Photo credit: www.cnbc.com
Recent findings from the Federal Trade Commission (FTC) reveal that consumers lost an astonishing $5.7 billion to investment scams in 2024. This figure marks a significant increase of 24% compared to the losses reported in 2023, making investment fraud the most pervasive form of financial deception documented by the agency.
Investment scams often lure individuals with promises of exceptionally high returns by promoting new and seemingly lucrative opportunities. Many of these scams target victims through various means, including social media, dating applications, and unsolicited messages, as emphasized by the FTC.
The data shows that nearly 79% of individuals who reported falling prey to investment scams suffered financial losses, with the average victim losing upwards of $9,000. This statistical insight likely underestimates the true impact of investment fraud, as many victims do not report their experiences.
“The rise of these scams has become a pressing concern for consumers across the nation,” stated John Breyault, Vice President of Public Policy, Telecommunications, and Fraud at the National Consumers League.
More from Personal Finance:
Crypto relationship scams pose ‘catastrophic harm’
How this 77-year-old widow lost $661,000 in a common tech scam
‘Financial sextortion’ of teens is a ‘rapidly escalating threat’
The Role of AI and Cryptocurrency in Investment Fraud
Among the various types of investment fraud, “pig-butchering” is particularly notorious. This term refers to the strategy of building a rapport with victims to ultimately exploit them for financial gain.
Fraudsters frequently initiate contact unexpectedly, often establishing trusting relationships before promoting investments that promise substantial returns, especially in digital currencies like cryptocurrencies. Unfortunately, these schemes are often nothing more than elaborate traps, resulting in criminals absconding with the victims’ funds.
The methods employed by these criminals are becoming increasingly sophisticated, partly due to advancements in artificial intelligence, which allow for more convincing interactions, such as the use of deepfake technology. Breyault highlighted that deepfakes involve altering images or video to create realistic but fabricated scenarios.
Furthermore, organized crime syndicates have proliferated, particularly in Southeast Asia, with established scam operation centers in nations like Cambodia, Laos, and Myanmar. Reports indicate these centers employ large numbers of individuals, often under coercive conditions, to execute investment scams on a global scale.
Researchers from the University of Texas at Austin note that criminals often favor cryptocurrencies for conducting these scams because they enable them to transfer large sums of money discreetly and without incurring significant costs, minimizing their risk of detection.
Strategies for Mitigating Investment Fraud Risk
Although it is challenging to completely eliminate the risk of falling victim to fraud, there are effective strategies that consumers can adopt to safeguard themselves. Breyault identified several common traits often present in fraudulent pitches:
Urgency: Exercise caution with offers that convey a sense of urgency, as scammers typically pressure victims to make quick decisions. The FTC warns that fraudsters may employ threats of legal action or other forms of intimidation to compel rapid responses.
Unusual Payment Methods: Be skeptical of requests for payment through unconventional methods. Scammers frequently push for payment in cryptocurrency, wire transfers, or prepaid gift cards, which can be difficult to trace and recover.
Isolation: Scammers aim to cut off victims from outside influences that could lead to their detection. They may make claims designed to instill fear, suggesting that no one will believe them if they report the scam or that their loved ones may be endangered if they speak out.
Source
www.cnbc.com