According to a 2022 report by Datareportal, 58.4% of the world uses social media, which is well over half the world’s population. Social media has grown tremendously over the last decade simply because people crave interaction and connection with others, something social media can facilitate quite well.
But this worldwide adoption has made social media a gold mine for scammers. According to the Federal Trade Commission, more than half of the people who had losses from investment scams last year reported the scam started on social media, usually through ads, posts and messages. There have been a total of 95,000 reports of fraud initiated on social media platforms, 18 times what they were in 2017 such as instagram scams.
What are Social Media Investment Scams?
The best way to keep yourself safe from these social media scams is to educate yourself on how social media investment scams work such as an Instagram investment scam. Fraudsters find that social media is an easy, low-cost way to connect with thousands of people at once. Moreover, they can use fake accounts and email addresses to maintain anonymity at all times. Such criminals will try to make their accounts look as legitimate as possible.
These scams usually include ads or success stories of past customers to promote their investments, so they seem legitimate. They may also link professional-looking websites, videos, and photos to their accounts to back up their investment.
Most investment scams will have at least one of the following characteristics:
⦁ They will reach out to you unsolicited and offer investment opportunities.
⦁ They will promise you high returns with little to no risk in a very short period. If you feel like the returns sound too good to be true, it may very well be a scam.
⦁ They fail to provide you with any form of written information regarding the investment, the risks involved, and what you can do to pull out your money.
⦁ They link their websites that may seem professional but provide little to no information about the company, its management, location, or investment details.
Types of Social Media Investment Scams
There are many types of investment scams running on social media such as Instagram giveaway scams. Some have been around for quite some time; others are relatively new. Here are some of the latest social media investment scam types you should be looking out for.
⦁ Cryptocurrency Scams
Cryptocurrency has been on the rise, and with it, so have been reports of crypto-related scams. There are several ways users can be scammed using cryptocurrency. The scammer may impersonate a celebrity promoting a type of giveaway or investment that will double your money once you deposit a dedicated amount of crypto into a wallet address. However, once you give away your cryptocurrency, it is lost.
Another way scammers can convince you to invest in new ICOs or NFTs. Here they will create fake websites for ICOs and send these to you through your social media channels. There they will have users deposit their cryptocurrency into a wallet address. An ICO, also known as an Initial Coin Offering, is a means through which funds are raised for a new cryptocurrency venture. However, the promoters will collect the ICO money with ICO scams and disappear forever.
⦁ Ponzi Schemes
Ponzi schemes are a type of investment fraud where you may be asked to pay to join in and then recruit others to join in and invest their money as well. For investors to continue making money, they need to bring in new members. Eventually, however, new investors may not show up, and the scheme collapses.
Ponzi scheme operators also use social media to lure new investors into their schemes. They may convince you to invest in these easy, get-rich-quick schemes and promise huge profits. However, you will end up with more losses than you can count.
⦁ Real Estate Scams
Scammers are using social media to create rentals and fake listings at incredible, low prices. They will lure in people looking for homes at low prices and have them wire funds upfront to hold as a deposit or share their sensitive information, such as their Social Security Numbers. Most of these scammers have no real connection to the property or its owners. It’s only after you show up at the property that you realize you have been scammed.
⦁ Pump-and-Dump Schemes
Investors use social media to do research on stocks and look up information on investment advisors, broker-dealers, etc. Social media can be helpful in offering investors valuable information, but they also offer opportunities for fraudsters.
In a pump-and-dump scheme, promoters will create false positive rumors that will “pump” up stock prices. This will lead to a buying frenzy, and the promoters will sell their shares at high prices before the frenzy dies down. After the sale, however, new buyers will see the stock price drop dramatically, leading to losses.