Con Artists Tap into Social Networking Sites in Search of New Victims

Download | Informed Investor Advisory: Social Networking Fraud

WASHINGTON, D.C. (September 7, 2011) – As people increasingly turn to online social networking sites to interact with one another, so have con artists who lurk in the virtual shadows with shady investment deals to pitch to unsuspecting investors, state and provincial securities regulators said today.

The North American Securities Administrators Association (NASAA) today cautioned investors to make sure they know who they are doing business with when considering investments pitched through “friends” on social networking sites. NASAA’s social networking advisory is available here.

“Just because someone has ‘friended’ you online does not mean that person is your friend when it comes to investing,” said NASAA President and North Carolina Deputy Securities Administrator David Massey. “The person behind the profile may be deliberately mimicking your likes and interests to lure you into a scam.”

Con artists have launched “affinity fraud” schemes for years by targeting victims through traditional offline social networks, such as community service groups, professional associations or faith-based organizations. Scammers infiltrate groups of individuals connected through common interests, hobbies, lifestyles, professions or faith to establish strong bonds through face-to-face contact and sharing of personal interests before launching their schemes.

The rise in popularity of websites such as Facebook, Twitter, LinkedIn, eHarmony and other online social networks and communities has made it easier for con artists to quickly establish trust and credibility. “Crooks peddling scams increasingly are logging on to find investors and their money,” Massey said.

Online social networking sites enable scammers to gain 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.

“A con artist can take advantage of how easily people share background and personal information online by using this information to make a highly targeted pitch to “friends” within that social group,” Massey said.

NASAA’s alert advises investors to watch for red flags common to online investment schemes: promises of high returns with no risk; offshore operations; requests for payment through e-currency websites; offers of bonuses to recruit your friends into the scheme; and professional-looking websites with little to no information about the company and no written information about the investment, such as a prospectus detailing the investment’s risks and procedures to get your money out.

The alert also offers tips on how to protect against fraud in social networking: protect your personal information; search the names of all persons and companies connected to the investment being offered; beware of the use of names or testimonials from “satisfied” investors; obtain a prospectus; don’t take the word of a salesperson; and contact your state or provincial securities regulator to determine if the investment and the person recommending it are properly registered. To contact your state or provincial securities regulator, visit

“Take time to check out the investment yourself, and remember: If it sounds too good to be true, it probably is,” Massey said.

For more information:
Bob Webster, NASAA Director of Communications
Leah Szarek, NASAA Manager of Communications and Investor Education