Investment Fraud

What is Investment Fraud?

Investment Fraud lures someone with promises of low- or no-risk investments that turn out to be non-existent. Typically, bad actors will entice potential investors by describing returns in amounts that are clearly too good to be true. There is no such thing as a guaranteed return on investment. Fraudulent investments include, but are not limited to, real estate, penny stocks, Ponzi and pyramid schemes, digital assets, and cryptocurrency.

The Process

Selecting a Victim

Scammers use a variety of methods to initially lure and contact victims. Here are some of the most common methods:

• Social Media: Scammers use social media to reach out to victims directly — by messaging them — or indirectly through deceitful job advertisements or investment opportunities that can be found on all main social media platforms.
• Texting: Scammers text victims pretending they misdialed a number, sending a photo of themselves, or saying they work for a company that is hiring for job opportunities.
• Dating Sites: Scammers create thousands of fake dating profiles on all common dating sites and match with victims to establish a romantic relationship based on trust.

Red Flag: Once the victim agrees to continue communicating, it's common for the scammer to ask to move their messaging to another platform. They may use a different phone number from the one the victim may have been contacted from initially.
For variants involving a professional relationship only, scammers may invite victims to join chat groups, where there are often many others in the same chatroom — most of whom are scammers impersonating "happy" clients.

Bottom Line: If you met someone through a method described above, and that person pitched an investment opportunity, beware: this is likely an investment fraud scheme.

Building Trust

Once initial communication has been established, scammers seek to deceive victims about who they are (their "persona") and what they want (their "desires") to forge trust with the victim. Tactics vary, but below are common characteristics of an investment fraud scammer personas

• Excessive flattery
• Empathizing with, and often suffering from, similar life events as the victim (e.g., if a victim is going through a divorce, then the scammer may be going through a divorce, too).
• Suffering from a hardship that requires help from the victim.
• Sharing pictures, often selfies, of themselves.
• Offering to meet in person but making those meetings contingent upon the victim accomplishing a task (e.g., we can meet once you raise enough money).
• Offering to meet in person, but always finding an excuse at the last minute for why they can’t.
• Expressing a strong romantic interest in the victim.
• Agreeing to some video conference calls but preferring instead to speak over text.

The Pitch

Once trust is established with victims, criminals introduce the topic of investing. It's common for scammers to say they themselves — or people in their family or close network — are experts in such investments. They may promise they can bring the victim in on "the ground floor". Types of investments can vary, however common ones include binary trading, liquidity mining, and gold futures.

Red Flag: Were you introduced to the investment scheme by someone in person? If it was someone you know, it could be that they, too, are unwitting victims, and you should warn them immediately. If it was a stranger, and they pitched the idea not long after meeting you, it is entirely possible they are part of a criminal network supporting these schemes.

Initial Investment

Once the scammer convinces the victim to participate in their scheme, the scammer will instruct the victim how to invest the money, as follows:

• Open an account at a reputable trading platform or cryptocurrency exchange.
• Transfer money from a traditional bank account to the new account.
• If trading cryptocurrency, convert the money — now hosted on the cryptocurrency exchange — to the cryptocurrency type the scammer specifies, e.g., Bitcoin, Ether, Tether.
• Open an account on the "investment platform" provided by the scammer or an individual or group that the scammer directed the victim to.
• Deposit the funds or cryptocurrency to the investment platform either directly or through a private wallet.

Investment Platforms: Note that these "platforms" exist in the form of what appear to be traditional websites, either accessible via the web, or when dealing with cryptocurrency investments, through a specific browser only accessible via cryptocurrency applications. Common factors include:

• Registration using an email address or phone number.
• Two-factor authentication (e.g., a phone number + an email address) to log in.
• A website name that closely mimics — or "spoofs" — a legitimate site.
• A professional-looking site design that shows the portfolio in an appealing manner.
• A customer support portal used to communicate about investments and withdrawals.

"Growing" the Investment

Once the victim starts to "invest," returns shown on the investment platform will appear to be extremely lucrative, encouraging the victim to invest more and more. It is common in the early stages for the scammers to allow victims to withdraw not only the original deposit but the earnings as well.
This is meant to trick victims — a means to reassure them that the platform is legitimate. Scammers use various means to “sweeten the pot,” or encourage further investing. Examples include:

• "Matching": Providing their own funds to the victim's portfolio to help the victim reach an (arbitrary) investment goal.
• "Scarcity": Stating that returns or investment opportunities are only available in a short time.

Taxes, Fees, and the End of the Scheme

Once the victim is ready to withdrawal all their earnings, they will find their account frozen and an arbitrary requirement will arise, usually in the form of paying "taxes" or "fees" to unlock their funds.

Red Flag: You are required to pay taxes or fees to receive or unlock your investment.
The scammer may have already allowed you to "withdraw" a small amount to give the appearance that the investment is legitimate.

This is a trap: it is simply another method used by the scammers to try and convince victims to invest even more money.

It can be a particularly devastating point in the scheme, as victims will often pay more money to unlock their funds than any amount, they previously deposited. At this point, there is usually nothing the victim can do: the scammers will never unlock the funds and it's likely they have already withdrawn those funds into criminally controlled cryptocurrency wallets inaccessible to the victim. In the end, the victim loses all the money they deposited into the scheme.