Investors are facing an increased risk of falling victim to cryptocurrency scams through fake relationships established on social media, dating apps, and networking sites. Scammers use these platforms to pose as a romantic partner, old friend, or investment professional to build trust with their targets over time. Eventually, they suggest investing in cryptocurrency and then defraud victims through fake investment opportunities. The Securities and Exchange Commission (SEC) warned that these relationship investment scams, including those involving crypto assets, pose a significant risk to retail investors and are becoming more popular with fraudsters.
Last month, the SEC took enforcement actions against criminals involved in crypto relationship frauds for the first time. These individuals had stolen millions of dollars from investors through schemes tied to platforms such as WhatsApp, LinkedIn, Instagram, and fake crypto asset trading platforms. According to the Federal Bureau of Investigation (FBI), consumers lost an estimated $5.6 billion from crypto-related scams in 2023, with investment scams accounting for the majority of these losses. The FBI highlighted that the dollar losses from these scams can be substantial, with some victims losing an average of $178,000 per person.
Criminals have been increasingly turning to cryptocurrency as a means of conducting fraud due to its decentralized nature, fast irreversible transactions, and ability to move money globally. These scams are often long cons where fraudsters gradually build trust with their targets before defrauding them of their money. Victims of these scams often end up losing significant amounts of money, with one individual, Jules, recounting on a FINRA podcast how she was convinced to take out personal loans to fund crypto investments after falling victim to a fraudulent romantic interest.
To protect yourself from falling victim to crypto romance scams, it is essential to be cautious of investment advice or promotions from individuals you have only met online and have never met in person. Look out for domain or website names that impersonate legitimate financial institutions, especially cryptocurrency exchanges, and avoid downloading or using suspicious-looking investment apps. Do not be lured by promises of early withdrawals or profits and be wary of fake testimonials from people claiming to have made money through the investment. If an investment sounds too good to be true, it likely is, and double-check that any investment firm is registered on BrokerCheck.
As these relationship investment scams continue to pose a threat to retail investors, it is crucial to stay vigilant and exercise caution when engaging with individuals online who claim to offer investment opportunities. By following the tips provided by the FBI, SEC, and financial experts, investors can better protect themselves from falling victim to cryptocurrency scams. With the rapid rise in cryptocurrency-related fraud, staying informed and cautious of potential red flags can help investors avoid significant financial losses and prevent falling prey to fraudulent schemes.
