Fake investment scam prompts public warning

A new investment scam involving fake investment education foundations prompted a warning from a state agency and an investor protection organization on Tuesday, March 25.

The Washington State Department of Financial Institutions (DFI) Securities Division in Olympia teamed up with North American Securities Administrators Association members in issuing the warning  to the public about a new investment scam.

The scam using fake foundations to lure investors with promises of education on stocks, as well as cryptocurrency, "risk-free" trials and loans, the groups said in issuing the warning.

The idea is to persuade investors to invest their money into the platform and take out fake loans, which come with exoibitant commissions.

"The rise of fake 'investment education foundations' is a concerning trend preying on investors' desire to reduce the risk of investing in cryptocurrency," said DFI Director Charlie Clark in a statement.

"These scams often promise guaranteed returns and sophisticated advice, but they are designed to deceive. It’s crucial for investors to remain vigilant and skeptical of unsolicited offers before handing over their money."

The groups said the scam typically starts with social media ads leading to messaging app groups managed by a fake founder and bots. The founder provides investment lessons, eventually introducing a fraudulent cryptocurrency exchange.

Investors are enticed to test a proprietary artificial intelligence bot with “free” tokens, which generate fake profits, leading to real money investments. If funds are lacking, fake loan providers on the messaging app offer loans deposited directly onto the exchange.

Investors can’t withdraw profits until they repay these fake loans or commissions, with accounts frozen for fake regulatory reasons. The scam is eventually shut down and often restarted under new names, the groups said.

Scammers legitimize their operations using real government and professional documents, including registration with the U.S. Department of the Treasury and the Securities and Exchange Commission.

They may also post articles online to appear legitimate and use old website domains to seem established, the groups said.

How to protect yourself

DFI urges investors to exercise caution before responding to unsolicited investment offers, especially those received though social media, emails or phone calls.

“Don’t assume an education foundation is trustworthy just because it is promoted on social media,” Clark said. “Contact DFI to check if the education foundation and cryptocurrency exchange are registered.”

If you suspect fraud or illegal activity, reach out to DFI immediately. For additional tips and resources, visit DFI’s informational pages on investment fraud and financial scams and fraud. People may also wish to sign up to receive consumer alerts.