Relationship Investment Scams: What They Are and Tips to Avoid Them

Don’t trust that unexpected text or direct message from a stranger—it might be the first step in a relationship investment scam. These scams often involve bad actors contacting targets seemingly at random, then gaining trust before ultimately convincing them to take advantage of investment “opportunities,” many of which turn out to be fake.

Sometimes referred to by other terms such as romance scams, crypto investment scams, financial grooming scams and “pig butchering” scams, relationship investment schemes typically start with scammers attempting to develop a personal relationship with targets over time, then making initial solicitations of small or modest investments intended to bolster targets’ confidence. Such scams have grown dramatically in recent years, with reported losses totaling billions of dollars. Individual investors have lost tens of thousands—and in some cases, millions—of dollars.

Building the Relationship

Here’s how the schemes frequently evolve: A stranger will contact you out of the blue via text message, on social media or on a messaging application and attempt to build rapport. They might provide a seemingly benign explanation for this initial outreach, such as having found your name in their contacts list, and often have online profiles that include fake but realistic-looking photos intended to pique your interest. They might also pretend to be a past acquaintance or someone wanting to develop a genuine friendship or romantic relationship.

At first, the scammer will send you messages about personal, non-investment-related topics. They might try to foster trust by sending pictures, talking about activities—such as volunteering—that demonstrate good character, or sharing fictitious life details that mirror your own. They might claim to be a widow, a single parent or even a member of the U.S. military living overseas, for example. In the process, the scammer will also seek to obtain personal information that they can later use to manipulate you into surrendering your money.

Though these scams can present in different ways, inevitably the bad actor will at some point—after days, weeks or even months—steer the conversation toward investment-related topics, often asking whether you have an investment or crypto asset account. Their intent at this phase of the scheme is to create the perception that you’ll make money by following the scammer’s instructions and to ensure your ability to invest in the forthcoming investment scam.

The next steps often vary depending upon the type of asset the scammer is promoting. However, the goal is the same: entice you to put more and more of your money toward the “opportunity” they’ve shared.

Stock Scams

Relationship scams involving stocks are often variations of pump-and-dump schemes. After you express a willingness to invest and have verified that your brokerage account has the ability to trade in the relevant security, the scammer will likely then provide additional instructions, including the company to invest in, the quantity to purchase and a specific price. They might claim that you need to place an order to buy the stock immediately and also ask you to send a screenshot proving that your trade was executed.

While you might be placing such trades in your own investment accounts and with your own funds, the scammer is working to influence your decision-making in these and similar scenarios. They might point to impressive gains from initial investments and urge you to deposit increasingly larger amounts. Once you do, though, the scammer’s market manipulation might cause the stock price to plummet, leaving you with devastating losses.

A Crypto Asset Variation

Often, relationship investment scams involve the scammer dangling riches supposedly made through trading in crypto assets that aren’t securities. A scammer might invite you to join a fraudulent “investment group” where they promote high-risk crypto assets in private chat rooms. They might then advise you to invest using a specific crypto asset trading platform that’s likely to be fake and controlled by the scammer or their associates. They might even allow you to withdraw early gains to build false confidence in their advice and encourage you to up the stakes with larger and larger investments.

These phony trading venues might feature some type of legitimate-looking but falsified dashboard that shows your assets exponentially growing. But the gains are usually fake, and your money has likely gone directly to the scammer. You might find yourself unable to withdraw the supposed profits from your account or that the platform where you recently deposited your crypto assets has suddenly become inaccessible. 

If you confront the scammer regarding the losses, they might express empathy and offer to help you recover your money, perhaps attempting to persuade you to make another investment. They might cite additional taxes and fees that you must pay before withdrawing your funds. And sometimes the scammer will simply disappear once they’ve received your funds.

Watch for Warning Signs

To protect yourself against relationship investment scams, watch for these red flags:

• Unexpected Contact – Never respond to unsolicited messages from unknown contacts, even about seemingly benign topics, especially via text message and on encrypted messaging applications. Delete, block and report unexpected messages from unknown senders.
• Request for Financial Information – Don’t share any information relating to your personal finances or identity with someone you don’t know who contacts you online, on a social media platform or through text message. Be suspicious if a new online friend or romantic connection starts asking about your personal finances, and consider putting the brakes on the relationship.
• Invitation to Invest in Specific Financial Products – Be wary of any unsolicited investment advice or tips, particularly from someone you’ve only spoken to online and even if they suggest you trade through your own account. Always question what a source stands to gain from sharing tips with you and whether the transaction fits with your financial goals, investment strategy and risk tolerance.
• Unknown or Confusing Investment Opportunity – Carefully evaluate the product, as well as the person and/or company requesting your investment. Along with a basic search, try adding words like “scam” or “fraud” to see what results come up. Consider running recommendations by a third party or an investment professional who has no stake in the investment. Use FINRA’s BrokerCheck to see if the promoter is, or was at one point, a registered investment professional and to check for any disciplinary history.
• Unfamiliar Trading Platforms – Do extensive research before moving any money between accounts, particularly in the evolving crypto assets space, which has a multitude of trading platforms. Who controls the platform? What security measures are in place? How can you withdraw funds if desired or needed? If you don’t know the answers to those questions, don’t put your assets there.
• Exaggerated Claims and Elevated Emotions – Be skeptical of any investment that offers much higher than average returns or is touted as “guaranteed.” Scammers will adjust their pitch to appeal to your emotions—for example, they might say something like, “Don’t you want to have money to send your kids to college?”
• Sense of Urgency About an Upcoming News Announcement or Share Price Increase – Even if it’s not a scam, remember that insider trading is illegal, and you should never trade in shares of a company based on material, nonpublic information.

Learn more about how to protect your money from fraud and get additional insight from the Commodity Futures Trading Commission, FBI, U.S. Securities and Exchange Commission (SEC) and your state securities regulator about relationship investment schemes.

If you have information about potentially fraudulent, illegal or unethical activity, contact your local law enforcement, and submit a regulatory tip to FINRA. If you think you’ve been the victim of any cyber-enabled scam, file a report with the FBI’s Internet Crime Complaint Center.