The B.C. Securities Commission is highlighting the perils of the “trust trap” as part of Fraud Prevention Month across Canada.
“Fraudsters exploit the trust and friendship that exists in tight-knit groups,” said Doug Muir, the BCSC’s director of enforcement, via a statement March 2. “Investors need to do their own research before making an investment, and shouldn’t just rely on advice from their friends, family or co-workers.”
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Women and millennials are particularly vulnerable, according to the commission.
Recently, a so-called trust trap netted minimal penalties for formerly banned trader Richard Gozdek, a White Rock resident.
Last December, Gozdek was convicted of breaching his securities ban and sentenced to one-year probation in addition to a $5,000 fine. He was also ordered to pay $10,000 back to investor Sheila Crittin, a Saskatchewan resident, who Abbotsford Provincial Court Judge Robert Gunnell said “doesn’t seem to be particularly sophisticated” in terms of handling investments.
In fact, “for some reason Ms. Crittin thought Mr. Gozdek was a person she could trust in that he had done well for himself in business,” stated Gunnell in his reasons for judgment against Gozdek.
It’s not known what sort of relationship the two had, nor Crittin’s age.
The BCSC stated it conducted research on human reactions to dubious investment pitches made by family, friends and close associates. The regulator found nearly half of young adults in B.C. would consider putting money into a dubious investment offer if it came from a friend or family member.
“Whether the offer came from a friend or family member or just a random person at a social event can make a big difference in vulnerability, depending on someone’s age and gender.”
People aged 35-54 were half as likely as young adults to consider a dodgy investment offer if it came from friends or relatives. The research also showed women were more susceptible than men.
“The percentage of women intrigued by such an offer was 13 points higher when it came from a friend or relative. By comparison, the source of the offer seemed to make less of difference for men, for whom the gap was only six points.”
In the case of Crittin, she was informed by Gozdek of Worldwide Marijuana and gave him $10,000 as an investment (even using her husband’s RRSP).
Gozdek sent Crittin promotions that were, according to the judge, “the type of things some might think you might find in your junk email folder. The type of thing that I think if I received I would probably delete.”
Worldwide Marijuana was delisted from the Canadian Securities Exchange in 2016 and is now named Endocan Solutions, a shell company with $4,375 in assets.
Gozdek got a small fine and probation for pleading guilty to violating his five-year securities ban – issued in 2013 after he admitted to illegally selling shares in Armadillo, a low-value Nevada oil company claiming assets in Oklahoma.
The judge noted the sentence was a joint submission from Gozdek and the Crown prosecutor. Gozdek’s violation was summarized as a “technical breach” and not an intentional one. After a BCSC investigation, Gozdek paid Crittin back the money she invested.
Gozdek also paid back $65,062 from his 2013 settlement agreement and was free to return to business in the capital markets in June 2018, according to the BCSC.
Investors can take the BCSC’s new scenario-based quiz to test their ability to spot suspicious investment opportunities, read the affinity fraud warning signs or contact the BCSC if they have a concern about investment fraud.
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
