California Attorney General Warns of Rising Investment Scams on Social Media Platforms
Have you ever come across advertisements on your mobile phone social platforms featuring “exclusive investment insights” provided by CEOs of investment companies or financial experts? California’s Attorney General issued a warning about scammers misusing celebrities’ images to lure people into financial traps through the development of deepfake AI technology. Clicking on these types of ads mistakenly could lead to irreversible financial losses.
According to the statement from California Attorney General Rob Bonta last week, he cautioned Californian residents to be vigilant against the investment scams spreading on social media.
“We have observed a rising trend of investment fraud cases on Facebook, Instagram, and WhatsApp. These schemes have resulted in some victims losing their lifelong savings,” he stated. Bonta also highlighted that if one becomes a victim, they should not blindly trust messages from strangers claiming to be “asset recovery experts” or “lawyers” to avoid being deceived twice, especially in cryptocurrency transactions where recovering the funds can be challenging.
The statement mentioned common investment scams on current social media platforms, including the “pump and dump” fraud and “confidence scams” that lure investments after establishing trust.
“Confidence scams” involve using advertisements or fake news articles to entice investors to provide contact information. Subsequently, scammers will initiate contact with the victims, build a mutual trust relationship, and persuade them to make investments through false platforms, often referred to as “boiler room” scams.
On the other hand, the “pump and dump” scheme combines the “fake celebrity effect” and stock market manipulation as a financial scam typically executed in three steps:
1) Bait:
Scammers use the images of well-known public figures or financial advisors in advertisements on Facebook or Instagram, claiming to offer exclusive “insider” membership or “guaranteed high returns” on investment insights.
2) Transfer:
Once a victim clicks on the fraudulent ad, they are directed to move the conversation to other encrypted communication platforms like WhatsApp or Telegram.
3) Enticement Trap:
The victims are led into group chats where they receive advice from alleged “experts” along with fabricated success case studies, known as the scammers’ “shills.” The scammers guide the victims to purchase specific undervalued stocks or cryptocurrencies, creating a false sense of profit in a short time. After manipulating the stock prices to peak levels, the scammers sell off, causing a sudden crash and leaving the victims empty-handed.
Bonta specifically warned everyone that fraudulent ads are now utilizing cutting-edge technology to mimic real individuals through videos or live streams. The investment advertisements seen on social media alone serve as high-risk signals. Legitimate brokerage firms and investment advisors typically do not promote their investment strategies in such forms.
The Attorney General’s office pointed out in the statement that investment opportunities claiming “zero risk, guaranteed high returns” or advertisements using endorsements from celebrities and phrases like “invest now, or you’ll miss out” are often regarded as “red flag signals” requiring extra caution.
Furthermore, it is advised not to hastily trust any sudden recommendations for “excellent investment opportunities” and to refrain from sharing personal account information, social security numbers, or financial details with anyone, nor allow strangers to remotely control your computer or phone.
Laying emphasis on numerous fraud prevention suggestions, the underlying principle boils down to one sentence: “If an investment sounds too good to be true, it most likely is.”