Fraud on the Rise—Be Careful!
By Russell W. Hall, CFP®, CPWA®
With scams and fraud proliferating, it’s becoming increasingly difficult to stay informed about all the ways criminals are trying to take our money. Take, for example, recent Facebook advertisements that are really social-media “pump and dump” schemes.
These false advertisements use photos of well-known investors to pitch entry into supposedly elite investment groups. When users click on the ads, they are told to download a messaging app and join a group to receive the latest and hottest stock tips.
In reality, the users are the target of the infamous pump-and-dump scam, where the investment they are being told to buy is a “penny” stock. Penny stocks are usually valued at less than $5 and are traded over the counter, meaning they are not bought and sold on a major stock exchange and therefore lack the oversight that other securities have.
This can make them easy to manipulate, as seen in the case of the Facebook ads, where the scammers inflate the stock by getting users to bid up the price per share. After the value has gone up, the scammers sell (dump) a large quantity of the shares at a huge profit. That sale causes the price to crash, leaving the new owners with little to no value.
This scam has become so widespread that a group of U.S. attorneys general recently sent a letter to Facebook’s parent company, Meta, requesting that they step up their efforts to block the ads. The letter reports that several individuals lost tens or even hundreds of thousands of dollars (in some cases, more).
It’s a stark reminder to be very careful with social media and the internet in general, especially when it comes to investments. The age-old saying “Don’t believe everything you read” now needs to be updated to “Don’t believe everything you see, either.”
Along that same line, we’ve also recently heard about fake bank or credit card notifications becoming more prevalent. This scam isn’t new; how many junk emails have you received purportedly from your bank saying, “Youre acCounT is frOzEn”? Unfortunately, scammers are becoming more sophisticated, with texts that read like real fraud alerts from a bank or credit card company.
Typically, the text will mimic that of a large bank or financial institution (such as Citibank, Bank of America, Chase, USAA, or Capital One) and ask if you have authorized a recent charge or withdrawal. The language can also reference “unusual activity” in your account and ask that you verify your identity. This can be even more convincing if the criminals are using stolen data to link your name and phone number to a company that you actually use.
Replying “no” will result in the scammer providing a phone number for you to call a “representative” or telling you that a “specialist” will contact you to confirm. This is where the con begins in earnest, with the scammer asking you to provide login information or even share your screen with them. They can then access your bank account and transfer out money, or rack up charges on your credit card.
How do you protect yourself from this scam? First, don’t reply to any text or phone message unless you are completely sure it’s legitimate. Real fraud alert texts won’t come from 10-digit phone numbers or email addresses, won’t ask you for any additional information (including your login), and won’t include a phone number to call or a website to access. If you’re at all uncertain, call the financial institution at the phone number listed on your statement or the back of your credit card.
We also covered additional tips for spotting scams in a previous article and provided details for the next steps if you’ve been a victim of fraud. If you have additional questions, please visit our website at eclecticassociates.com to schedule a complimentary phone call or meeting with one of our fee-only financial advisors.