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Consumers lost $5.7 billion to investment fraud in 2024, according to new data from the Federal Trade Commission.
According to the FTC, investment scams generally include claims that consumers will benefit greatly from investing in hot new money making schemes.
Most people (79%) who reported investment fraud to the FTC reported that a typical victim lost an average of more than $9,000, the agency said.
Because FTC data is based on fraud consumer reports, the true scope of investment fraud can be much higher after considering people who don’t move forward.
“These scams are becoming really a big problem for consumers,” said John Breyo, vice president of public policy, telecommunications and fraud for the National Consumer League.
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AI and cryptocurrency contribute to investment fraud
Common investment scams include the “pig butchering” scam, a name that refers to the practice of fattening pigs before genocide.
Scammers often try to gain trust before trying to get in touch with the victim, build relationships and gain trust, perhaps via text, social media, or dating apps, before pitching investment opportunities that often bring high returns on virtual assets such as cryptocurrencies.
While investments may seem legal, criminals will eventually disappear with consumer money.
Artificial intelligence has helped make criminals more persuasive, such as using deepfakes, making it easier to commit these and other related frauds, Breyo said. Deepfakes are manipulated videos or other images and sounds that people can say that they look real but aren’t.
According to the Diplomatic Council, organized crime networks have also established fraud operations centres throughout Southeast Asia in countries including Cambodia, Laos and Myanmar. The centre has thousands of people located there, and it has often been illegally trafficked and forced them to implement these investment schemes worldwide.
Criminal networks often use cryptocurrencies to promote scams that cover pigs. This is because researchers at the University of Texas wrote in a recent research paper, “It’s easy, cheap, and not too afraid to have a fair amount of funding.”
How to reduce the risk of investment fraud
There is no “silver bullet” to protect against fraud, but there are ways consumers can reduce risk, Breyo said. There are three characteristics that carry out many scams, he said:
emergency. Beware of pitches with urgency, Breyo said. The FTC says that scammers “want you to act before you have time to think about it. Scammers often ask victims to pay in a specific or unusual way, Breyo said. “They often insist that they can only pay by using cryptocurrency, wiring money through companies like MoneyGram or Western Union, using payment apps, putting money in gift cards, or numbering the back of the card,” the FTC said. As fraudsters try to isolate the victims, they won’t tell others about situations that could warn them that it is a fraud, Breyo said. They might say, “If you talk about this, no one will believe you,” or “If you report it, the officer will come and pick you up,” or “Your loved one will be in danger,” Breyo said.
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