Attorney General Bonta Warns Californians of Investment Scams on Facebook, Instagram, and WhatsApp

If an investment seems too good to be true, it probably is 

OAKLAND — Attorney General Rob Bonta today issued an alert warning Californians about the prevalence of fraudulent investment scams across Meta platforms, including on Facebook, Instagram, and WhatsApp, as well as on other online platforms. Scammers are increasingly using deceptive advertisements (ads) and deepfake technology to lure people into high-stakes scams in order to then defraud them of their savings. Last year, Attorney General Bonta sent a letter to Meta urging the company to adopt protocols to properly tackle this pervasive issue — or otherwise ban all investment ads on its platforms. Attorney General Bonta encourages anyone who may have been a victim of these types of scams to report it to oag.ca.gov/report.

“Californians, we’ve seen an uptick in investment scams across Facebook, Instagram, and WhatsApp. These scams have cost some people their life savings and typically use photos of well-known or trusted people without their permission in order to create the necessary trust to get into consumers’ pockets,” said Attorney General Bonta. “I encourage Californians to learn about common scams and review tips to protect themselves, and I urge investors to scrutinize social media investment ads before investing.”

COMMON SOCIAL MEDIA INVESTMENT SCAMS

The Pump and Dump Scam:

In a pump and dump scheme, victims are lured into online investment groups and convinced to invest in low-priced stocks or deal in volatile cryptocurrencies. The scammers advertise, hype, and recommend buying the stocks or cryptocurrencies, increasing their prices, and then sell when the price is high, while the victims lose their money. These schemes typically follow a three-step process:

1. The Bait: Scam ads appear on Facebook or Instagram featuring recognizable figures, like Cathie Wood (Ark Invest), Joe Kernen (CNBC), or Kevin O’Leary (Shark Tank), without their permission. Other ads may feature less well-known financial advisors, also without their permission, especially those trusted by members of specific cultural or geographic communities. The ads often promise exclusive “insider” memberships or “guaranteed” high-return investment tips.
2. The Shift: Once a user clicks the ad, they are pressured to move the conversation to WhatsApp or other encrypted platforms such as Telegram. 
3. The Hook: Victims are funneled into group chats where they receive so-called “expert” advice and false testimonials. Eventually, victims are coerced into buying stocks or crypto, with the initial fraudulent tips sometimes appearing successful and generating a profit. Victims are convinced to spend large amounts in a stock or cryptocurrency, which then goes up in price and which the scammers sell off at this inflated price, leaving the victims to lose their money once the price plummets.

The Confidence Scam:

In confidence scams, fraudsters develop trusting relationships with their victims and convince them to “invest” using fake investment platforms that drain the victims’ money. These scams can also follow a three-step process:

1. The Bait: Scammers post ads suggesting that investors can make money using an investment platform or strategy. Once the user clicks on an ad, they may be asked to enter their contact information or taken to a different website to do so.
2. The Investment: After the user provides their account information, they are contacted by scammers who develop a relationship of trust and confidence with the victim. Scammers may offer to "teach" the user how to trade on a fake investing platform or even connect the victim with their own personal advisor who will speak with the user daily. Scammers then guide their victims to a legitimate-looking website or app — often a clone of a real trading platform — and ask victims to invest a small amount of money at first. The app will show the investment making significant profits over the course of a few days, and scammers may let the victim withdraw some of the initial profit back to their bank account. Believing the platform is legitimate and having developed a close connection with the scammers, victims will over time invest larger amounts of money. 
3. The Scam: Once the victims seek to withdraw their profits, they are told they need to pay some kind of fee, such as a commission or tax, to do so. Even if the victims pay, the scammers will find other excuses not to return the money. Once the victim stops paying these fees or making more investments, the scammers will disappear along with the victim’s investment.

PROTECT YOURSELF 

Californians should be very cautious before responding to any social media investment ads and making related investments. Reputable broker-dealers and investment advisors typically do not advertise their investment strategies on social media.

Fraudulent transactions, especially those involving cryptocurrency, can sometimes be irreversible. If you choose to deal in cryptocurrency, always keep a paper trail and archive all communications. If you lose your money, you may hear from a purported asset recovery specialist or attorney who promises to retrieve the money you lost for a fee. Be very wary of these people as some may be looking to take advantage of your situation to make money — and may even be scammers themselves.  

To avoid falling victim to predatory investment schemes on social media, people should take the following steps: 

1. Identify Red Flags

Be highly skeptical if you see:

• Promises of guaranteed returns: No legitimate investment is “risk-free” or offers a guaranteed return.
• High-pressure tactics: Warnings that you will “miss out” or demands to invest immediately.
• Celebrity endorsements: Scammers often use AI-generated images or videos of famous entrepreneurs to lure victims.
• Cryptocurrency demands: Requests to use crypto ATMs or to send crypto to private wallets or platforms should be regarded with suspicion. Crypto assets are extremely volatile, and purchasing them involves a very high degree of risk — you should not use any money that you cannot afford to lose.
• Requests to accept other people’s money: Scammers will sometimes ask victims to accept other people’s funds in their bank accounts and convert them to cryptocurrency.  
• Platform hopping: Requests to move the conversation from Facebook to encrypted apps like WhatsApp or Telegram.

2. Verify Before You Invest

Conduct your own independent research:

• Verify credentials: Use FINRA’s BrokerCheck to confirm if a professional is registered. But be wary, scams may often impersonate people, firms, and their credentials.
• Search for reviews: Search the name of the company or salesperson alongside words like “scam” or “complaint.”
• Check email addresses: Verify that you are communicating with a real email associated with a real advisor’s company. Remember that scammers may register email addresses that are slightly different or may change one letter from a legitimate domain.
• Look for spelling errors: Given that many scams sometimes originate overseas, ads and other communications may have spelling mistakes.  
• Consult with a trusted advisor: Before investing, consult a trusted legal professional or financial advisor who can advise you if the investment is proper.
• Follow warnings from current advisors: If your bank or investment/financial advisor cautions you about your new investment, take time to further investigate the new “investment opportunity” and do not simply dismiss their concerns.
• Trust your instincts and think twice before investing: If an investment seems fishy or too good to be true, it probably is.

3. Beware of "Deepfakes" and AI

Scam ads now use sophisticated technology to mimic real people in videos or livestreams.

• Spot the fake: If a video seems slightly off or the audio doesn’t perfectly match the lip movements, it may be a deepfake.
• Reverse search: If you see a video of a famous figure, search for the original footage online. Fraudsters often repurpose old interviews.
• Beware of financial advice: Famous figures do not usually provide financial advice online or advertise dealing in obscure cryptocurrency trading platforms. 

4. Protect Your Identity and Network

Your Facebook, Instagram, and WhatsApp profiles are gold mines for scammers looking to build a relationship with you.

• Lock down your profile: Change your settings to keep your friends list, photos, and posts private. This prevents scammers from seeing who you know.
• Verify friends: If a friend suddenly messages you about a "great investment opportunity," contact them outside of Facebook via phone call or text to ensure their account hasn't been hacked.
• Never share credentials: Do not provide login info, Social Security numbers, or financial details to anyone you met online. 
• Do not provide strangers access to your devices: Do not allow anyone you do not know well to access your computer or mobile phone remotely to help you with your existing investment account or open a new account. Often times, scammers will pose as a representative of the company you have an account with and ask for a password or answers to the security questions and — within seconds — empty everything in your account.

Anyone who may have fallen victim to these types of scams can report it to the California Department of Justice at oag.ca.gov/report.