Most of us believe we would never fall for a scam. Yet last year, losses from scams in the United States alone totaled $2.1 billion—eight times the 2020 figure according to the Federal Trade Commission (FTC). Social media sources accounted for 30% of those scams, with Facebook leading the way. Shopping scams—in which buyers pay for items that never arrive—are small potatoes in comparison to investment scams which accounted for $1.1 billion in losses.
Gone are the days of emails riddled with spelling and grammatical errors requesting an advance payment to claim a lottery prize to be shared with the victim. Scammers now use artificial intelligence (AI) to contact victims and steer would-be investors to websites featuring fake advisors and clients whose purported successes surpass Bernie Madoff’s in his heyday. Victims are often urged to distrust their families and current advisors. After discovering the fraud, investors may be scammed again by organizations promising to recover their losses.
How can you protect yourself? Be wary of unsolicited messages, especially those promising guaranteed returns that seem too good to be true. Verify on the SEC website (https://adviserinfo.sec.gov/) that the firm or individual is licensed to sell securities; never use a link supplied by the person promoting the investment.
I recently attended a seminar led by Tracy Hall, author of The Last Victim. An intelligent, accomplished woman, Ms. Hall fell victim to a romance scam. She dated a man she met online for years, and he persuaded her to invest her retirement savings with him. As she explained, such schemes weaponize trust. Only when a friend saw him being arrested did she realize she had been deceived. She now devotes herself to educating the public about scams, which grow more sophisticated each day with the help of AI.
Our faces and voices are no longer ours alone. I have seen AI fakes convincing enough to fool me, although an expert might spot them. But these scams target you and me, not experts. Imagine receiving a call that appears to be from a family member in danger who urgently needs money. You recognize the voice and may even see a familiar face. Would you question whether the emergency—or the caller—is real? A voicemail greeting or an online recording may give AI enough material to clone a voice convincing enough to deceive a non-expert. If you hang up but cannot independently reach the person to verify the story, would you send the money? Such scams happen all the time. One precaution suggested at the seminar is to agree on a family password to help confirm that a caller is truly a family member who needs help.
Another huge scam began during COVID-19 when gambling syndicates, mostly in Cambodia and Myanmar, converted resort complexes into huge fortified compounds and lured unemployed workers with promises of jobs. Once inside, the workers had their passports confiscated and became forced laborers. They spend their days contacting victims overseas through dating apps and messaging platforms, building trust gradually in a scheme known as “pig butchering.” The name comes from the way a farmer fattens a pig before slaughter: the criminals feed the victim attention, affection and small early profits, then take everything.
Pig butchering can take months, and if successful, the victim is persuaded to invest in a fictitious cryptocurrency or other “opportunity”, usually starting small and even allowing for withdrawals early on to secure the victim’s trust. Once the victim has sunk a significant sum into the investment and tries to cash out, the account is suddenly “frozen”, and an additional payment is required to release it. The pretext can be as believable as unpaid taxes. Many victims keep paying until they have nothing left. Agencies exist to help, but recoveries are rare because these operations are skilled at diverting the proceeds.
These are all financial scams, but I cannot close without warning about the “Yahoo Boys,” a group of overseas criminals who use social media to approach young people with promises of romance. Victims are induced to share explicit photos and are then blackmailed with the threat of exposure. The financial, social and psychological toll on these young people is severe, and in some cases it has ended in suicide.
Report suspicious approaches to the platform from which they originated. If you have been scammed, contact your financial institution and law enforcement. For financial frauds, you can also report to the FBI at IC3.gov or the Federal Trade Commission at https://reportfraud.ftc.gov/. In New Jersey, also report at https://www.cyber.nj.gov/report.
Let’s hope this never happens to any of us, but the odds suggest that is wishful thinking.
Article contributed by Lois S. Fried, CPA, CFE, CVA, ABV
