The California Attorney General recently issued a warning surrounding the popularity of investment scams, specifically ones shown on social media. Technological advances like Artificial Intelligence (AI) are making it easier for scammers to successfully steal money from unsuspecting victims. This warning focused on two major scams: The Pump and Dump Scam and The Confidence Scam. 

The Pump and Dump Scam
In Pump and Dump scams, fraudsters create social media advertisements promoting low-priced stock options and cryptocurrency deals. These advertisers will usually include AI-generated images of prominent financial figures to make the advertisement seem legitimate. Once a victim has clicked on the advertisement, they’ll be directed to a website where they’ll enter their contact information to “learn more.” Once the victim is contacted, the scammer will ask to join a group via a messenger app like WhatsApp or Telegram that discusses “exclusive” investment tips. The “investors” encourage victims to spend large amounts of money on the stock or crypto, causing a "pump" in the stock price. Once the price inflates, scammers will then sell the investments at the pumped up price and will stop promoting the investment, causing it to “dump,” and reduce greatly in price. This price reduction ultimately results in investors losing money.

The Confidence Scam
Confidence scams are like relationship scams, as these fraudsters create trust before asking for money. To lure people in, scammers will post various advertisements on social media promoting their "successful investing platform" that will “guarantee returns.” After someone clicks on the advertisement and adds their contact information, the scammer will contact the victim and create a relationship with them. Once there is trust and confidence, the scammer will “teach” the victim how to use the investing platform, which is really a clone of a system and not a real investment platform. Once they’ve invested money and see their earnings grow, victims will likely continue to invest money into the platform. When the victim contacts the scammer to withdraw their profits, the scammer will ask the victim to pay a fee prior to withdrawal. Once the fee is paid, scammers will make excuses for not being able to send the victim their money and will shortly cut all contact, leaving the victim with lost funds.

How to Avoid Falling Victim
It’s easy to be duped into believing these scams are legitimate, but there are few tips you can use to determine whether you’re being scammed.
  • Spot Red Flags: Common scam tactics include creating urgency, guaranteeing returns, or anything involving cryptocurrency. If you spot an advertisement on social media promoting a “big investment opportunity,” think twice before clicking on the advertisement.
  • Avoid Conversations Within Apps: If someone asks to “move the conversation” to a different app, like WhatsApp or Telegram, it’s likely a scam. 
  • Do Your Research: If you’re unsure of the validity of the financial advisor or the firm, look them up on FINRA BrokerCheck. If you need additional assistance, contact a local financial advisor. If you’ve received an email, review the email address – scammers will usually create an email address that is only slightly different from the company they are posing as.
To learn more about common scams and how to prevent them, visit sdccu.com/scams. If you believe that you have been scammed, file a report at irs.gov or oag.ca.gov if you are a California resident.

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