NEW YORK (AP) — Social media is full of scammers promising guaranteed returns on investments, and consumers lost billions of dollars last year because of them.
Troy Gochenour, 50, of Columbus, Ohio, was scammed out of $25,800, including $15,800 with money he borrowed, in a cryptocurrency mining scam that began with a WhatsApp message from a beautiful stranger
“I had barely moved here to restart my life after trying to make it in show business in New York, and I felt lonely,” Gochenour says. “So I started dating online. Then I got a WhatsApp message saying, ‘Sorry to bother you.'”
Financial scams, including cryptocurrency fraud, cost consumers $3.8 billion last year in the United States alone, according to the Federal Trade Commission (FTC), the double that in 2021. These scams are also a global problem.
Those who work in that space, including the FTC and the Better Business Bureau, a nonprofit body that promotes confidence in the marketplace, say the speed and convenience of the internet, the rise of payment platforms and apps online, and the spread of financial misinformation have contributed to the increase. They also cite the isolation and loneliness of the pandemic era.
In Gochenour’s case, he spent several weeks exchanging messages with someone who seemed to have romantic intentions before she mentioned “liquidity mining.”
Although he had been skeptical of cryptocurrencies, he eventually began to follow their advice and instructions. Scammers like the one he took advantage of at Gochenour have become skilled at setting up websites that have the convincing appearance of being legitimate cryptocurrency companies, and Gochenour fell for it. After he created a cryptocurrency wallet, it seemed that the money he transferred was having the returns that his scammer had promised.
“I was hooked on this person,” he noted. “At first it seemed like it was working. He told me, ‘We could be together, you and me, and make all this money.'”
Until one day, when he had transferred about five thousand dollars of his own money to the wallet, he woke up to check the balance and the money was gone. When he visited a page his scammer had referred him to, to try to understand what had happened, he saw a “contract.” He contacted the scammer to consult her, and she told him to contact “customer service”, where they told him to wire another $10,000 to get his money back, plus bonuses.
Gochenour kept adding money to his wallet when asked, despite each time money coming out of his wallet, until it looked like he was about to receive $200,000.
“All the figures were false, all manipulated,” he said.
When told he would have to pay $35,000 in taxes up front to access the $200,000, Gochenour realized it was a scam. By that point, he had already taken out personal loans totaling nearly $16,000 plus his $55,000 of student debt, lured each time by promises of ever-increasing rewards. He now works with the Global Anti-Scam Organization, a non-profit organization that fights online fraud, to investigate similar scams and help inform others.
To avoid a scam, consider the following:
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WHAT ARE SOME COMMON INDICATIONS OF AN INVESTMENT SCAM?
Most appear to be quick, easy, and risk-free or low-risk. Many involve real estate, cryptocurrency, financial advice, or gold. In general, the company uses words like “proven” and “guaranteed” along with testimonials from people who say they have used the services and benefited incredibly. Most of the time these are paid actors and fabricated reviews, according to Melanie McGovern, director of public relations for the International Association of Better Business Bureaus.
“Be careful with those kinds of recommendations,” McGovern said. “And get to know their friends. If you get a suspicious-looking message from someone’s account, especially from someone you haven’t heard from in a while, contact them on another platform. It could be spoofing,” McGovern shares. (Spoofing is a term for a hacker impersonating a trusted source.)
The offers are also often accompanied by an urge to act: “Make money fast!” “Once in a lifetime offer, expires tomorrow!” Or they involve complex steps that require injections of more funds at each stage, like the liquidity mining that Gochenour experienced. In general, the scammer presents a picture of what life will be like when you are rich. But no one can guarantee returns, and anyone who promises a risk-free investment is a fraud.
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WHAT TO DO IF YOU SUSPECT AN INVESTMENT SCAM?
First, take the time to research the offer. Scammers want to rush you, so take your time. Research the name of the business online along with words like “review,” “scam,” or “complaint.”
Second, consult the information with a friend or adviser. It may be the first time you’ve received an offer of this nature, but chances are you know someone who has, especially since scams often target specific communities, according to the FTC.
Third, don’t accept unsolicited offers. If you get an unexpected call, text, or email about “an amazing investment opportunity,” it’s a scam.
Finally, reject proposals that pressure you.
“Legitimate companies allow you to take the time to do your research before you spend any money,” McGovern said.
Scammers also tend to exaggerate the importance of current events, quote headlines, and tie their pitch to the news. By making an opportunity seem exciting, innovative, and timely, they hope their target will commit without having thoroughly researched the offer.
“Delete, hang up, and walk away,” advises the FTC. “Especially if they ask you to withdraw money from your 401(k) retirement plan to invest it.”
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WHAT ABOUT CRYPTOCURRENCY INVESTMENT SCAMS?
One indication of a cryptocurrency scam is when the scammer asks you to send money in advance for any reason, the FTC warns. The scammer will claim that they require this advance in order to buy something for a large profit or to somehow protect the money you have already invested. Gochenour experimented with several versions of this approach, whereby if you send more money, you get more money.
“Never mix online dating with investment advice,” the agency warns. “If you meet someone on a dating site or app and you want to teach them how to invest in cryptocurrency or ask you to send them cryptocurrency, it’s a scam.”
McGovern says the true scale of the losses exceeds those reported because many are ashamed of having fallen prey to these scams and want to hide the consequences from family and friends. But he encourages the public to report scams to the BBB, the Consumer Financial Protection Bureau, the FTC and the Internet Crime Complaint Center.
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WHAT ARE OTHER COMMON INVESTMENT SCAMS?
INVESTMENT ADVICE
In this scam, the scammer will tell you that their “patented,” “proven,” or “proven” strategy will make you money if you invest in stocks, bonds, foreign currency, or federal tax liens. He promises that his approach will sort out her life and allow her to stop working. But after the free events and introductory videos, you’ll have to pay up-front fees for the rest of the expensive consulting, with no guarantee of returns.
“It’s all part of a marketing ploy to get you to pay thousands of dollars for what turn out to be empty promises,” the FTC says in its alert to consumers.
REAL ESTATE ADVICE
Online and in-person real estate investing seminars often promise “risk-free” training, luring their targets with promises of financial freedom. If promotional materials and sales pitches make exaggerated claims, be wary. Pay attention to phrases like “a sure thing,” “security for years to come,” or the opportunity to “earn money working part-time or from home.” Most people never get back the thousands of dollars they paid up front.
PRECIOUS METALS AND COINS
If “metal dealers” or “rare coin dealers” tell you there’s no better time than now to invest, beware. Scammers specializing in this area often keep your money. The FTC advises consumers to read the Commodity Futures Trading Commission’s precious metals fraud alert before investing in bullions, bullion coins, collectible coins, or gold.
