Gift Card Scam Highlights The Importance Of Protecting Your Personal Data

The run-up to Christmas is often marked by a feel-good ‘Santa Rally’ in the markets. However, it’s also a time for traders to ensure they keep their money in legitimate assets and out of the pockets of scammers. Gift card scams are a relatively new and increasingly common problem, with the US Federal Trade Commission (FTC) reporting $148m has been stolen from consumers in this way.

How The Gift Card Scam Works

The scam typically starts with a call from someone claiming to be representing a business, a government agency or a bank with which the unsuspecting target has an online account. The claim made by the caller is that there is a security problem with the account and the fix involves the target buying a gift card and sending a photo of it to the caller.

Once the scammer has a copy of the gift card ID code, they’re able to redeem it themselves, cash the victim’s money and then filter it away through a chain of fraudulent accounts.

Intimidation is often a key part of the approach, with threats being made that proposed payments and legitimate purchases may be cancelled. It’s not only a hard sell but is also well thought out. To avoid being detected by the security systems of banks and retailers, the scammers instruct victims to visit a range of different stores and buy gift cards in denominations too low to cause alarm. Specific instructions to buy a specific card, at a certain store, by a particular time are not uncommon and appear to add credence to the claim that the process is legitimate.

Assessing and Managing Risk

The Gift Card scam has two obvious red flags: it starts with a cold call, and the ensuing conversation involves a hard sell. But the $148m lost by victims is proof of it being plausible enough.

It’s impossible to avoid all risks, but keeping up to date with new scams can have cross-over benefits for those who trade the markets. Never share personal data, and never be railroaded.

Trusted online brokers regulated by Tier-1 authorities such as FCA, ASIC, SEC and CySEC, do cut down on operational risk. Operational risk takes many forms, but the main one is the chance that your account might be hacked, and your funds stolen. Being regulated means brokers have to comply with Anti-Money-Laundering and Segregated Funds rules.

The fundamental principles of Market risk, the chance that a stock or other asset bought at a broker might decrease in value, is unavoidable. Each asset group has its risk profile, and making the wrong call on a high-risk instrument like crypto can result in traders losing everything.

Trading isn’t for everybody, but there is the potential for investments to make a return and even a trade that treads water looks a better option than losing funds to a gift card scam.

Crowdsourcing information about scam brokers can help others avoid falling into the traps set by disreputable brokers, and you can share your experiences here. If you want to know more about this particular topic or have been scammed by a fraudulent broker, you can also contact us at [email protected]

About the author: Justin Freeman

Justin is an active trader with more than 20-years’ industry experience of working for big banks and hedge funds. He has an inside knowledge of how the financial markets work, thanks to roles including trader on a $750m Event-Arbitrage desk and CRO and COO of hedge funds running a variety of strategies. From stat-arb and trend-following CTA to fixed-income relative value. Firm’s he has worked at include big banks like Citi, and prominent hedge funds including D. E. Shaw and Millennium Capital Management.

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