate.
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Sometimes the scammers impersonate celebrities, politicians or well-known stock advisers.
After they sell their shares and the prices of the stocks they were promoting fall, the groups typically vanish. Victims who had invested are left holding what Jennifer Quaid calls “the proverbial bag.”
Ms. Quaid, who serves as executive director of the Canadian Cyber Threat Exchange and the Canadian Anti-Scam Coalition, said that using social media gives scammers access to “a whole new generation.” The coalition includes financial institutions, telecoms, technology companies and other organizations, who have come together with the aim of tackling fraud.
“These are the people who are just getting into the market. They’re dipping their toe in,” she said.
The loss can be particularly devastating because it can undermine their belief in the system, she added.
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“It really makes me angry because these are the people who should be investing in the markets now and starting to save for their futures, and they’re doing the right thing and they’re being responsible. But the problem is that they don’t understand or know how to determine the real from the fake.”
Ms. Quaid said it’s important to be wary of investments promising returns that sound too good to be true, or any adviser who is trying to create a sense of urgency.
“Anybody that is trying to get you to make a decision quickly, you’ve got to question why they’re doing that. Because if a stock truly has value, it’s gonna have value tomorrow,” she said.
The federal government is in the midst of consultations for a national anti-fraud strategy that is expected to address the issue of liability for fraud losses.
The consultations follow a plan announced in Ottawa’s 2025 budget to develop a cross-sector, national anti-fraud strategy that brings together financial institutions, telecommunications providers and technology companies.
Consumer advocates have proposed that banks be required to reimburse fraud victims, while the banking sector has been has been advocating for a cross-sector approach. The consultation period is set to close on April 28.
The CSA has been working with an unnamed third-party technology service provider to disrupt fraud by taking down websites peddling investment scams.