Fraudsters have been using social media platforms like Instagram and Facebook (FB) to scam investors, particularly those interested in cryptocurrency, who have ended up losing £63m ($89m) in the past 12 months.
More than 5,000 reports of investment fraud to Action Fraud, the national reporting centre for fraud and cyber crime, referenced a social media platform.
Instagram was the most referenced one, with 35.2% of complaints saying they were misled on the photo-sharing app. Some 18.4% of said fraudsters used Facebook to scam them.
About 45% of reports said the fake commodity they had been scammed into investing in was a type of cryptocurrency.
Action Fraud said some victims were approached directly by an investment fraudster, whilst others were attracted to a fake investment through adverts. Some reports even mentioned seeing LinkedIn profiles for the broker who had approached them, which helped persuade them that the offer was legitimate.
27.5% of all social media investment fraud victims were aged 19 to 25, and 61% were men.
Reports of this kind of fraud “have increased significantly since the start of the coronavirus pandemic, which is unsurprising when you think the vast majority of us have had to conduct nearly every aspect of our lives on a computer or mobile phone,” said superintendent Sanjay Andersen, from the City of London Police’s National Fraud Intelligence Bureau.
“Being online more means criminals have a greater opportunity to approach unsuspecting victims with their scams.”
Criminals are also using social media influencers to carry out their scams, by advertising bogus celebrity endorsements. Often, fake testimonials are accompanied with a picture of a well-known figure to help the investment seem legitimate.
Between April 2020 and March 2021, Action Fraud received over 500 investment fraud reports which made reference to a bogus celebrity endorsement, with losses reaching over £10m.
Another common trend relates to cloned company investment fraud, where criminals will copy the branding of legitimate investment companies to trick people.
Andersen said anyone thinking about making an investment should do their research first, visit the Financial Conduct Authority’s website and double check every detail before handing over any money or personal details.
“Online investment scams have a devastating financial and emotional impact on victims and our research has shown that the current reactive approach taken by social media platforms is not fit for purpose," said Rocio Concha, director of policy and advocacy at consumer group Which?.
She said major online platforms have a responsibility to protect their users from scams.
"It is essential that the Online Safety Bill gives them a legal responsibility to prevent, identify and remove fake and fraudulent content on their sites."
This bill, according to the government, establishes a new regulatory framework to tackle harmful content online.
Earlier this year UKFinance said reports of investment fraud in the UK climbed 32%.
Losses from these scams rose 42% to £135m last year, with people of all ages targeted, while “authorised” fraud losses increased 5% to £479m.
Watch: How do influencers make money from Instagram?