Informed Investor Advisory: Romance Scams

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Thursday, February 08, 2024 | 02:28pm

Romance Scams on the Rise

This blog post is provided in partnership with the North American Securities Administrators Association (NASAA). To view the full investor alert, click here.

Government agencies across North America are seeing an increase in investment-focused romance scams. In September 2021, the Federal Bureau of Investigation (FBI) issued a warning that its Internet Crime Complaint Center (IC3) had received more than 1,800 complaints related to online romance scams with losses of over $133.4 million. In a similar report, the Federal Trade Commission (FTC) stated, “In the past five years, people have reported losing a staggering $1.3 billion to romance scams, more than any other FTC fraud category.”

Investments tied to cryptocurrencies and digital assets topped the North American Securities Administrators Association’s (NASAA) 2022 list of investor threats. Some of these threats may be tied to romance scams. Finally, the Canadian Securities Administrators (CSA) recently warned of fraudsters using social media, messaging apps, and online dating sites to lure people into investment scams.

Romance Scams Are Real; Know the Warning Signs

Romance scammers set online traps and use technology and social media platforms to profile targets. They also spend time getting to know people before asking for money or introducing an investment opportunity. Here are some common tactics and warning signs to look out for:

  • Reluctance to meet in-person or by video: Most scammers avoid meeting face-to-face because often times they aren’t who they say there are. They pretend to be anyone they think you would be attracted to. They will make excuses not to meet, like being too busy with work, or not being able to get away from family or community obligations. “In-person” may include refusing a video chat with the victim while they groom them for the scam.
  • Wanting a long-distance relationship: Once you enter into a “relationship” with an online romance scammer, they might tell you that they live far away, travel a lot for work, or have a job outside the country or area you live. They won’t offer to visit you and may discourage you from trying to visit them.
  • Discussing wealth or business success: In order to interest you in investing, romance scammers may brag about how successful they are. They may flaunt their supposed wealth, using photos of luxury items, real estate, expensive cars, etc. They may offer to help you make money or become wealthy, often offering access to supposed inside information or trading secrets for trendy or complex investments, like cryptocurrencies or non-fungible tokens (NFTs).
  • Pressuring you to give them money: At some point, the romance scammer will likely ask you point blank to provide them with a sum of money. They will likely try to show you that your investment has grown quickly and substantially in order to hook you into giving larger and larger amounts. If you show reluctance, they may put pressure on you by saying manipulative things, such as that they are considering breaking off the relationship or they are offended that you can’t trust them.
  • Introducing an app or website: When you show a willingness to invest, a romance scammer may steer you to an investing app that they say they are using or a website that offers investments. The website or app may be controlled by the scammer or a criminal organization they are associated with. The scammer may also offer to teach you how to invest or trade, and then ask for remote access to your computer or request your online banking information.

How to Protect Yourself Against Romance Scams

When we’re smitten with someone, we tend to lead with our heart instead of our head. A romance scammer depends on this, encouraging you not to look too deeply into their background or the type of scheme they are promoting. Protect yourself by following these steps:

  • Keep your guard up. If a new romantic interest suddenly starts asking for money or encourages you to start investing, be cautious. A potential partner should be focused on your developing relationship, not your money or investing interests.
  • Run a background check. Do online searches to get a better idea of who the person you are dealing with is and what they do. Most people have an online presence these days, which includes personal and professional information. Fake online profiles tend to lack information about an individual, and the images used in an activity feed may feel impersonal or staged. Scammers often use stolen images from real people or stock images, so it’s good to do online image searches to check the origin and use of the image.
  • Check registration. Firms that provide investment advisory services in the U.S. are typically registered with the U.S. Securities and Exchange Commission (SEC) or one or more state securities regulators. In Canada, firms and individuals must be registered with the securities regulators in the provinces they operate in. Check the SEC’s Investment Adviser Public Disclosure database or FINRA’s BrokerCheck to verify registered individuals or firms. In Canada, use the CSA’s National Registration Search.
  • Suggest meeting in-person or by a clear video feed: To determine if a person is who they say they are, you can try and meet in-person in a public place. Make sure to meet in a safe, busy, and public place. Bring a friend or family member too – your wingmate doesn’t need to stick around if things go well, but it will give you a witness and an easy excuse to leave if you feel uncomfortable.
  • Research websites and apps: Scammers create a custom online platform and direct you to it in order to take your money and hide from authorities. Building a custom app or website that can accept money or crypto assets is surprisingly easy. If a person encourages you to invest and recommends an investing website or app, make sure it is registered to do business in your state or province before investing. When dealing with registered investing platforms, do business directly with the platform, don’t allow someone to act as an intermediary.
  • Look for red flags: Scammers might attempt to make the investment look safe by convincing you that they are investing and taking risks too. Alternatively, they may say the investment is low risk or no risk, while offering guarantees that your money will be safe. This is a red flag of investment fraud. Review NASAA’s Warning Signs of Fraud to better understand common tactics fraudsters use to scam people.

NASAA has provided this information as a service to investors. It is neither a legal interpretation nor an indication of a policy position by NASAA or any of its members, the state and provincial securities regulators. If you have questions concerning the meaning or application of a particular state law or rule or regulation, or a NASAA model rule, statement of policy or other materials, please consult with an attorney who specializes in securities law.