Friend, Lover Or Fraudster? The CSA warns of Online Relationships Turning into Investment Scams

In a press release sent out this Valentine’s Day, the Canadian Securities Administrators’ (CSA) is warning the public about fraudsters using social media, messaging apps and online dating sites to lure Canadians into relationships that lead to investment scams.

According to data from the Canadian Anti-Fraud Centre (CAFC), investment scams and romance scams were the top two reported scams in 2021, respectively. The number of reported romance scams increased 24% year over year (1,546 in 2020 vs. 1,928 in 2021) and the dollar loss for romance scams was over $64 million in 2021 compared to over $27 million in 2020.

“Fraudsters are becoming more sophisticated in targeting Canadians, particularly as we spend more time online. They are increasingly using social media and dating sites to manipulate people into establishing virtual friendships or romantic relationships, and then requesting money for investment scams after building trust,” says Louis Morisset, Chair of the CSA and President and CEO of the Autorité des marchés financiers. “Fraudsters are targeting people of all ages and demographics – it can happen to anyone. It is extremely important to recognize the signs of investment scams and always do your own research before you hand your money over to invest.”

Fraudsters are adapting their techniques to the latest trends and technologies using a variety of tactics to defraud Canadians:

  • People are approached via dating apps, messaging apps or other social media sites. After developing an online relationship, the fraudster brings up an “investment opportunity” and convinces the person to make an initial payment. The fraudster is often able to convince victims to continue investing, which can lead to substantial losses.
  • The fraudsters identify a person’s friend, and then take control of the friend’s social media accounts. The suspect, posing as the friend, easily convinces the person to take advantage of the supposed investment opportunity. According to the CSA 2020 Investor Index, 25% of Canadians stated that they can usually trust someone who is promoting an investment if they have a friend who has already invested with them.
  • Fraudsters research their potential victims online, including reviewing their social media posts, in order to come up with a tailored strategy for each victim to maximize their chances of success.
  • The fraudster, while calling with a pitch for an investment, convinces a person to provide remote access to his or her computer. The suspect shows the person a fraudulent investing website that promises substantial returns. In many cases, people will continue investing until it becomes clear that their funds cannot be withdrawn.
  • Fraudsters may claim that they will use a person’s money to buy investments, such as crypto assets, and cut off all communication once receiving the funds.

The press release then offers advice on how to best protect yourself at Friend, Lover or Fraudster? Canadian Securities Administrators warns of online relationships turning into investment scams.