Shalender Singh was surprised at when he got a message on WhatsApp from a stranger telling him to hold off on selling any shares because the stock market was about to go up. But when their advice paid off, he started to trust them.
The person claimed to work for an investment firm Singh recognized and promised high returns of up to 30% if he began investing through their platform. They advised the Schaumburg resident to put his money into cryptocurrency and added him to chat groups with fellow investors.
For months, the mobile app Singh was told to use showed his investments were growing. But when he tried to withdraw cash from the account, the scammers blocked him on WhatsApp and all other communication channels. That’s when Singh realized it was a scam.
“It looks like an investing app, but it’s all fake,” he said. “You cannot withdraw the money so you’re just transferring the money into their applications, but you will never take them out. So it’s a very, very big trap.”
Singh lost nearly $20,000 since the scammer first contacted him in May. It’s money he still hasn’t been able to recover, leaving him with significant debt.
A new study from the Better Business Bureau reports investment scams are on the rise, especially cryptocurrency and romance scams. Since 2020, the BBB received more than 4,000 reports related to investment scams — hitting a three-year high in 2023 with 1,400 reports.
Investment scams are among the oldest forms of financial fraud, but what’s changing is where and how scammers are building trust, according to Steve Bernas, president and CEO of the Better Business Bureau of Chicago & Northern Illinois.
“Investment scams often take the form of long-term confidence scams, where fraudsters pursue romantic and platonic relationships to gain the trust of their targets. They’re not the quick hit anymore,” he said. “Now, they’re actually building up a type of relationship with that person, and they go on for months sometimes.”
Social media also plays a significant role in these scams, Bernas said, with hundreds of people encountering scammers on their favorite platforms.
The amount of money people are losing has also increased, with the median loss reaching $4,000 last year and nearly $6,000 as of June 2024. Last year, 80% of people who reported an investment scam lost money, according to the BBB.
The increasing popularity of cryptocurrency has opened the floodgates for scammers, who often exploit the industry’s lack of regulation and the public’s confusion about the digital currency. Since 2021, nearly half of all investment scams reported to the BBB Scam Tracker were crypto related.
Romance and friendship schemes have also grown, where scammers develop relationships with potential targets over dating apps or social media to build trust with them. These scams can continue for months, allowing scammers to steal thousands of dollars before the victim or their family realizes what happened.
“It’s very underreported, especially because people are embarrassed and usually find out through another family member when they pass on or start going through their records, and they realize they’ve been duped for years and have lost their life savings,” Bernas said.
But there are red flags people can keep an eye out for, the BBB said. Here are some tips to avoid investment scams.
- If it sounds too good to be true, it probably is. The BBB recommends avoiding strategies or people who offer investment opportunities with “guaranteed” returns or low or no risk with a high return. “If somebody comes out of the blue or somebody you don’t know promises you something — don’t even fall for it. Move along and deal with somebody you know and trust like a certified finance planner,” Bernas said.
- Be careful if investments are unregistered with the Securities and Exchange Commission or other investment industry regulators. Also, the BBB said to check licensing for the sellers.
- Feeling pressured? It’s often a sales tactic to use “opportunity meetings” or high-pressure situations to gain your trust and money. And be careful of fake success stories as the person could actually be paid by the promoter of the plan.
- “If you find that the reward for recruiting new distributors and selling them products and training materials is more than the reward for selling products, you may be dealing with a pyramid scheme,” according to the BBB.