It started with a text and cost her US$20,000. Why investment scams are getting harder to spot

L was having a tough time when Leena reached out.

It was summer 2023. L, who’s in her 30s, had relocated to another state from the Bay Area for a job that didn’t work out. (The Chronicle is referring to her by her first initial under its confidential sources policy, since people who have been victims of scammers are likely to be targeted again.) She was stuck in her apartment lease, making pricey payments on the car she’d just bought while trying to leverage her three degrees and a lengthy work history at top companies into a new job.

It was “a very vulnerable time,” she said.

That vulnerability helped make her a prime target for an investment scam that cost her more than US$20,000 (RM82,710) and took a psychological toll as well as a financial one – a situation the Better Business Bureau says is increasingly common.

According to the bureau’s 2023 Scam Tracker report released this month, investment scams reached a three-year high in 2023, with 1,378 reports. 2024 is on track to be an even bigger year for scammers, with 737 reports just in the first half of the year. The median victim lost US$4,000 (RM16,542).

The Federal Trade Commission said consumers lost more than US$10bil (RM41.36bil) to fraud in 2023, US$4.6bil (RM19bil) of which was lost to investment scams like the one L was victimised by. Its Consumer Sentinel Network received 301,840 reports of investment scams in 2023 alone.

Alma Galvan, a spokesperson for the Better Business Bureau, said there’s no stereotypical profile of a scam victim. She’s spoken to people of all ages and education and income levels. The Bureau’s report found that more than 60% of targeted individuals were approached virtually – by text, email, social media and dating apps.

Scam started with a text

L got a text from a number she didn’t recognise. It was Leena. They’d met at a party in another part of California where L used to live and had lots of friends.

L vaguely recalled meeting Leena. Sort of. She’d met lots of people at events over the years and didn’t remember every single person she’d ever talked to. She figured Leena was a friend of a friend, and in that moment, she needed a friend.

Soon, they were texting almost every day. Leena was fun and interesting and glamourous. She traveled a lot and sent photos to L where she was chicly dressed, with perfect makeup, having the time of her life. Leena loved shopping at high-end stores and playing golf. She said she’d be in L’s city soon to visit family in the area, and they started to plan a meetup. They became close.

They talked regularly for a month. Leena started to bring up how she was funding her lifestyle.

“She mentioned that she has an ecommerce retail business that has changed her life,” L said. “And like, maybe one day she’ll tell me more, but she’s not rushing into it.”

More details emerged: It was an online business opportunity for new entrepreneurs based out of Hong Kong, and she was getting 20% to 30% returns on her investment. The job gave her financial freedom and let her travel the world and buy anything she wanted.

It sounded like a dream to L, who was still struggling to find work and needed a way to pay her bills. L asked Leena to introduce her to the boss – whom she called “the master” – and get set up with her own store.

The role of cryptocurrencies and AI

Two burgeoning industries in the Bay Area have bolstered the scamming world: cryptocurrencies and artificial intelligence.

Some people in the world have made real money investing in cryptocurrency, which makes victims think, “Why not me, too?” Galvan said. There are sites and apps that let you use bitcoin, ethereum and other cryptocurrencies to make purchases from places like PlayStation and Apple. The Los Angeles Lakers play at Crypto.com Arena.

These things all help normalise new forms of payment so that it seems more business-savvy than scammy when your new job asks you to set up a crypto wallet.

“The explosion in popularity of cryptocurrency over the last five years pushed the once complicated technology into the public sphere,” the Better Business Bureau report found, saying scammers “prey on the public’s lack of knowledge about the subject.” Nearly half of all investment scams reported to the Better Business Bureau Scam Tracker since 2021 involved cryptocurrency.

And artificial intelligence allows scammers to craft endless text messages, email blasts, training materials and websites instantly from thin air.

Doubts, then a deal

L was familiar with ecommerce, marketing and drop shipping through her previous work. The training materials they gave her were extensive and looked legitimate.

She researched the company and found some bad reviews. And she couldn’t find any social media presence or advertisements for the company, which made her even more suspicious. When she confronted Leena’s boss about it, he got defensive and said maybe they shouldn’t work together. He had a smooth explanation for every question she asked. L felt like she couldn’t let the opportunity go, so she swallowed her doubts.

It worked like this: L would manage an online store. She didn’t have to pay any money until customers started ordering things. She wasn’t required to pre-purchase inventory or anything like that. But once orders started coming in, she had to pay for the items being shipped.

When the money started coming in from customers, she did a little test. She tried withdrawing US$20 (RM82) from the shipping platform to her bank account. It worked. The money was real.

‘We’re being deluged’

Eva Velasquez, president and CEO of the Identity Theft Resource Center, said if you feel like you’ve been getting blasted by scammy texts, LinkedIn messages, Instagram DMs, job ads and emails, you’re not the only one.

“We’re being deluged,” Velasquez said. “The use of generative AI and these large language models makes this stuff so much more believable.”

Scammers can now automate their entire operation, she said. A chatbot can be running a romance scam. One person can be running a thousand of those chatbots from one phone. And generative AI also allows scammers to create realistic-seeming photos that won’t be findable with reverse image search. (L suspects the photos Leena sent her were AI-generated.)

The Better Business Bureau report states romance scams are on the rise. Despite the name, only some are romantic in nature – “many strike up platonic friendships,” the report says, like scammers did with L.

Discovery and aftermath

Customer orders got bigger and bigger, and L got more and more excited watching her money grow. She got legitimate-looking invoices and emails with questions from customers. The company asked her to use a crypto wallet to send larger amounts, but she couldn’t get the site to work, so she sent international wires instead. At one point, when she couldn’t afford to fund an order, Leena loaned her US$500 (RM2,067).

About three weeks in, she got her biggest order yet. L had to withdraw US$15,000 (RM62,032) from her savings to cover it. Suddenly, something felt off. She decided to talk to the boss and ask to withdraw all the money that was sitting in her account – US$27,332.55 (RM113,033). She made up a story about needing it for a sick relative in another country.

He told her that wouldn’t be a problem – she just needed to pay him 35% of her earnings up front to cover taxes. She told him she knew that wasn’t how taxes worked: She would withdraw her money and handle the taxes on her own. He pivoted, threatening to donate all her earnings to charity.

At that point, she knew it had all been a scam. She was out more than US$20,000 of her own money she’d invested in funding orders.

She filed reports with the police, her bank, and other organisations that track scams and help victims, including leaving a review of the ecommerce store on the Better Business Bureau’s website. She describes the experience as traumatic.

Since then, she’s moved to another state and is starting her own business. She’s been targeted by four scammers since her fraudulent ecommerce experience. One was a romance scam. One claimed to be the Prince of Dubai. One claimed to be Keanu Reeves’ mom. And one, when she confronted him about what he was doing, pivoted and said he wanted to make an honest living. He asked for a donation to help him buy a computer so he could learn to code instead of scam.

How to spot a scam

We all know the saying, “If it sounds too good to be true, it probably is.” Every person who’s been scammed has heard that expression, too. But it’s difficult in the moment, with a new friend or boyfriend or girlfriend pressuring you, to not get excited about a business or investing opportunity that could change your life.

Here are common hallmarks of modern scams.

Cryptocurrency. Scammers take advantage of people’s lack of knowledge. If you don’t know anything about cryptocurrency, be wary of anyone asking you to get involved.

Texts from strangers. Many scams begin with an unsolicited message saying they’re a friend of a friend, like with L. Another type of scam known as a “wrong number” will send you an urgent-seeming message meant for someone else, then strike up a casual conversation when you correct them.

Artificially generated text and images. There’s no guaranteed way to tell if any message or photo was made by AI. But there are things to look for. The Better Business Bureau says AI text tends to be robotic with repetitive words and phrases. And AI-generated images may have strange textures, blurry spots, or glossy effects, especially in backgrounds.

Investment training. Scammers set up “investment schools” with “patented,” “tested” or “proven” methods for doubling, tripling or quadrupling your money, often with investments in allegedly new cryptocurrencies, real estate or precious metals.

Guaranteed returns on your investment. There’s no such thing.

Scam recovery offers. If you’ve been scammed, don’t trust anyone who reaches out and says they can help. “Most of the time we never see (victims) getting their money back,” Galvan said.

Galvan outlined steps you can take to thoroughly “do your homework” before making an investment:

Look for certifications. Ask for the company’s business certifications and check with the state they’re registered in to make sure it exists.

Search the Better Business Bureau Scam Tracker. It lists scams reported from all over the US. – San Francisco Chronicle/Tribune News Service