25 September 2022- Pump and dumps on crypto, underhanded celebrity endorsements, and outright fraud abound on the internet these days. With volatile markets, many are fleeing traditional wealth management and investment schemes for new and radical internet sources. A wild west, frontier landscape to some, this may come as a boom or a bust to different types of shrewd investors. The SEC and FBI are leading the charge to try to hamper these opportunities but everyone needs to be warry that these bad actors are out there every day. Tips, tricks, and more from the SEC on how to insulate yourself from these bad cookies can be found below.


Investors increasingly rely on social media for information about investing.  While social media can provide many benefits to investors, it also creates opportunities for fraudsters.  Social media allows fraudsters to contact many people quickly, cheaply, and without much effort – and it is easy for fraudsters to post information on social media that looks real and credible. 

Fraudsters may disseminate false information anonymously or while pretending to be someone else.  They may make up credentials, create entirely fake profiles, or impersonate legitimate sources.  It can be difficult to track down who is behind a social media account, and anonymity can make it harder for fraudsters to be held accountable.  

Testimonials and Celebrity Endorsements.  Do not be swayed by testimonials or celebrity endorsements when making an investment decision.  Fraudsters sometimes pay people – for example, actors to pose as ordinary people turned millionaires, social media influencers, and celebrities – to tout an investment on social media.

Investment information found in social media also may be inaccurate, incomplete, or misleading.  Social media may convey false impressions of consensus or legitimacy, making it look like large numbers of people are buying an investment when this is not the case.  Fraudsters may use social media to lure investors into a variety of schemes, including impersonation schemes, “crypto” investment scams, romance scams, market manipulation schemes, and community-based investment fraud.  Here are a few scams you should be aware of:

Impersonation Schemes

Fraudsters may impersonate legitimate brokers or investment advisers or other sources of market information on social media.  For example, fraudsters may set up an account name, profile, or handle designed to mimic a particular individual or firm.  They may go so far as to create a webpage that uses the real firm’s logo, links to the firm’s actual website, or references the name of an actual person who works for the firm.  Fraudsters also may direct investors to an imposter website by posting comments in the social media account of brokers, investment advisers, or other sources of market information.

When you receive investment information through social media, verify the identity of the underlying source.  Look for slight variations or typos in the sender’s account name, profile, email address, screen name, or handle, or other signs that the sender may be an imposter.  When contacting a company or attempting to access its website, be sure to use contact information or the website address provided by the company itself, such as in the company’s SEC filings.  Similarly, only contact a broker or investment adviser using contact information you verify independently – for example, by using a phone number or website listed in the firm’s Client Relationship Summary (Form CRS).  Carefully type the website’s url into the address bar of your web browser.

Some social media operators have systems that may help you to determine whether a sender is genuine.  For example, Twitter verifies accounts for authenticity by posting a blue verified badge (a solid blue circle containing a white checkmark) on Twitter profiles.  While a verified account does not guarantee that the source is genuine, readers should be more skeptical of information from accounts that are not verified.

Fraudsters may even impersonate SEC staff on social media.  Like many companies and agencies, the SEC maintains a list of verified social media accounts, which is available at www.sec.gov/opa/socialmedia.

Fraudsters have also found victims by hacking into social media profiles and sending fraudulent investment opportunities to the hacked person’s contacts.  Be wary if someone – even someone you trust – sends a social media message recommending an investment, and be sure to check with them “off-line” to make sure that person actually sent the message.

“Crypto” Investment Scams

Fraudsters may exploit investors’ fear of missing out to lure investors on social media into “crypto” investment scams.  “Crypto” assets are marketed using a variety of terms, including digital assets, cryptocurrencies, coins, and tokens. 

How do you know if an investment involving “crypto” assets is a scam?  As with any other type of investment product, if a crypto investment “opportunity” sounds too good to be true, it probably is.  Promises of high investment returns, with little or no risk, are classic warning signs of fraud.  Fraudsters may post fabricated historical returns on their websites showing high investment returns.  Depictions of investment accounts rapidly increasing in value and providing large returns are often fake.  

If you are considering a “crypto” asset-related investment, take the time to understand how the investment works and look for warning signs that it may be a scam.  Carefully review all materials and ask questions.  Check out the background (including license and registration status) of anyone offering you an investment in securities using the search tool on Investor.gov.

Learn more about investments involving “crypto” assets on Investor.gov.

Romance Scams

Romance scams through apps or websites have become increasingly pervasive as fraudsters take advantage of anonymity to mask their deceptive intentions.  The fraudster may be located in another country and communication may be exclusively through messaging due to language barriers.  Do not invest money based on advice from someone you have solely met online or through an app.  Do not share any information relating to your personal finances or identity including your bank or brokerage account information, tax forms, credit card, social security number, passport, driver’s license, birthdate, or utility bills. 

The FBI issued a Public Service Announcement about fraudsters using romance scams to persuade victims to send money allegedly to invest or trade cryptocurrency.  How these scams typically work is the fraudster establishes an online relationship with the victim through a dating app or other social media site.  The fraudster gains the victim’s confidence and trust, and then claims to know about lucrative cryptocurrency investment or trading opportunities. The fraudster directs the victim to a fraudulent website or app.  After the victim invests and sees a purported profit, the website or app allows the victim to withdraw a small amount of money, further gaining the victim’s trust.  The fraudster then instructs the victim to invest larger amounts of money and conveys a sense of urgency.  When the victim tries to withdraw funds again, the victim is instructed to pay additional funds, claiming that taxes or fees need to be paid or a minimum account balance must be met. When the victim can no longer pay the additional funds, the fraudster stops communicating with the victim and the victim cannot get the money back.

Other agencies and organizations also have issued warnings about romance scams, including:

Be careful if someone claims to offer you an investment opportunity that is exclusive or based on “inside” or confidential information.  Do not take comfort because someone encourages you to make an investment through what appears to be a third party website or app.  The fraudster may be behind the website or app, and it may be a scam.  Also, be wary of any “opportunity” that requires you to use “crypto” assets (for example, Bitcoin or BTC) to purchase an investment.

If you encounter any issues withdrawing your money from an investment, do not put in more money to try to get your money out, and submit a complaint to the SEC If you believe you have been the victim of an Internet crime, report it to the FBI’s Internet Crime Complaint Center IC3.

Do not be pressured to act quickly.  Take your time to research an investment thoroughly before handing over your money.

Market Manipulation Schemes

Fraudsters can manipulate the share price of a company’s stock (either positively or negatively) by spreading rumors on social media. Fraudsters then profit at investors’ expense.  Fraudulent stock promotions on social media can take various forms, including memes.

Fraudsters may promote a stock on social media anonymously or while pretending to be someone else.  Fraudsters can set up new accounts specifically designed to carry out their scam while concealing their true identities.  Be skeptical of information from social media accounts that lack a history of prior postings or that contain minimal original content.

Fraudsters may use social media to conduct schemes including: 

  • Pump and dump schemes – pumping up the share price of a company’s stock by making false and misleading statements to create a buying frenzy, and then selling shares at the pumped up price. 
  • Scalping – recommending a stock to drive up the share price and then selling shares of the stock at inflated prices to generate profits.
  • Touting – promoting a stock without properly disclosing compensation received for promoting the stock. 

In other instances, fraudsters start negative rumors urging investors to sell their shares so that the share price plummets and then the fraudsters buy shares at the artificially low price.

Microcap Fraud. Microcap stocks (low-priced stocks issued by the smallest of companies), including penny stocks (the very lowest priced stocks), are more susceptible to market manipulation.

Exercise extreme caution if there appears to be greater promotion of the company’s stock than of the company’s products or services.  Be skeptical regarding new posts on your wall, tweets, direct messages, emails, or other communications you did not ask for that promote a particular stock (even if the sender appears connected to someone you know). 

Community-Based Investment Fraud

Fraudsters often use social media to perpetuate community-based investment fraud (aka affinity fraud), which targets members of groups with common ties, including based on ethnicity, nationality, religion, sexual orientation, military service, and age.  These scams exploit the trust and friendship that exist within groups. 

Many communities use social media as a way to stay connected and share information.  Fraudsters, who may be (or pretend to be) part of the group they are trying to cheat, may solicit potential victims on social media through posts or direct contact.  Fraudsters also may enlist group leaders, who then spread the word about the scheme on social media.  Those leaders may not realize the “investment” is actually a fraud, which means they too may be victims.

Know who you are dealing with and know what is being offered – even if you have something in common with the person.  Type the person’s name into the search tool on Investor.gov to do a background check.  Confirm that the person is currently registered or licensed, and find out if that person has any disciplinary history.  

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Check the background of anyone selling or offering you an investment and confirm that the person is currently registered or licensed.  It only takes a few minutes using the free and simple search tool on Investor.gov.  

Before making any investment, research the company thoroughly.  Make sure you understand its business and carefully review publicly disclosed company information

Never feel pressured to buy an investment right away.  It can be tempting to jump on the band wagon and follow whatever the crowd seems to be doing on social media.  Sometimes, however, following the crowd may lead you to fall victim to an investment scam.