Investment Scams Are a $3 Billion Problem — Here’s How to Steer Clear

This advice can help you spot the signs of investment scams and keep your money safe.
by Sarah Grossbart |February 1, 2024

You may know better than to send money off to strangers, and perhaps even how to spot a phishing email from a mile away, but there’s a new threat to your hard-earned cash that’s likely more difficult to detect. Here’s what you need to know about the rise in investment scams and how you can avoid becoming the latest victim.  

“Hey, how’s your day going?” is how it begins. Even if it’s coming from a number you don’t recognize, a breezy message like this might feel innocuous – but it could be the start of a criminal scheme that ultimately costs you thousands. According to the FBI’s 2022 Internet Crime Report, investment scams now top the list of digital threats, with losses totaling $3.3 billion (a 127% increase over the previous year).  
 
Unlike some other scams, these so-called “pig butchering” schemes, in which the attacker cold contacts their target and builds up trust over time before luring them into a “can’t-miss investment opportunity,” can be surprisingly easy to fall for. The good news is you can avoid getting caught in that costly trap if you know what to look for.

How it works

If you respond to that initial reach-out over text, email or social media, the scammer will work to establish a rapport. This could take days, weeks or even months, and will feel much like building any new friendship, says Kenneth Conner, vice president of scam policy and communications at Citi.  
 
“In the next phase the scammer might talk up their financial successes and mention a promising investment opportunity they’re letting you in on,” he adds. “Or they’ll offer to give you guidance on how to trade cryptocurrencies or foreign currencies.” 
 
The tricky aspect is that it will entail investing through a realistic-looking trading platform. “Initially, these customers can see the returns,” Conner explains. “For example, they can log into a site and see that the $100,000 I put in there a month ago has now grown to $160,000.” 
 
The other shoe doesn’t drop until you attempt to withdraw your funds. You might be told you need to pay taxes on your cash (“so you’re even giving above and beyond the original investment,” says Conner), and at that point, the trading platform you’ve been using to track your funds disappears. “You have no access to it, the money is gone, and there's no way to reach your investment contact,” he says.

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What to look out for

Does your contact have licensing through a reputable firm? Are they professional when they interact with you? Are they pressuring you to make quick decisions? “As a general rule, these ‘can’t-miss,’ cash investment opportunities don’t exist, Conner warns. Investing can be a good way to build wealth because, when you purchase an investment — a stock or bond, for example — the hope is that the value will increase over time and provide you with larger returns than you’d get from a traditional savings account. But there will always be at least some risk.  

“There are some investments that do have guaranteed returns, but it's five or ten years down the line,” he says. What these schemes tend to promise is guaranteed, immediate, sizable returns. But, as Conner notes, “There’s nothing out there that has that quick of a return and is guaranteed.” 

What to do

Be vigilant and ask a lot of questions, Conner suggests. When presented with a seemingly lucrative opportunity, keep an eye out for key risk indicators: “Did you just meet somebody on social media? Did they befriend you? Keep in mind it could take months of chatting and building up a relationship until the scammer is like, ‘You trust me. We've been talking for six months, and now here's this good opportunity,’” he says.  
 
If a recent connection offers you investment tips and suggests you buy in with large sums of money, but the interaction feels off, try turning to a trusted friend or relative. “That's one thing we find is a very good deterrent because it gets discussions going,” says Conner, along the lines of: “’Hey, I had this individual call with this type of scenario. What do you think?’” 

As with any investment opportunity, it’s also crucial to do as much research as possible, he adds. If you’re looking to invest in a particular company, for instance, “validate that the company actually exists, that they have a physical footprint,” he suggests. And if there are ways to invest directly through a more legitimate source (a licensed stockbroker, for example, or a security that’s registered with the SEC), go that route instead.  

If you think you may be a victim, contact your bank immediately and explain you’ve made a series of fraudulent transactions. You can also file a case with the FBI and file a report with the Federal Trade Commission. The key is to act the moment you become concerned, notes Conner, because if you catch this in time, “there is some level of recourse. 

 

Sarah Grossbart

is a writer and editor covering pop culture and lifestyle. She is the deputy editor at E! Online and has previously been a senior editor at Us Weekly. She has also written for Real Simple, Buy Side from WSJ, HGTV Magazine, Glamour, ElleDecor.com, Airbnb Magazine and Woman's Day.

The content reflects the view of the author of the article and does not necessarily reflect the views of Citi or its employees, and we do not guarantee the accuracy or completeness of the information presented in the article.
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