Common Financial Frauds and Scams

Business and Investment Fraud

Investment or business fraud schemes will try to lure you in with the promise of low- or no-risk investments. Scammers often ask for upfront cash in exchange for guaranteed future returns—but there is no such thing as a guaranteed return on investment. It's a scam.

Common Schemes

• Advance fee schemes ask you to invest upfront money for a larger return later, such as a loan, contract, or gift.

• Nigerian Letter or 419 schemes ask someone to share in a percentage of millions of dollars that the author—a self-proclaimed government official—is trying to transfer illegally out of Nigeria.

• Ponzi schemes use current investors' money to pay previous investors. They inevitably collapse.

• Pyramid schemes ask you to bring in new investors to make a profit or recoup your investment.

• Telemarketing fraud schemes try to steal your money over the phone, whether by telling you won a prize, are in legal trouble, or some other approach.

Protect yourself

If it sounds too good to be true, it more than likely is.

• Do your homework and thoroughly research any investment opportunity independently of what any salesperson provides you.

• Never rush into an investment opportunity. If you’re rushed or told not to discuss it with others, you're being scammed.

• Remember, there is no such thing as a guaranteed return.

Cryptocurrency Investment Fraud

Scammers, through various means of manipulation, convince victims to deposit more and more money into financial “investments” using cryptocurrency. In truth, these investments are fake; all victim money is under the control of—and ultimately stolen by—criminal actors, usually overseas. As a result, victims typically lose all money they invested. 

How it works: 

1. Selecting the victim: Sammers use a variety of methods to initially lure and contact victims. Some of the most common methods are Social Media, Texting, and Dating sites

2. Building trust: Once communication is established, scammers seek to deceive victims by excessive flattery, sharing of pictures, usually selfies of themselves, and expressing romantic interest to name a few. 

3. The Pitch: Once trust is established, the scammer will introduce the topic of investing. It's common practice for them to say they are experts or people they know are experts.  Types of investments can vary, however common ones include binary trading, liquidity mining, and gold futures.

4. Initial Investment: Once the scammer convinces the victim to participate in their scheme, the scammer will instruct the victim how to invest the money by: Opening a cryptocurrency account, Transfer money from a traditional bank account to the new cryptocurrency account, Convert the money, Opening an account on the "investment platform", and finally Deposit the cryptocurrency into the investment platform

5. “Growing” Investment: Once the victim starts to "invest," returns shown on the investment platform will appear to be extremely lucrative, encouraging the victim to invest more and more. It is common in the early stages for the scammers to allow victims to withdraw not only the original deposit but the earnings as well. This is meant to trick victims—a means to reassure them that the platform is legitimate. Scammers use various means to “sweeten the pot,” or encourage further investing.

6. End of the Scheme: Once the victim is ready to withdraw all their earnings, they will find their account frozen and an arbitrary requirement will arise, usually in the form of paying "taxes" or "fees" to unlock their funds. This is simply another method used by the scammers to try and convince victims to invest even more money.

At this point, there is usually nothing the victim can do: the scammers will never unlock the funds and it's likely they have already withdrawn those funds into criminally controlled cryptocurrency wallets inaccessible to the victim. In the end, the victim loses all the money they deposited into the scheme. 

How to protect yourself

• If an unknown individual contacts you, do not release any financial or personal identifying information and do not send any money.

• Do not invest per the advice of someone you meet solely online.

• Verify the validity of any investment opportunity from strangers or long-lost contacts on social media websites.

• Do not download or use suspicious looking apps as a tool for investing unless you can verify the legitimacy of the app.

• If an investment opportunity sounds too good to be true, it likely is. Be cautious of get rich quick schemes.

• If you already invested funds and believe you are a victim of a scheme, do not pay any additional fees or taxes to withdraw your money.

• Do not pay for services that claim to be able to recover lost funds.

Elder Fraud

Each year, millions of elderly Americans fall victim to some type of financial fraud or confidence scheme, including romance, lottery, and sweepstakes scams—just to name a few. Seniors are often targeted because they tend to be trusting and polite. They also usually have financial savings, own a home, and have good credit—all of which make them attractive to scammers.

Scammers targeting elder citizens may employ one or more of the following types of schemes:

• Romance scam: Criminals pose as interested romantic partners on social media or dating websites to capitalize on their elderly victims’ desire to find companions.

• Tech support scam: Criminals pose as technology support representatives and offer to fix non-existent computer issues. The scammers gain remote access to victims’ devices and sensitive information.

• Grandparent scam: A type of confidence scam where criminals pose as a relative—usually a child or grandchild—claiming to be in immediate financial need.

• Government impersonation scam: Criminals pose as government employees and threaten to arrest or prosecute victims unless they agree to provide funds or other payments.

• Sweepstakes/charity/lottery scam: Criminals claim to work for legitimate charitable organizations to gain victims’ trust. Or they claim their targets have won a foreign lottery or sweepstake, which they can collect for a “fee.”

• Home repair scam: Criminals appear in person and charge homeowners in advance for home improvement services that they never provide.

• TV/radio scam: Criminals target potential victims using illegitimate advertisements about legitimate services, such as reverse mortgages or credit repair.

• Family/caregiver scam: Relatives or acquaintances of the elderly victims take advantage of them or otherwise get their money.

How to protect yourself

• Create a shared verbal family password or phrase that only you and your loved ones know.

• Search online for the contact information (name, email, phone number, addresses) and the proposed offer. Other people have likely posted information online about individuals and businesses trying to run scams.

• Resist the pressure to act quickly. Scammers create a sense of urgency to produce fear and lure victims into immediate action.

• Be cautious of unsolicited phone calls, mailings, and door-to-door services offers.

• Never give or send any personally identifiable information, money, gold or other precious metals, jewelry, gift cards, checks, or wire information to unverified people or businesses

• Take precautions to protect your identity if a criminal gains access to your device or account. Immediately contact your financial institutions to place protections on your accounts, and monitor your accounts and personal information for suspicious activity.

Holiday Scams

Every year, thousands of people become victims of holiday scams. Scammers can rob you of hard-earned money, personal information, and, at the very least, a festive mood.

Scams include:

• Non-delivery scams, where you pay for goods or services you find online, but you never receive your items

• Non-payment scams, where you ship purchased goods or services, but you never receive payment for them

• Auction fraud, where a product you purchase was misrepresented on an auction site

• Gift card fraud, where a seller asks you to pay with a pre-paid card

How to protect yourself

• Don’t click any suspicious links or attachments in emails, on websites, or on social media. Phishing scams and similar crimes get you to click on links and give up personal information like your name, password, and bank account number. In some cases, you may unknowingly download malware to your device.

• Check each website’s URL to make sure it’s legitimate and secure. A site you’re buying from should have https in the web address. If it doesn’t, don’t enter your information on that site. 

• Avoid buyers who request their purchase be shipped using a certain method to avoid customs or taxes inside another country.

• Never wire money directly to a seller.

• Use a credit card when shopping online and check your statement regularly. If you see a suspicious transaction, contact your credit card company to dispute the charge.

• Always get tracking numbers for items you buy online, so you can make sure they have been shipped and can follow the delivery process.

Romance Scams

In romance scams, a criminal uses a fake online identity to gain a victim's affection and trust. The scammer then uses the illusion of a romantic or close relationship to manipulate and/or steal from the victim.

The criminals who carry out romance scams are experts at what they do and will seem genuine, caring, and believable. Con artists are present on most dating and social media sites.

Scam artists often say they are in the building and construction industry and are engaged in projects outside the U.S. That makes it easier to avoid meeting in person—and more plausible when they ask for money for a medical emergency or unexpected legal fee.

If someone you meet online needs your bank account information to deposit money, they are most likely using your account to carry out other theft and fraud schemes.

How to protect yourself

• Be careful what you post and make public online.

• Research the person’s photo and profile using online searches to see if the image, name, or details have been used elsewhere.

• Beware if the individual seems too perfect or quickly asks you to leave a dating service or social media site to communicate directly.

• Beware of individuals who attempt to isolate you from friends and family or requests inappropriate photos or financial information that could later be used to extort you.

• Beware if the individual promises to meet in person but then always comes up with an excuse why they can’t. If you haven’t met the person after a few months, for whatever reason, you have good reason to be suspicious.

• Never send money to anyone you have only communicated with online or by phone.

Spoofing and Phishing

Spoofing is when someone disguises an email address, sender name, phone number, or website URL—often just by changing one letter, symbol, or number—to convince you that you are interacting with a trusted source.

Phishing schemes often use spoofing techniques to lure you in and get you to take the bait. These scams are designed to trick you into giving information to criminals that they shouldn’t have access to.

In a phishing scam, you might receive an email that appears to be from a legitimate business and is asking you to update or verify your personal information by replying to the email or visiting a website. The web address might look similar to one you’ve used before. The email may be convincing enough to get you to take the action requested.

But once you click on that link, you’re sent to a spoofed website that might look nearly identical to the real thing—like your bank or credit card site—and asked to enter sensitive information like passwords, credit card numbers, banking PINs, etc. These fake websites are used solely to steal your information.

Phishing has evolved and now has several variations that use similar techniques:

• Vishing scams happen over the phone, voice email, or VoIP (voice over Internet Protocol) calls.

• Smishing scams happen through SMS (text) messages.

• Pharming scams happen when malicious code is installed on your computer to redirect you to fake websites. 

How to protect yourself

• Companies generally don't contact you to ask for personal information like your social security number, username or passwords.

• Don't click on anything in the unsolicited email or text messages. Remember, you can always look up the company’s phone number on your own and call the company to ask if the request is legitimate. 

• Be careful of what you download. 

• Set up two-factor (or multi-factor) authentication.

• Be careful with what information you share online or on social media. By sharing things like pet names, schools you attended, family members, and your birthday, you can give a scammer all the information they need to guess your password or answer your security questions.

Tech Support Scams

In these scams, criminals pose as technical or customer support/service. They may impersonate any type of personnel appearing to offer support or assistance for the following:

• Computer/Virus Support

• Virus software renewal

• Banking

• Utility Company

• GPS

• Cryptocurrency exchange

How it works:

Scammers pose as representatives from legitimate companies, such as financial institutions, utility companies, or cryptocurrency exchanges. They tell you that there's some sort of issue with your device or account and They’ll try to reach you in a number of ways, including:

• Unsolicited phone calls or text messages

• Internet pop-up windows

• Online ads advertising tech support numbers 

However the scammer gets your attention, they'll inform you that they can fix the issue for you—for a fee—and that you have to act fast. Scammers may ask you to wire cash, send a gift card, or even transfer cryptocurrency as payment. Once you grant the scammer remote access to your computer or your account, they'll steal your personal information and/or money.

Unfortunately, many people in this situation don’t realize they're being scammed until it's too late.

How to protect yourself

• Slow down and think. Scammers create a sense of urgency and panic within the victim to convince them to act.

• Know that legitimate companies will not call you randomly and offer tech support. 

• Never let someone claiming to be tech support have remote access to your computer or device. Scammers often get a victim on the phone and send them a link to download malicious software on their computer. Once that scammer is in your computer, they have access to all of your personal information and files and can potentially drain your bank accounts, too. 

• Keep your virus scan software up to date. 

How to report the scam

If you believe you or someone you know may have been a victim of a scam, file a complaint at the FBI’s Internet Crime Complaint Center at https://www.ic3.gov/ 

When reporting a scam—regardless of dollar amount—include as many of the following details as possible: 

• Names of the scammer and/or company

• Dates of contact

• Methods of communication

• Phone numbers, email addresses, mailing addresses, and websites used by the perpetrator

• Methods of payment

• Where you sent funds, including wire transfers and prepaid cards (provide financial institution names, account names, and account numbers)

• Descriptions of your interactions with the scammer and the instructions you were given

Whenever possible, you should keep original documentation, emails, faxes, and logs of communications.

Additional Resources

• Equifax:

  • Phone 800-525-6285 

  • Email equifax.com 

• Experian: 

  • Phone 888-397-3742

  • Email experian.com 

• TransUnion: 

  • Phone 888-909-8872 

  • Email transunion.com 

Annual Credit report: http://annualcreditreport.com/ 

Consumer Financial Protection Bureau (CFPB): https://www.consumerfinance.gov/consumer-tools/fraud/ 

Federal Trade Commission (FTC):  https://reportfraud.ftc.gov/ 

Elder Abuse Fraud Hotline: 

Phone: 833-Fraud-11 or 833-372-8311

https://ovc.ojp.gov/program/stop-elder-fraud/providing-help-restoring-hope 

FBI: https://www.fbi.gov/how-we-can-help-you/scams-and-safety