3 Tips to Protect Against Social Media Scams

October 10, 2022
Forging fraudulent relationships via social media is the latest financial scam.

Last year, scammers on social media cost nearly 100,000 Americans a total of $770 million—an eighteenfold increase since 2017, according to the Federal Trade Commission. One key difference in these newer scams: Instead of seeking financial assistance, they purport to offer help.

"Pandemic-driven isolation, which pushed people to forge more online connections, was one big driver of the phenomenon," says Peter Campbell, director of financial crimes risk management at Schwab. Another was the rise of cryptocurrencies, which left many with a fear of missing out on a hot new investing trend.

Many social media cons start with a fraudster claiming to be a mutual acquaintance of someone in your social network. Once a bond is formed over weeks or even months, they boast of big gains from an investing opportunity and offer you a way in.

Others use the stolen identity of a legitimate financial professional, sometimes setting up a fake website using her or his likeness. For example, in June 2022, the FBI warned of a cryptocurrency scam on LinkedIn in which bad actors posed as reputable financial professionals. After establishing a rapport, the scammers persuaded their victims to invest in what turned out to be a bogus crypto opportunity.

"Bad actors are having to constantly change their tactics, which in turn is changing the landscape of online fraud," says Tiffany Wax, a senior manager at Schwab who works with Peter to combat online fraud. "It's no longer just a phone call or a phishing email. They're now using social engineering combined with sophisticated technology, which is a real game changer."

Tiffany and Peter offer a few tips to steer clear of social media scams:

  • "Be extremely selective about the information you share and the invitations you accept," Peter says. That goes for not only Facebook and Instagram but also professional networks like LinkedIn.
  • Vet any new contacts or opportunities carefully—even Googling a name or details of an investment can unearth previous victims.
  • And finally: "If you own crypto, never share your private key or private wallet with anyone," Tiffany says. "This may sound obvious, but you'd be surprised at how often people are tricked into doing so."

Of course, it never hurts to check with your financial advisor about any new investment opportunities that come your way. Many advisors—including those at Schwab—stay abreast of the latest scams. Fraudsters may be growing more sophisticated, but with a little effort you can still stay a step ahead.

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