Washington State Department of Financial Institutions

Social Networking Investment Scams

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Social networking in the Internet age allows people to connect to one another more quickly and easily than ever before. Investment promoters increasingly are logging on to find investors... and their money.

Before investing through a social network, ask yourself these questions:

  1. Have I verified that the promoter is legitimate?
  2. Do I understand the risks of the investment?

What are social networks?

A social network is a group of individuals (or organizations) who are connected through common interests, hobbies, lifestyles, relationships, faith or other beliefs. Websites such as Facebook, Twitter, LinkedIn, eHarmony and other online social networks and communities have made it faster and easier for users to meet, interact and establish connections with other users anywhere in the world.

Offline, social networking involves making these connections through membership in community service organizations, professional associations, faith-based organizations, multi-level marketing opportunities and singles groups, among others.

While social networking helps connect people with others who share similar interests or views, con artists infiltrate these social networks looking for victims. By joining and actively participating in a social network or community, the con artist builds credibility and gains the trust of other members of the group.

How do con artists exploit social networks?

In traditional social networks, con artists use the weekly or monthly meetings to establish strong bonds through face-to-face contact and sharing of personal interests and lifestyles.

In online social networks, a con artist can establish this trust and credibility more quickly. The scammer has immediate access to potential victims through their online profiles, which may contain sensitive personal information such as their dates or places of birth, phone numbers, home addresses, religious and political views, employment histories, and even personal photographs.

The con artist takes advantage of how easily people share background and personal information online and uses it to make a skillful and highly targeted pitch. The scam can spread rapidly through a social network as the con artist gains access to the friends and colleagues of the initial target.

What are the red flags of an online investment scam?

Online investment fraud has many of the same characteristics as offline investment fraud. Learn to recognize these red flags:

How can I protect myself from fraud in social networking?

Before you invest

Evaluate every investment opportunity in the virtual world the same way you would in the real world. Visit the DFI website www.dfi.wa.gov for more tips on recognizing, avoiding and reporting investment fraud.