Expat Investment Advice: How to Avoid the Latest Scams

By Peggy Creveling, CFA and Chad Creveling, CFA

The US Financial Industry Regulatory Authority (FINRA) has released a new Investor Alert warning against a recent significant increase in a new swindle called the ‘Investment Group Imposter’ scam.  This type of scam, like many rip-offs that expats can fall prey to, is often cross-border in nature and very difficult or impossible to unwind if you become a victim to it. 

Investor Group Imposter: Fraudsters pretend to be legitimate investment advisers on Instagram or other social media sites, initially posting about well-known stocks to gain trust. After earning the confidence of their marks through joint participation in an investor group, the scam artists switch the conversation to encrypted private chats on other channels such as WhatsApp. They then get their victims to open new investment accounts and pitch investments in low-priced, illiquid stocks listed on the US OTC, Hong Kong, Frankfurt, or other markets. 

At this point, the scam turns into the classic pump-and-dump scam reminiscent of the movie Boiler Room.  The fraudsters convince their unwitting targets to purchase large amounts of penny stocks at grossly inflated prices while unloading their own previously purchased shares - to their own great profit, and their victims’ great loss. The predatory Jim Young, actor Ben Affleck’s Boiler Room character, would be delighted in a cruel way. 

Pig butchering: In a related post, FINRA warns against contact from a stranger in which the scam artist appears to be targeting you randomly, pretending to want to develop a friendship. Over time, the perpetrator attempts to gain trust by discussing non-investment-related topics, sending fake photos, and trying to engage you in your personal interests. This is the “pig fattening” stage.  Eventually, the conversation turns to some hot investment or crypto-currency, and the fraudster will try to get you to participate in some form of a pump-and-dump or other scam, again to their great profit and your great loss (the “butcher”).

The good news is that although these types of rackets can bankrupt their victims, they are also entirely avoidable. Here's a checklist of how to protect yourself:

• Do not respond to unsolicited messages from unknown contacts.
• Check out anyone claiming to be an investment professional. It’s not enough to look at their website (which could be faked or copied from a legitimate site). Find out how they are regulated and what professional credentials they hold, then double-check their claims with the regulator and professional organizations directly.
• Request a video chat with anyone new who wishes to either befriend or advise you, to make sure they are the same person as on a website or social media profile photo. Fraudsters can pretend to be real, legitimate advisors, without the knowledge of the actual investment advisor.
• Do not share financial information with anyone you’ve not either met in person, researched with a regulator, or otherwise taken reasonable steps to ensure is legitimate.
• Only open new accounts with financial institutions that are credible, well-regulated custodians.
• Be wary of anyone trying to create a sense of urgency or fear of missing out (FOMO), hoping that you’ll make a hasty decision to avoid missing some supposedly “hot” investment.
• Be careful, and remember what my dad says: the best con artists seem to be the nicest people (as they must be to succeed).  

Additional Resources

• Investor Alert: Social Media ‘Investment Group’ Imposter Scams on the Rise
• ‘Pig Butchering' Scams: What They Are and How to Avoid Them
• How a Cross-Border Financial Advisor Can Help Expatriates (and How to Choose the Right One)
• 5 Questions Expats Should Ask Before Choosing an Offshore Custodian

About Creveling & Creveling Private Wealth Advisory

Creveling & Creveling is a private wealth advisory firm specializing in helping expatriates living in Thailand and throughout Southeast Asia build and preserve their wealth. The firm is a Registered Investment Adviser with the U.S. SEC and is licensed and regulated by the Thai SEC. Through a unique, integrated consulting approach, Creveling & Creveling is dedicated to helping clients cut through the financial intricacies of expat life, make better decisions with their money, and take the steps necessary to provide a more secure future.

Copyright © 2024 Creveling & Creveling Private Wealth Advisory, All rights reserved. The articles and writings are not recommendations or solicitations, and guest articles express the opinion of the author; which may or may not reflect the views of Creveling & Creveling.