We recently became aware of a few clients who fell victim to financial scams. Examples include:
- Pig butchering (more on this below).
- You receive an arrest warrant for "missed jury duty" and need to send money to cover the fine, or else you'll be arrested.
- You receive a text from a loved one that they are in jail and need bail money – including a link sent to send money (this isn't how bail works!).
- Someone on an online dating sites asks you for money to cover plane tickets, vacations, home repairs, etc (rule of thumb: she's not real until you meet her in person)
- A friend's social media account gets hacked. They message you and ask for money or assistance.
One client was able to cancel the wire transfer just in time (after speaking to their financial advisor). Another client fell victim to a scam called "pig butchering" and was not so lucky. This client ended up cashing out their IRA (incurring a huge tax bill in the process) and sending the money somewhere to be converted to cryptocurrency. The client received access to an online portal (which was fake) and received fictitious statements showing the "account value", which "grew" significantly over a short period of time. After a few months the client no longer had access to the online account and could not reach the "firm" behind it all.
This money cannot be recovered and the client will still have to pay the tax bill incurred after liquidating their IRA. The FBI was involved but essentially told the client "yep, that happens".
The name of this scam - "pig butchering" - is appropriate. The cyber criminals will spend a long time - days, weeks, maybe even months - building trust with their victim (fattening them up) before convincing the victim to convert of a bunch of their money to cryptocurrency and send it somewhere (the slaughter). Once the money is sent, it cannot be recovered.
The "building trust" part can happen through dating apps (she's not real, bro), text messages, email, or any other medium which allows the scammer to pretend to be somebody they are not.
If a person you have never met in person tells you to move a bunch of your money somewhere, you should be very skeptical, especially if they show you returns that are too good to be true, and even more especially if there is any mention of cryptocurrency (Bitcoin, Etherium, Monero, Tether, etc).
Almost all scams rely on a sense of urgency, FOMO (fear of missing out), emotional manipulation, or some combination of the above. Some quick tips:
- Ask your financial advisor first, especially if it involves a lot of money
- Social media and email accounts can get hacked. If someone you know sends you an out-of-character message asking for money or other financial assistance, you need to verify the situation
- Do not send money to anyone you've never met in person
- Always verify urgent situations. Very rarely does a financial transaction need to be done within 24 hours of you finding out about it.
- Always verify things that are too good to be true (ask your advisor!)
- The girl isn't real until you meet her in person. There are tons of fake accounts on dating sites that want to separate emotionally vulnerable people from their money.
