At least once a week I receive an email or cell phone message that is a scam, and I bet you do, too. Despite television announcements, magazine and newspaper articles, and warnings posted in public places, scams and other fraudulent schemes take a toll – to the tune of about $10 billion in 2023, according to FTC fraud data!
That does not include the emotional toll as well as all the time to attend to account changes and reporting requirements. It can happen to any of us. No one is immune. I recently wrote a blog about the scam that caught me off guard: My Scam Story: Do As I Say, Not As I Do.
According to FTC data from 2023, 2.6 million people (about the same as 2022) reported fraud and one in four reported losing money to scams, with a median loss of $500 per person. Of the people who reported their age, younger adults ages 20-29 reported losing money more often than older adults age 70+. Email was the #1 contact method in 2023, especially when scammers pretended to be a business or government agency to steal money.
If younger adults are more likely to be scammed, why is there so much publicity about scams against the elderly? The older age group is more likely to lose larger amounts of money or other assets and is also most likely to be permanently hurt by their loss. This is a huge problem and all of us need to be aware of the most common scams and talk with our families about them.
Read Common Scams Targeting Seniors and How to Avoid Them.
The Most Common Scams
Of the scams reported to the FTC in 2023, these are the most common:
Imposter Scams
Imposter scams remained the top fraud category, with reported losses of $2.7 billion in 2023. These scams include people pretending to be your bank’s fraud department [my experience], the government, a relative in distress, a well-known business, or a technical support expert.
Investment Scams
While investment-related scams were the fourth most-reported fraud category, losses in this category grew. People reported median losses of $7.7K – up from $5K in 2022.
Social Media Scams
Scams starting on social media accounted for the highest total losses at $1.4 billion – an increase of $250 million from 2022. But scams that started with a phone call caused the highest per-person loss ($1,480 average loss).
How did scammers prefer that people pay? Bank transfers and payments accounted for the highest losses ($1.86 billion) with cryptocurrency a close second ($1.41 billion reported in losses).
Investment Fraud
What is investment fraud? Investment fraud is a white-collar crime, and it’s when someone purposely misleads or deceives an investor for financial gain. It is illegal for any party to hide material information about investments – such as the risks involved – to induce investors into investing. Investment scams abound and come in various forms. Here are a couple of examples from my experience.
My Professional Experience
When I was an advisor in a brokerage firm, I was referred to an elderly woman with a sum of money to invest. As I recall, it was about $100,000. After talking with her, I became very concerned. Apparently, she had also been contacted by someone associated with her church. That person guaranteed her a very nice return on her investment, a higher rate than was currently attainable through any investment or mix of investments I could find. That immediately made me skeptical – a guarantee of a higher rate than publicly available sounds like an investment that is too good to be true.
After we talked for a while and I started to gain her trust, I suggested that she might want to double-check the person’s background and get more information about the investment, and then we would talk again. However, when I contacted her again it was too late. She had already invested her money. To give her credit, she did talk with church friends, and she did read the pamphlet given to her, but she was charmed. She was not savvy enough to ask hard questions. Unfortunately, I read some time later that several people associated with her church (affinity group) had been caught in this Ponzi scheme and lost all their money.
A Story I Read About
Another investment fraud case I read about involved two brokers employed by a large, well-known firm. Their grandmother was awarded millions of dollars in a FINRA settlement because they mishandled her account. Both the grandsons and the firm were liable. They breached their fiduciary duty, they made inappropriate risky investments, and one grandson even went as far as forging his grandmother’s signature. Granted, that situation is rare, but many were duped by Bernie Madoff and his Ponzi scheme – the largest known in history.
Here is a list of common investment frauds:
Ponzi Schemes
These scams promise high returns with little risk, using funds from new investors to pay earlier investors instead of generating legitimate profits.
Pyramid Schemes
Like Ponzi schemes, these rely on recruiting new investors, where returns are paid primarily from the investments of later recruits rather than from profit.
Pump and Dump
Scammers artificially inflate the price of a stock by spreading false or misleading information. Once the price rises, they sell off their shares, leaving others with worthless stock.
High-Yield Investment Programs (HYIPs)
These often promise unrealistic returns, claiming to invest in foreign exchange or cryptocurrency, but usually just use new investors’ money to pay earlier investors.
Forex (Foreign Exchange) Scams
Some companies promote forex trading with promises of guaranteed profits, often leading to losses when investors cannot withdraw their funds.
Real Estate Scams
These may involve fake property listings or promising high returns on real estate investments that don’t exist.
Fake Investment Platforms
Scammers create fake websites that mimic legitimate trading platforms, luring individuals to invest money that they cannot recover.
Social Media Scams
With the rise of social media, scammers promote “get rich quick” schemes or solicit investments through platforms like Instagram or Facebook.
Affinity Fraud
Scammers exploit relationships within communities, often targeting religious or ethnic groups, to promote investment schemes they trust.
Advance Fee Scams
These involve promising a large return on investment in exchange for an upfront fee, after which the promised investment or return never materializes.
Always conduct thorough research and, if feasible, consult with a financial advisor who is a fiduciary before investing.
Return of Romance Scams
For those of you who are single, the romance scam was recently highlighted on a major newscast. After meeting on an online dating site (match has a fake picture and bio) and getting to know you and the relationship develops, the fraudster requests money. Maybe the money is for a recent setback or travel expenses, or even an investment. Sometimes an in-person meeting may be set up (the fraudsters hire someone to impersonate the online match). As soon as the money is received, the relationship is over.
Be Cautious, Not Afraid
New variations of investment scams appear all the time. Scammers are clever and even though I was scammed, I will not live in fear, nor do I wish that for you. It pays to be a little skeptical, however. Do not click on any links or follow any instructions without checking thoroughly. Ask questions if you are contacted by phone or just hang up if it sounds fishy. If an email looks suspicious, delete it. I especially look for bad grammar and poor English. Ask yourself – does this make sense?
Be smart, be vigilant, but beware!
Let’s Have a Conversation:
How do you identify a scam email or text? Have you noticed an increase in the number of potential scam contacts? Other than being vigilant, do you have any ideas of steps we can take to stop these scams?
