Financial Crime World

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The Growing Threat of Investment Fraud

In recent years, investment fraud has become a significant threat to individuals and the economy as a whole. According to the FBI’s Internet Crime Complaint Center (IC3), cyber-enabled investment fraud cost U.S. citizens a staggering $3.3 billion in 2022 alone, representing a 127 percent surge from the previous year.

What is Investment Fraud?

Investment fraud refers to schemes where criminals provide false information so that the victim will invest or transfer control of assets to the perpetrator. This can include types of securities fraud, such as:

  • Ponzi Schemes: where returns are paid to existing investors from funds contributed by new investors
  • High-Yield Investment Programs (HYIPs): where investments are promised with unusually high rates of return

Once the perpetrator has control of the assets in investment fraud schemes, they divert funds out of the investment vehicle.

Key Points about Investment Fraud

Here are some key points to be aware of:

  • Target Demographics: Certain professions lend themselves to being used to facilitate certain types of schemes, and each scheme type targets a certain demographic.
  • Types of Investment Fraud: Investment fraud includes Ponzi schemes, high-yield investment programs, and other types of securities fraud.
  • Methods of Operation: Criminals often target vulnerable populations, such as the elderly or religious or ethnic communities, and use advertising to solicit funds for investment vehicles that offer potentially high rates of returns with minimal risk.
  • Misappropriation of Funds: After transferring funds into the investment vehicle controlled by the criminal, they misappropriate the funds by transferring them to personal or otherwise undisclosed bank accounts.

Social Media Influencers and Investment Fraud

Social media influencers have contributed to and facilitated investment fraud by using their large audiences and fans’ rapport to solicit funds for investment schemes. Additionally, regulatory bodies such as the SEC have charged individuals and companies for securities law violations related to unregistered offers and sales of crypto asset securities.

Protecting Yourself from Investment Fraud

Overall, it is essential to be aware of these types of investment fraud and take steps to protect yourself from becoming a victim:

  • Research thoroughly: before investing in any scheme
  • Verify information: through reputable sources
  • Be cautious of high returns: with minimal risk
  • Report suspicious activity: to regulatory bodies