Enforcement News: Relationship Investment Scams

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Posted on: Apr 16 2025

On April 16, 2025, the Securities and Exchange Commission (“SEC” or Commission”) announced (here) that its Office of Investor Education and Advocacy (“OIEA”) had unveiled an anti-fraud public service campaign to warn investors about the impact relationship investment scams can have on their financial future.

As explained in the release, “[r]elationship investment scams typically involve a ‘long con’ in which scammers reach out online or through text messages, attempting to build trust through friendship or a romantic connection to convince someone to put money into phony investments.”[1] Relationship investment scams are often referred to romance scams, financial grooming scams, and the distasteful description, “pig butchering”,[2] scams. These scams also sometimes involve “catfishing,” where fraudsters might set up fake online identities to carry out crimes.

The SEC’s public service campaign features two animated videos ‒ “Don’t Open the Door to Scammers” and “Let’s Talk About Relationship Investment Scams” ‒ and a resource page about how relationship investment scams work, what investors should look out for, and how investors can protect themselves and others.

In the release, the SEC pointed to a few “[k]ey takeaways for investors”. These include:

Ignore messages from anyone they don’t know and consider blocking or deleting them.
Be wary of unsolicited investment opportunities, no matter how much they trust the person.
If they suspect they may be caught up in a scam, stop communication with the individuals immediately, and do not give them any more money.
Report the scam to the SEC.

“Investor protection is a vital part of the SEC’s mission. These kinds of frauds can be devastating and cause investors to lose billions of dollars every year,” said Acting Chairman Mark Uyeda. “I encourage investors to utilize the resources on our investor education website, Investor.gov, to learn how to spot and avoid fraud to help protect their hard-earned money and life savings.”

“If you receive an email or text message from a person, number, or email address you don’t know or recognize, it’s a red flag of fraud — especially if the message is vaguely worded or appears aimed at someone else,” said Lori Schock, Director of the SEC’s OIEA. “Don’t respond. Instead, ignore, block or delete these senders from your phone or messaging app.”

In addition to the public service campaign videos and resources, the SEC also suggested that investors read an article by Lori Schock, Director of the OIEA, entitled “Relationship Investment Scams – Starts With ‘Hello,’ But Could End With Saying ‘Goodbye’ to Your Money.

The CFTC’s Office of Customer Education and Outreach (“OCEO”) also issued an investor alert about relationship investment scams (here). In the CFTC’s alert, the OCEO explained in more detail how the scams work:

Criminals and other fraudsters seek their targets in many different ways. They often initiate contact online or on social media platforms —including professional networking, dating, and messaging websites/apps. They might run advertisements or add targets to a group chat that the target didn’t seek to join. Fraudsters might text a target pretending to be an old friend or claiming to have contacted the target accidentally. They might even use an auto dialer to blast out unsolicited text messages to thousands of people—these messages are designed to mimic ones intended for some other personal or business acquaintance, seeking to prompt a response from potential targets. They might offer financial advice or express romantic interest. Sometimes, these fraudsters quickly move communications away from the initial platform to a different, sometimes unmonitored space.

Concerning the “long con”, the OCEO explained that once the fraudster finds a target, the fraudster will “begin the long process of building their trust, be it through friendship, romance, or an offer to help achieve financial goals.” The OCEO said that the fraudster “might even suggest meeting in person but then come up with excuses so that this never happens.” In romance scams, the fraudster often pledges their love very quickly.

Sometimes, the fraudster creates a fake identity as a financial professional with a prominent online presence, or they might impersonate—or “spoof”—legitimate investment professionals or brokerage firms. They sometimes use altered images or videos to lead their targets to believe that others have made money on their platform. The OCEO noted that “[n]ew artificial intelligence (“AI”) technologies can make these images and videos convincingly realistic.”

Once fraudsters have established a relationship or friendship with their target, said the OCEO, they might offer their advice on trading or claim to know about profitable opportunities. “They might even indicate that they or someone they know is a financial advisor or is an ‘insider’ and is able to provide valuable trading recommendations.” These fraudsters often lead their targets to believe “they are doing well trading by sending fake screenshots, showing fake trading information, or manipulating the target’s online account to make it appear that the ‘investments’ and ‘earnings’ are ‘legitimate,’ all of which is intended to build trust.”

Relevant to commodities, the OCEO noted that “[f]raudsters might also steer their targets towards investments involving crypto assets.” “For example, the target might think they’re buying into a crypto asset investment like an ‘Initial Coin Offering’ (“ICO”) when the target is actually sending money directly to the fraudster’s crypto asset wallets or accounts.”

In addition, noted the OCEO, “[f]raudsters might direct their targets to a legitimate looking (but fake) website or to a widely used app that can be downloaded from a well-known app store.” However, said the OCEO, “just because an app is available on a well-known app store doesn’t mean that the app itself, or the activities conducted within it, are legitimate.” The OCEO also noted that “[f]raudsters might tell their targets to wire cash or obtain crypto assets—such as bitcoin, ether, or tether—at a bitcoin ATM (or kiosk) or through a crypto asset platform in order to make investment deposits.” The OCEO warned that “[a]n investment might not be legitimate if the investor is required to pay for it with crypto assets.”

Like the SEC, the OCEO advised investors that if they are directed to pay for an investment by wire transfer or check, they should be suspicious if:

You’re asked to pay an individual, a firm that is different than the one with which you thought you’re investing, or a business that appears unrelated to your investment (for example, a nail salon or foot massage business);
The address is suspicious (for example, an online search for the address suggests it’s not an office building where the firm operates); or
You’re told to note that the payment is for a purpose unrelated to the investment (for example, luxury watches, goods, or furniture).

The OCEO explained (in bold and italicized writing): “If you wire money outside of the United States or use crypto assets for an investment that turns out to be a scam, you likely will never see your money again.”

In the release, the OCEO noted that

Fraudsters sometimes deliberately falsify information to make their targets believe they’ve profited from whatever investment “opportunity” the fraudsters presented. They might even allow a target to withdraw a portion of their “profits” to further gain their trust and falsely reassure them that the investment is legitimate. The fraudsters might provide what they claim is “real time” trading information that is, in fact, fake. They often lead targets to believe that other investors are making enormous profits too. Fraudsters might then ask their targets to invest larger sums of money. [Orig’l emphasis.]

“But,” warned the OCEO, “when the target wishes to withdraw their funds, the fraudsters often come up with an excuse why that isn’t possible, say more money is required, or tell the target for the first time that they must pay more to cover fees or taxes.” In fact, said the OCEO, “the target will never recover their investment or any ‘profits,’ so paying additional funds only causes the target to lose more money.”

Similarly, said the OCEO, “fraudsters might pretend to loan their targets funds for trading but require these ‘loans’ to be repaid before any purported profits or principal can be withdrawn. This, too, is a further attempt to steal more money.”

The OCEO also warned that investors should beware of fake testimonials. In this regard, the OCEO explained that “[f]raudsters often use fake testimonials to convince targets that others have invested and made money. Never rely solely on testimonials in making an investment decision.”

The OCEO further warned about relying on celebrity and influencer testimonials:

Fraudsters sometimes pay others—for example, actors to pose as ordinary people turned millionaires, social media influencers, and celebrities—to tout an investment on social media or in a video. If you’re in a group chat, others in the group who claim to have made huge profits might be in on the fraud.

Finally, the OCEO discussed how AI could be used to alter or generate photos or videos “to make it falsely look like others have profited.” “Promises of high investment returns, with little or no risk, are classic warning signs of fraud,” said the OCEO.

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Jeffrey M. Haber is a partner and co-founder of Freiberger Haber LLP.

This article is for informational purposes and is not intended to be and should not be taken as legal advice.

[1] In a parallel alert issued by the Commodities Futures Trading Commission (“CFTC”) (here), the CFTC described the scam as situations in which “fraudsters—including criminals and other bad actors—often hide their true identities, reach out to unsuspecting targets (often online or through text messages), gain their trust over time, and then defraud them through fake investments.”

[2] Pig butchering is the English translation for the Chinese term sha zhu pan (杀猪盘).