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A new kind of romance scam

Brett Lassoff

Posted on May 18, 2022

Brett Lassoff is a compliance consultant at MassMutual.
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There is a new kind of romance scam targeting older, lonely, and unsuspecting Americans. It involves digital assets and is causing significant losses to individual retirement assets.

Romance scams — where a fraudster uses the pretense of intimacy and love to con someone into directly giving them money — aren’t new. Luckily, efforts to raise awareness about these scams by financial institutions and government agencies has helped prevent many individuals from falling for the ploy. (Related: How to protect against romance scams)

But this new scam is ensnaring even the most savvy individuals. That’s because — in addition to engendering a false feeling of trust and authenticity — it also takes advantage of many people’s inexperience with cryptocurrency, foreign exchange, technology, and investment platforms.

How the new romance scam works

It starts in a typical way: a connection on a dating or a social network website. A targeted victim is lured into a conversation with an “intriguing” individual who will attempt to create a rapport.

Unlike typical romance scams — where the victim is asked for money for a fabricated medical emergency, to bail a loved one out of jail, or for emergency travel expenses — the scammer will discuss having a “secret method” for safely investing money that will create significant gains. Typically, this secret method involves cryptocurrency, foreign exchange swaps, or some other newly introduced financial vehicle appearing in the headlines.

The scammer will convince the targeted person that this secret investing technique can help them get wealthy with only a small investment. Once convinced, the scammer will then direct their victim to an online trading platform where they can put money into this secret investment via a designated account.

The use of an online trading platform adds an air of legitimacy that previously did not exist in romance scams. Through the platform, the investment will inevitably show a large gain and the victim will begin to trust the scammer and will continue to increase their investment contributions through the account on the platform.

In some cases, victims have sent millions of dollars from their retirement savings in the mistaken belief that they are making significant gains on their investments and that the investment is safe and legitimate.

Unfortunately (and obviously), it’s all fake.

Scammers are getting the victim to either:

  • Use a fake account on a legitimate online trading platform.
  • Use a bogus platform altogether.

Either way, the purported investment gains in the account are all fraudulent. The funds invested by the victim went into the hands of the scammers. Once the victim tries to either retrieve funds from or liquidate the account, the account or the entire platform will disappear.

Protection against the scam

Here are a few strategies to protect yourself and your family from these new romance scams involving digital assets:

  • Be wary of people going out of their way to become your or your loved one’s confidante. These scams work by creating an emotional connection with the victim and attempting to isolate them. This isn’t to say give everyone the cold shoulder. But be aware and wise.
  • Talk with your friends and family about any unique investment opportunities you are offered. Scammers will often advise that the victims keep their investment a secret because they are using an investment loophole to make the gains. Don’t allow the scammer to isolate you (or your loved ones).
  • Never invest in anything that you — or you on behalf of a family member — have not researched and understood yourself. Part of the reason why this scam is effective is that there is still a lot of confusion around cryptocurrency, foreign exchange, and other types of sophisticated investment vehicles. Find investments that you can easily validate with a quick online search. (Related: Winning with a steady investment strategy)
  • Prior to taking a withdrawal from a financial institution to invest, talk with a financial professional about the investment. Financial professionals can help research whether an investment is legitimate.
  • Be skeptical of any online investment accounts shared with you that purport to show significant investment gains. The online exchange hosting the account may be legitimate, but that does not mean the investment account is legitimate. And don’t contribute to an account controlled by someone else, like a new “friend.”
  • Remember, as with any type of scam, if it sounds too good to be true, it probably is.

By teaming up and living mutually, we can all work together to create awareness of this growing variety of financial romance scams and help put a stop to them before they significantly damage any vulnerable adults.

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