Ponzi Schemes

For scammers, 2023 was a busy year. The FBI’s 2023 Internet Crime Report collected 880,418 complaints about scams and reported $12.5 billion in losses, the most over the last five years.

Since 2019, complaints were up 88% and financial losses were up 257%. Arizona had the most complaints per 100,000 population with 227.17.

Here are the 10 states with the most complaints per 100,000 people, based on the 2022 population count:

Investment fraud

In 2023, the FBI said investment fraud was once again the costliest type of crime tracked by the Internet Crime Report (IC3). Losses to investment scams rose from $3.31 billion in 2022 to $4.57 billion in 2023—a 38% increase. 

The second-costliest type of crime was business e-mail compromise (BEC), with 21,489 complaints amounting to $2.9 billion in reported losses. Tech support scams, meanwhile, were the third-costliest type of crime tracked by IC3. Different demographic groups tended to be impacted by different crimes.

Victims between the ages of 30 and 49 years were the most likely group to report losses from investment fraud, while the elderly accounted for well over half of losses to tech support scams.

The FBI said ransomware incidents, in which hackers take control of a computer or network, continued to be impactful and costly. 

“After a brief downturn in 2022, ransomware incidents were again on the rise with over 2,825 complaints,” the report’s authors wrote. “This represents an increase of 18% from 2022. Reported losses rose 74%, from $34.3 million to $59.6 million.”

In terms of numbers, phishing email scams were the most common last year. There were nearly 300,000 complaints last year, more than double the number from 2019.

Americans lost more than $10 billion to scammers in 2023 and there is no reason to think that number will fall in 2024, without more consumer vigilance.

In its annual report, the Federal Trade Commission (FTC) broke down the types of scams that victimized Americans throughout the year. Number one on the list is investment scams, costing consumers $4.6 billion.

These scams can take many forms, usually after the scammer has earned the victim’s trust. Think Bernie Madoff. Madoff ran a glorified Ponzi scheme for years, attracting investments from the rich and famous.

Only Madoff never invested the money. If someone wanted to withdraw some money he always provided it because he had a steady stream of new money flowing into his “fund.” It was only when the financial crisis of 2008 arrived that Madoff was exposed, since nearly everyone wanted to withdraw their money.

These days, investment scams often come in the form of “pig butchering.” That’s when a scammer makes contact with someone on social media and, after developing a relationship, casually mentions that they made a lot of money in a sure-fire Bitcoin investment and offers to help the victim make a killing as well.

Imposter scams

A variety of imposter scams also stole millions of dollars from victims. Scammers pose as government officials as well as well-known brands, such as Amazon, the U.S. Postal Service and Microsoft.

Other scam categories revolved around online shopping issues, phony sweepstakes and lotteries, and business and job opportunity scams.

"Digital tools are making it easier than ever to target hard-working Americans, and we see the effects of that in the data we're releasing today,” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “The FTC is working hard to take action against those scams."

Another shift worth noting is how scammers communicate with their victims. After years in which phone calls and text messages were the most common medium, scammers went back to using email in 2023.

Phone calls were the second most commonly reported contact method for fraud in 2023, followed by text messages.

The FTC said it received fraud reports from 2.6 million consumers last year, nearly the same amount as 2022. 

In the United States, we’re accustomed to phony investment scams coming from within our borders. But increasingly, Americans are being tempted by foreign investment “opportunities” that may sound enticing.

Maybe because the investment seems exotic, or maybe it promises huge returns, this week’s ConsumerAffairs-Trend Micro Threat Alert finds overseas investment scams are targeting more Americans.

Investment Scam 

• We saw this scam case last week. Trend Micro’s research team identified scammers impersonating a Federal Ministry of Agriculture and Nature Resource representative, inviting email victims to invest in a fake fund. However, Trend Micro did not detect a significant increase since identifying the scam last week.  

• Trend Micro detected 24,982 logs from July 25-August 1. 

“This is common to use impersonations to build trust that the investment is legitimate,” Jon Clay, vice president of Threat Intelligence at Trend Micro, told ConsumerAffairs. “Consumers should be wary of unsolicited emails or texts for investment opportunities and should investigate the opportunity before taking action."

 UPS Shipping Scam 

• Trend Micro's research team identified scammers impersonating UPS, asking customers for their personal information such as name, address, phone number, and credit card authorization to reschedule their parcel. 

• The top five states being targeted are Florida, Texas, North Carolina, Pennsylvania and California. 

There are several UPS Shipping scams but one of the more recent ones tries to make you think you’ve missed a package delivery and have to pay a fee to reschedule it.  

The tip-off that it’s a scam is that you are asked to pay through a portal that is not part of UPS. And yes, you might even be asked to pay with gift cards.

DHL Phishing 

• Trend Micro identified a scam, a type of phishing email impersonating DHL, where scammers asked the receivers to check the delivery status and make the payment via fake DHL pages.  

• Trend Micro detected 264 logs on August 1.

UPS is not the only delivery service scammers are using. DHL is being used in exactly the same kind of ruse.

“In most cases the communications concern the sale of consumer goods over the internet where payment may be requested before the goods are delivered,” the company warns on its website. “Please be advised that DHL does not request payment in this manner. DHL only collects money due for official DHL-related shipping expenses.”

Fake AVG Scam 

• Trend Micro's research team identified a fake alert SMS message from scammers pretending to be AVG, informing iPhone users that their phone is at risk for viruses and other malware. The scammers lure a 75% discount as bait to prompt victims to renew their anti-virus protection in order to get access to credit card information. 

• The top five states being targeted are California, Texas, Colorado, Illinois and Arizona.

AVG advises consumers to only contact AVG Support through the official support website. In other words, don’t click on links in a text.

The offer of a 75% discount is another dead giveaway. Companies go broke by offering discounts that large.

Travel Scam  

• Between April 1-July 30, the Trend Micro research team identified 2,244 travel-related scam URLs, which increased by 9.8% compared to the past weeks.  

• Trend Micro found three fake booking.com pages, with over one-third of the victims from Oregon (32.68%). 

• The top five states being targeted are Oregon, Virginia, Washington, Pennsylvania and Illinois.

The lasting power of travel scams should be no surprise this summer because of the massive number of trips consumers are taking.

International travelers have to be extra careful. They may be in a strange land and be unfamiliar with local laws and customs. Many overseas scammers specifically target American travelers, expecting a bigger payoff.

Email System-Related Phishing 

• Trend Micro’s research team found a phishing email showing victims that they received several emails identified as spam. To access those spam emails, they are prompted to log in with their personal information/account information to access these emails.  

• Trend Micro detected 3,634 logs on July 31. 

This begs the question of why anyone would want to read their spam emails. But apparently, some people do. Just don’t give anyone your login credentials to do so.

Members of every generation are victims of scams and fraud but sometimes different generations are targeted with different cons.

The Association of Certified Fraud Examiners (ACFE) has studied this subject and identified the types of fraud that pick and choose their targets largely based on their age. For example, if you are a baby boomer you are most likely to be targeted by investment and other financial scams.

But because this group is most likely to own their home, they are also targets of contractor fraud, losing money to fraudulent roofers and remodelers, who demand upfront payment but then disappear.

Because they are more likely to receive regular health care, baby boomers are often the targets of medical fraud. Because this generation often makes their final arrangements in advance they are more likely to fall victim to scammers posing as funeral homes, collecting money but providing no service when the time comes.

Targeting Gen X

Members of Generation X, often the children of baby boomers, are approaching retirement and trying to make sure they have enough money to stop working someday. ACFE reports this group is most likely to fall victim to credit card and debt relief scams, as well as mortgage relief scams.

Millennials, now the largest generation, often fall victim to scams involving technology, such as online shopping scams and smishing scams, which send fraudulent texts that appear to be from a legitimate source, such as the user’s bank notifying them of suspicious charges.

Law Helie, general manager of the Consumer Banking product line at nCino, a firm providing cloud banking services, says millennials grew up with technology and might be a little too trusting.

“In the millennial space, what we see are people logging into an app, if I get an email that looks legitimate I’m just going to click on it, then I start plugging in my details,” Helie told ConsumerAffairs.

Millennials are more accessible to the bad guys

Jason Ioaniddes, an engineer at Alloy, an identity risk management firm, says trust may play a role. But he says other factors make the generation more vulnerable.

“There may also be a component of accessibility by a bad actor because you can just hit more people in that group through a digital channel because more of them are connected to these kinds of digital services,” he told us. “If you’re sending out spam texts millennials and the group behind it may be more likely to be touched by the scam than older generations.”

Generation Z is another demographic group that has grown up with technology. But a bigger factor, according to the ACFE report, may be education. The group is often targeted by federal student tax scams. And just like millennials, they are often targeted by social media and cybersecurity scams.

“Hi! I just made $600,000 thanks to a little-known secret about buying cryptocurrency!” The Federal Trade Commission (FTC) says overtures like that are starting to fill up email in-boxes by the score and that every single one of them is a fake.

Can’t-miss opportunities are just one of the arrows scammers use, but investment scams cost Americans close to $4 billion last year and the agency is doing all it can to stop that number from going higher.

How an investment scam works

Investment scammers don’t waste their time on promising a target they can make $25 or $50. They want to create the impression that someone can “make lots of money" with "little to no risk." Jim Kreidler, a Consumer Education Specialist, at the FTC said that those come-ons often start on social media, online dating apps, or from an unexpected text, email, or call. 

But how do you tell the difference between a legitimate investment — and a scam? For one thing, don’t accept any unsolicited offers.

“If you get an out-of-the-blue call, text, or e-mail about “an amazing investment opportunity,” it’s a scam. Hang up. Delete. Walk away. Especially if they want you to take money out of your 401(k) to invest,” Kriedler said.

“Reject the high-pressure pitch. Scammers try to plant an image in your head of what life will be like when you’re rich. Don’t believe it," Kriedler said. "They’ll say ‘This is a once-in-a-lifetime offer — and it will be gone tomorrow.’ But, if it is a legitimate investment, the person on the other end will let you take the time you need to investigate before spending any money."

Kriedler has two other suggestions, starting with doing your own research.

“Don’t make any investment until you’ve checked it out. Research the investment and the person offering it. Search online for the name of the company plus ‘review,’ ‘complaint,’ or ‘scam.’”

His second? “Don’t believe promises that you’ll make money or earn guaranteed returns. No one can guarantee you’ll make lots of money with little to no risk — anyone who does is a scammer,” he said.

There are also investment coaching scams to worry about

A twist on investment scams is the “investment coaching scam,” where a scammer will pitch you on their “patented,” “tested,” or “proven” strategy (or something similar) they say will teach you how to make money investing in stocks, bonds, foreign currency, or tax liens.

Promises like “Now, you’ll be able to retire without a worry in the world!” are full of problems. So are many real estate investment seminars where you’ll be coached on how to rake in money by working part-time or at home. Sure, it’s possible that someone may have made some money off of a real estate trick, but most people never make their investment back, the FTC said.

For a full breakdown of all investment scams the FTC has seen, they’re available here.

A recent report had TikTok under fire for spreading misinformation in suggested videos on current news topics. Now, the social platform is the source of a new cryptocurrency investment scam. 

According to a report from the Better Business Bureau, scammers are using TikTok to lure users into a crypto scam. Content creators show off huge piles of money, enticing TikTok users that a similar fate awaits them if they invest in crypto.

The creator asks for money over Venmo or Zelle, which will then be invested on behalf of the TikTok user, and they promise to return three times as much as the original investment. 

However, before users can ever cash in on their investments, the scammers ask for “fees” for "help.". This is where things can get problematic.

There are reports of some scammers asking for these fees – which can be a few hundred dollars – several times, and they often try to make users feel that they’re always missing out on the next big investment if they ask for their money back.

Unfortunately, those who have fallen victim to this scam haven’t gotten their money back. This includes their original investment and any additional “fees” that they sent to scammers. 

Be vigilant on social media

Consumers who encounter any potential social media investment scams should report it to law enforcement and the Securities and Exchange Commission (SEC). Even if no money is personally lost, the more reports that are filed, the more awareness it creates of these pervasive scams. 

The Colorado Attorney General’s Office offers some tips for consumers who may spot an investment or money-flipping scam on social media. Research is key.

If you’re ever unsure about whether or not a video or post is a potential scam, search keywords in the post and see what comes up. Oftentimes, other users who have gotten scammed have shared their experiences, or important information about the scam is available online. 

They also warn consumers not to trust posts that come from friends or acquaintances on social media. Sometimes their accounts have been hacked, so just because someone you know is sharing something about investing or making money, doesn’t mean it actually came from that person. 

Ultimately, consumers should trust their instincts and avoid giving in to threats from scammers. If something doesn’t look right or looks too good to be true, that’s often a sign that it is indeed a scam.

Additionally, any social media user who pressures you to send them money or threatens legal action is likely hiding behind the scam. Vigilance is key when scrolling through social media.

Just as you shouldn’t rely on social media for credible news, you shouldn’t take investment advice from someone posting on Facebook and Instagram. Authorities are warning consumers that scammers are using these platforms to ensnare victims.

The scheme first hooks victims by helping them realize actual profits, a move that builds credibility and earns trust. But once the victim has earned some cash, the scammers encourage them to transfer the money to a fake trading platform. In reality, it’s a bank account controlled by the scammers, who steal the money.

The scam has popped up in Florida within a large population of retired people. Florida Attorney General Ashley Moody says her office has received about 100 complaints in the last month.

“The allure of quick profits has drawn millions to cryptocurrency trading, with many new investors joining the market daily,” Moody said. “Where there is opportunity though, there are also scammers, baiting victims with early success, then prompting them to transfer their profits to fraudulent trading platforms.”

Victims get scammed after making some money

Moody said investigators are seeing a sharp uptick in complaints that coincide with recent gains in cryptocurrency, such as Bitcoin. Moody said it’s important for people to understand how these criminals operate.

After a victim clicks on an ad promoting investments in a cryptocurrency website, they are prompted to set up an account with a legitimate cryptocurrency exchange. After they have made some money on trades, the victims are told to transfer their profits to other cryptocurrency websites that are fraudulent, imposter platforms. 

These fraudulent websites may only operate for a short time, and then the victims are blocked from signing in. They are also blocked from contacting any financial or investment planner they were paired with earlier on in the process.

Seek advice from trusted sources

Moody says there are simple ways to avoid these scams:

• Always be wary of unsolicited offers to invest.

• Know that if scammers request payment in cryptocurrency for the right to recruit others into a program and promise rewards paid in cryptocurrency, it is a scam.

• Be wary of fake cryptocurrency trading platforms that may resemble legitimate ones.

• Finally, do some independent research before investing—never wire money or provide personal or financial information until properly researching a platform and an opportunity.

If you are new to investing, seek the advice of someone you trust. If you open a trading account at one of the major platforms like ETRADE, TD Ameritrade, or Schwab, you will find plenty of research tools. Most companies have advisers who can answer your questions.

“Trades have no or small fees,” Michael, of Tulsa, Okla., wrote in a recent ConsumerAffairs review of Schwab. “You can build your own portfolio or use an advisor and let them do all the work for you based on your final goals.”

ConsumerAffairs has collected thousands of verified reviews of online investment companies to help you get started.

A new analysis from the Federal Trade Commission (FTC) shows that consumers lost more than $80 million to cryptocurrency investment scams since last October. The FTC said it received nearly 7,000 reports from consumers about these types of scams in just the last seven months, a time period in which cryptocurrency was highly buzzed about.

Many of the reports were from people in their 20s and 30s. The agency said this group reported losing more money to investment scams than to any other type of fraud, and more than half of their reported investment scam losses were in cryptocurrency. The median amount consumers reported losing to the scams was $1,900.

People 50 and older were less likely to report losing money on cryptocurrency investment scams, but their losses were much steeper when they did. The FTC said this group reported a median loss of $3,250. 

Scams come in a variety of forms

While investment scams topped the list as the most lucrative way for scammers to get cryptocurrency, the FTC said scammers are known for using “whatever story works to get people to send crypto.” 

“That often involves impersonating a government authority or a well-known business. For example, many people have told the FTC they loaded cash into Bitcoin ATM machines to pay imposters claiming to be from the Social Security Administration,” the agency said. “Others reported losing money to scammers posing as Coinbase, a well-known cryptocurrency exchange.”

The FTC noted that cryptocurrency investment scams come in a number of forms. Sometimes they begin as an offer of investment “tips” or “secrets” in online message boards that ultimately lead people to bogus investment websites. 

Other times, a scammer will promise that a celebrity associated with cryptocurrency will multiply and send back any cryptocurrency you send to their wallet. For example, the agency said consumers reported losing more than $2 million to Elon Musk impersonators alone since last fall.

Avoiding a cryptocurrency scam

Here are a few of the FTC’s tips for spotting a cryptocurrency scam: 

• You’re promised big returns. Promises of guaranteed huge returns or claims that your cryptocurrency will be multiplied are always scams, the FTC warns.

• Insistence on cryptocurrency. “If a caller, love interest, organization, or anyone else insists on cryptocurrency, you can bet it’s a scam,” the agency said.

The bottom line, said the FTC, is that the cryptocurrency itself is the investment. Anyone who claims to know of a better way to make money off of it is running a scam. 

“You make money if you’re lucky enough to sell it for more than you paid. Period. Don’t trust people who say they know a better way,” the FTC said.

The U.S. Securities and Exchange Commission (SEC) has charged investment adviser GPB Capital Holdings and a trio of executives with defrauding around 17,000 retail investors as part of a massive $1.7 billion “Ponzi-like” scheme.  

In a statement, the SEC said three GPB executives “lied to investors about the source of money used to make an 8% annualized distribution payment to investors.” 

Investors were allegedly told that the distribution payments were fully covered by profits generated by GPB Capital’s portfolio companies. In actuality, the investors were at least partially paid using money from new investors.

“GPB Capital projected an aura of success, touting that it consistently made an 8% annualized distribution payment to investors, as well as periodic ‘special distributions’ ranging from 0.5 to 3%,” the SEC said. 

However, the SEC claims the firm “used investor funds to cover the shortfall between funds from operations of the portfolio companies and the amount needed to make an annualized 8% distribution payment.”

The firm is also accused of violating whistleblower protection laws by including language in termination and separation agreements that prohibited two former employees from complaining to the SEC. 

‘All a lie’ 

Around 17,000 investors were affected by the scheme, and about 4,000 of those affected were seniors, according to the SEC. 

“The defendants misrepresented the holdings of GPB Capital through deceptive marketing practices, luring investors with promises of monthly distributions that would be covered by funds from the investments and not drawn from underlying invested capital,” William Sweeney, the head of the Federal Bureau of Investigation’s New York office, said in a statement.

“As we allege today, however, this was all a lie,” Sweeney said. “In truth, a significant portion of GPB’s distributions were paid directly from investor funds.”

According to a separate lawsuit filed Thursday by New York Attorney General Letitia James, the defendants also allegedly misappropriated investor funds to pay for things like private planes, luxury travel, and expensive cars.

"We won't let Wall Street fat cats get away with breaking the rules, as they pilfer New Yorker's wallets in the meantime," James said in a statement.

GPB has denied the allegations and says it intends to defend itself “vigorously” in court.

For most consumers, elder fraud isn’t on their radar. But those with aging parents may know  all about the scams that are being perpetrated -- investment scams, insurance scams, the rising “grandparent scam,” and even timeshare scams. With the aid or improved technology, those who run scams and other crimes singling out older Americans quadrupled from 2013 to 2017, which led to more than $6 billion in fraud losses. 

One aging baby boomer -- 69-year-old U.S. Attorney General (AG) William Barr -- has decided that it’s time the Department of Justice (DOJ) needs to take on elder fraud as a mission. 

“What makes these crimes particularly heinous is not only the vulnerability of the victims, not only the breach of trust involved, but also the victims’ stage in life – the victims usually do not have the opportunity to recover from the financial loss,” the AG remarked in a speech on Tuesday.

Not even the Attorney General is safe

In a statement, Barr explained that he had also been used by scammers to defraud other people.

“I myself was used as a lure in a scam,” Barr shared. “My official Justice Department portrait from 1992 was uploaded to various websites. My fake persona was informing people that, as the former Attorney General, I had special access to government grants, and that if people sent me some money, I would tell them how to get a lot of money in exchange.”

And, then, what happened, Bill?

“I started getting phone calls from people asking why they had not received their money. My portrait kept appearing on these bogus websites, and I kept getting calls at my office. These were frantic calls. Some people were desperately hoping this was not a scam. Others who called were embarrassed and wanted to let me know this was going on, and to know who they could contact for support. I remember a number of the calls. One woman from Georgia explained that she and her husband had lost their life savings: $40,000.”

Introducing the Elder Fraud Hotline

To get closer to the root of these scams, the DOJ knows that the crooks responsible for these crimes rely on their victims’ keeping quiet. And, for the most part, victims do -- often because they simply feel ashamed that they fell for the hustle.  

Barr says it’s time for victims to act and speak up -- without fear. 

Enter the National Elder Fraud Hotline, a service that will give adults aged 60 and older a safe place to contact and seek assistance. 

The multilingual service will be staffed by case managers with fraud prevention experience who will report any suspected fraud to relevant agencies and provide resources and referrals to other relevant services. Those actions include filing a complaint with the FBI Internet Crime Complaint Center (IC3) for Internet-facilitated crimes and consumer complaints to the Federal Trade Commission. 

To give added solace to the victims, the Hotline promises that it will assign a case worker who will stay with the consumer through the entire process.

“Reporting is the first step,” Barr said. “It can help authorities identify those who commit fraud, which can prevent others from becoming victims… (but) It will require everyone working together.  It will demand a close partnership between the public sector and the private sector.”

“Every one of us must do our part too. If you are a local banker who spots something fishy, call. If you are a cashier who sees a senior buying gift cards in bulk, step forward and say something.”

The number for the new Elder Fraud Hotline is 1-833-FRAUD-11 (1-833-372-8311).