Investment scams on social media By Cora Lewis
Social media is full of scammers promising guaranteed returns on investment, and consumers lost billions of dollars to them last year.
Troy Gochenour of Columbus, Ohio, was conned out of $25,800, including $15,800 in borrowed money, in a crypto-mining scam that began with a WhatsApp message from a beautiful stranger.
“I had just moved home to restart my life ... and I was lonely,” said Gochenour, 50. “So I started online dating. Then I got a WhatsApp message that began, ‘Sorry to bother you.’ ”
Financial scams, including schemes involving cryptocurrency, cost consumers $3.8 billion last year just in the U.S., according to the Federal Trade Commission, twice as much as in 2021.
Those who know the field, including the FTC and Better Business Bureau, say the speed and convenience of the internet, the rise of online payment platforms and apps, and the spread of financial misinformation have all contributed to the problem, as have pandemic-era isolation and loneliness.
Gochenour spent several weeks exchanging messages with someone who seemed romantically interested in him before she brought up “liquidity mining.”
Though he’d been a cryptoskeptic, he eventually began following her advice and instructions. Scammers have become skilled at setting up sites that look like those of legitimate cryptocurrency companies, and Gochenour was taken in. After he set up a cryptowallet, it appeared that the money he transferred was growing just the way his scammer said it would.
Gochenour continued to add money to his wallet as prompted, even though the money was transferred out each time, until it looked as though he had $200,000 coming to him.
When he was told he’d have to pay $35,000 in taxes to access the $200,000, he realized it was a scam. By then, he’d taken out nearly $16,000 in personal loans.
Gochenour now works with the Global Anti-Scam Organization to investigate similar frauds and to help educate others.
To avoid being taken for a ride, consider the following:
Some common signs of investment scams
Most scams will sound quick, easy, and low- or no-risk. Many involve real estate, cryptocurrency, financial coaching or gold. Typically, the supposed company uses words such as “proven” and “guaranteed,” along with testimonials from people, often actors, who say they’ve benefited wildly.
“Watch out for those endorsements,” said Melanie McGovern, director of public relations for the International Assn. of Better Business Bureaus. “And know your friends. If you get a message that seems sketchy from someone’s account, especially someone you haven’t heard from in a while, reach out to them on a different platform. Because someone may be spoofing them.” (Spoofing is when hackers disguise themselves as trusted sources.)
Offers also tend to come with time pressure: “Make big money fast!” “Once-in-a-lifetime offer, gone tomorrow!”
Or they involve elaborate steps that require more money at each stage. The scammer typically paints a picture of what life will be like when you’re rich.
But no one can guarantee a return, and anyone who promises a no-risk investment is a fraud.
What if I suspect an investment scam?
First, take time to research the offer. Scammers want to rush you, so slow down. Search online for the name of the company and words like “review,” “scam,” or “complaint.”
Second, run the information by a friend or advisor. Chances are someone you know has gotten a similar offer because scams often target specific communities, the FTC said.
Third, don’t accept any unsolicited offers. If you get an out-of-the-blue call, text, or email about “an amazing investment opportunity,” it’s a scam.
Finally, reject high-pressure pitches.
Scammers will also exaggerate the significance of current events. By making an opportunity seem timely, they hope a target will commit without having fully researched the offer.
Cryptoinvestment tactics to beware
One telltale sign of a cryptocon is when the scammer asks you to send money in advance for any reason, the FTC warns. The fraudster will often claim the payment is to buy something needed for a big return or to protect the money you’ve already invested.
“If you meet someone on a dating site or app, and they want to show you how to invest in crypto, or they ask you to send them crypto, that’s a scam,” the FTC cautions.
McGovern, of the Better Business Bureaus group, said losses are even bigger than reported, as many people are embarrassed to have fallen for these schemes and want to hide the problem from family and friends. But she encourages people to report scams to the Better Business Bureau , the Consumer Financial Protection Bureau , the FTC and the Internet Crime Complaint Center.
Other common investment frauds
Investment coaching: The fraudster will tell you their proven strategy will let you make money investing in stocks, bonds, foreign currency or tax liens. They promise the approach will set you up for life. But after the free events and introductory videos, you’ll have to pay fees upfront for expensive coaching, with no guarantee of return.
Real estate coaching: In-person and online seminars on how to invest in real estate often promote “risk-free” training, luring targets with promises of financial freedom. If the sales pitches make over-the-top claims, be wary. Watch for phrases like “sure thing,” “security for years to come,” or the chance to “rake in money by working part time or at home.” Most people never make back the thousands of dollars in upfront fees.
Precious metals and coins: If “metal dealers” or “rare coins merchants” tell you there’s no better time to invest, watch out. The FTC advises consumers to read the Commodity Futures Trading Commission’s precious metals fraud alert before investing in bullion, collectible or bullion coins or gold.