Confidence Schemes/Scams: What They Are and How to Avoid Them

You’d fund a “sure thing” investment in a stock or cryptocurrency if a stranger walked up and suggested it to you, right? Absolutely not, you hope! But what if a new financial advisor contacted you on LinkedIn, or a friend on Facebook mentioned a great opportunity to make some money? Frequently, this type of expertly concocted effort can snatch thousands of dollars from unsuspecting victims – and the number of consumers falling victim to this type of scam is growing each year.

A confidence scheme usually consists of several intricately designed parts in order to draw in the victim with bogus returns until the victim invests more and more funds in a phony investment account and the scammer disappears with the money. Here’s how they typically work:

Contact is made. These scams commonly begin as romance or confidence scams on social media channels or dating apps, or even professional networking sites. Sometimes they can begin via regular texting from unfamiliar phone numbers, or even by attempting to impersonate a family member. The scammer will eventually try to move the conversation off the initial platform onto a different platform such as WhatsApp to evade fraud detection software and encrypt the communications.

Trust and Credibility Are Built. Regardless of how initial contact is made, the goal of the scammer is to win the target’s trust and ultimately introduce an investment opportunity as a side note to the conversation. Often, depending on the type of person the fraudster is purporting to be, it may take several weeks or even months between the initial contact and the day the investment is brought up in conversation. The scammer may even support the ‘pitch’ with a nicely designed website or screenshots of an app showing impressive monetary gains in an account dashboard.

The Victim is Enticed to Invest. Once the victim feels comfortable with the investment idea, they are ready to pour in some money – sometimes this means drawing from life savings or taking out a loan in order to access funds.

The Returns Look High. Following the initial investment, the scammer’s website or app screenshots will display significant returns for the victim, which they hope will cause the victim to invest more funds. They might even send phony financial statements to enhance the legitimacy of the scheme.

The Fraudster Cleans Out the Account. Once the scammer has achieved the hoped-for level of investment from the victim, they will clear out the account and vanish, taking what often amounts to be thousands and thousands of dollars of the victim’s money with them.

Tips to Avoid Falling Victim to Confidence Scams

Just say no. Don’t invest in anything based purely on advice from someone you just met on an app or an ‘old friend’ who called out of the blue. This is especially true if the person won’t meet you in person or over a video chat!

Be skeptical. Avoid anything that claims to give guaranteed rates of return or promises that you will double your money – they are likely scams. If it seems too good to be true, it likely is!

Spend time on research. Any time you invest in anything, you need to do thorough research. Check internet domain registrations to determine how long the website has been active. Investigate the origin of the phone number – what’s the area code? Is this number actually associated with a local person, or is it someone spoofing a phone number in order to appear that way?

When all else fails, talk to your financial institution. We are here to help!