Investment fraud was the costliest type of fraud in the US in 2022, with a record $3.82 billion stolen, up from $1.6 billion the previous year, a new report has found.
The unprecedented rise in investment fraud is due to a combination of traditional and modern tactics, with the bulk of the increase coming from cryptocurrency-related scams, according to the 2023 State of Investment Fraud report published by law office Carlson Law, which analysed data from the FBI and Federal Trade Commission.
In formulating their report, Carlson analysed three metrics: the total number of victims and monetary losses, highest average losses per victim, and highest rates of investment fraud.
“In 2022, a record $2.57 billion was lost to crypto-investment scams. Traditional scams, including Ponzi schemes, pyramid scams and real estate fraud were also prevalent,” the report said.
Fraudsters are also exploiting advances in technology. Many of these news scams utilise artificial intelligence, such as voice cloning and deep fake videos.
”While all age groups are affected, people aged 30 to 49 are the main targets when it comes to investment fraud, according to the FBI.
Those in higher age brackets lost nearly $1 billion to investment fraud last year, forcing many to sell their homes, the report said.
Meanwhile, several professional athletes – among them NFL, NBA, MLB and NHL players – were left bankrupt after losing $585 million over a 15-year period, the research revealed.
A lawyer for Usain Bolt, one of the world's greatest sprinters, said in January that more than $12.7 million had gone missing from his account with Stocks and Securities Limited (SSL), a private investment company in Jamaica.
Bolt had $12.8 million in the account, which was part of his retirement savings, but it now reflects a balance of only $12,000, the lawyer said.
Separately, four people were arrested in March and charged with collectively defrauding four professional men’s basketball players out of more than $13 million, the New York Times reported.
In one scheme, three players were allegedly persuaded to purchase more than $5 million worth of life insurance policies at an enormous mark-up. In another, a fourth player spent $7 million to buy a women’s professional basketball team, but prosecutors said the money never went toward a purchase. In a third scheme, a player spent $1 million to fund a player representation agency that never existed, according to the indictment.
Similarly, five-time NBA champion Dennis Rodman fell victim to a fraudster. He entrusted his finances to adviser Peggy Fulford, who eventually conned him out of an estimated $1.2 million.
Ms Fulford is now serving a 10-year prison sentence after admitting she fleeced her victims out of millions of dollars by falsely claiming she was a Harvard-educated financial adviser.
She did not charge a fee, saying she just wanted to help her clients build “generational wealth” long after their playing careers were over. In fact, she was mostly building her own wealth. A key to her scam was obtaining powers of attorney from her famous clients.
Despite the increase in overall investment fraud in the US, the number of claims against financial advisers that included allegations of fraud fell to 699 in 2022 from 744 in 2021, according to data released by the Financial Industry Regulatory Authority.
Californians lost the most money overall ($870 million) to investment fraud, New Hampshire had the highest average loss per victim at $204,447, while Washington DC has the highest rate of investment fraud at 26 victims per 100,000 residents, according to Carlson Law.
The most common forms of investment fraud to watch out for in the US are AI deep fake and voice cloning fraud, crypto initial coin offerings, phantom property sales, Ponzi schemes and pump-and-dump schemes, the research found.
“Signs it may be a fraud or scam include guaranteed returns, aggressive sales tactics, if the person offering the investment is not licensed, will not provide the information in writing or agree to meet in person,” the report warned.
“If you want to recover your lost assets, document everything, report it immediately to regulatory agencies, hire an attorney to assist, follow up with law enforcement and regulatory bodies, call your bank to see if it’s possible to freeze the wire money transfer or obtain information on who the actual recipient of the wire transfer was.”
