Ontario man loses $260K in ‘pump-and-dump’ scam

Pat Foran explains how criminals are creating fake websites and forums using the logos of reputable companies for something called 'pump and dump' fraud.

If you invest, it’s important to do your due diligence or speak with a financial advisor to make sure your finances are in good hands.

Criminals are now creating fake websites and forums, using the logos of reputable companies for something called “pump-and-dump” fraud.

“Pump-and-dump” scams are when criminals try to create hype around a stock and pump it up, but when you buy it, they dump it, leaving you with potentially worthless investments.

You’re led to believe the stock is going to take off but once it collapses, they take the profits, and you lose your money.

‘It looked legitimate’

“When I signed up to Wealthsimple it was almost immediately that ads started showing up on Instagram,” said Israel Klait, of Richmond Hill.

Klait had his investments with a major Canadian bank but recently, due to a promotional offer, he decided to move his funds to Wealthsimple.

The transfer went smoothly but after he made the switch he says he saw a Wealthsimple offer on Instagram for an online trading forum on how to make money in the stock market.

“Those ads had the Wealthsimple name and the logo. It looked legitimate from Wealthsimple,” Klait said.

Klait joined the online group and said not long after it was suggested he buy a stock, which he did and saw his money doubled.

“I bought it and then I waited and then I got a message: ’Oh you know what this is not going to work out, just sell the stock.’ I sold the stock, but I actually made $14,000 on this transaction,” he said.

Klait felt the advice must be trustworthy, so not long after he made a much larger investment, but this time things went bad fast.

“As soon as I bought (the stock) that day five minutes later the stock tanked. It went from $1.68 U.S. to ten cents and at the time I just panicked” Klait said.

Klait says he was caught in a pump-and-dump scam and lost $260,000.

He said when he tried to contact the forum again, it was shut down.

“I tried to get into the group chat and everything was gone. Like the phone numbers looked like they were erased,” he said.

Klait contacted CTV News concerned that Wealthsimple should have warned him and other clients that criminals were using their logos in scams posted on social media.

A spokesperson provided the following statement:

“Fraudsters are becoming more aggressive and sophisticated every day. We’ve seen a huge spike in social media scams, and we were very sorry to hear what happened to Mr. Klait. In the last three months, my team at Wealthsimple reported more than 10,000 fraudulent ads to Meta and we’re only one of many financial institutions fighting this issue,” the company said.

“To support our clients, we regularly deploy warnings in our app, over email, and on social media. We partner with industry groups, government, and law enforcement to fight scams on behalf of our clients. And we’re constantly building and launching new tools to help protect our clients from many different types of fraud. Wealthsimple will never recommend specific stocks or securities to buy, and we encourage Canadians to be suspicious of financial advice that sounds too good to be true.”

Klait wanted to warn others what happened to him and said losing $260,000 means he now has to rethink his retirement plans.

“For two weeks I wasn’t able to sleep, going over everything in my head what I did wrong. It’s very upsetting, very upsetting,” he said.

Anytime you’re told you can double your money quickly that should be a red flag as most investments have to be held long term and increase in value overtime.

Also, beware of social media using logos of well-known financial institutions as they may be fakes.