As people increasingly turn to online social networking sites like Facebook,
Twitter, and LinkedIn to interact with one another, so have con artists
begun to lurk in the virtual shadows with shady investment deals to pitch to
unsuspecting investors, Indiana Secretary of State Charlie White is warning
The Securities Division of the Office of the Indiana Secretary of State is
cautioning investors to make certain they know with whom they are doing
business when considering investments pitched through “friends” on social
“Just because someone has ‘friended’ you online does not mean that person is
your friend when it comes to investing,” Indiana Securities Commissioner
Chris Naylor said in a statement released on Monday. “The person behind the
profile may be deliberately mimicking your likes and interests to lure you
into a scam.”
“This is nothing we haven’t seen before,” Naylor added. “Scammers are just
upgrading their pitches to keep up with the times.”
“Historically focused on traditional social networks, con artists’ “affinity
fraud” schemes have been around for years,” the statement said. “Targeting
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 Securities Division has investigated criminal fraud allegations
originating with scams peddled over popular websites before. The office’s
Prosecution Assistance Unit helped Indiana State Police and the Johnson
County Prosecutor bring charges against a woman using the popular online
Craig’s List classifieds to solicit investments and used her investors’
credit histories to apply for loans and credit cards. Last summer, the unit
helped Vanderburgh County authorities file charges against a Cincinnati man
who coaxed a woman over the Match.com dating community to give him $10,000
with promises to turn it into $1 million in one year.
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. Facebook
alone boasts 750 million users averaging 130 “friends” apiece and spending
over 700 billion minutes per month on the social network.
“Crooks peddling scams increasingly are logging on to find investors and
their money,” Indiana Investor Education Coordinator Melanie Woods said,
noting that according to the company’s website, Facebook users on average
are connected to 80 community pages, groups and events—all of them ripe for
con artist abuse.
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
“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,” Woods said.
The securities division has issued an alert advising investors to watch for
red flags common to online investment schemes, such as promises of high
returns with no risk, operations based offshore and requests for payment
through e-currency websites. 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 testimonials from “satisfied” investors;
obtain a prospectus; don’t take the word of a salesperson; and contact the
Office of the Indiana Secretary of State’s securities division to determine
if the investment and the person recommending it are properly registered.
“Take time to check out the investment yourself, and remember: If it sounds
too good to be true, it probably is,” White said.
The alert and additional information on how to protect yourself from
investment fraud is available on the Secretary of State’s website at
www.IndianaInvestmentWatch.com or by calling (800) 223-8791.
A PDF of the alert can be found at http://www.in.gov/sos/securities/files/NASAA_Advisory_Social_Networking_IN.pdf