How Phony Billionaires Are Scamming Stock-Market Investors Online
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What is the main topic discussed in this episode?
Here's your money briefing for Monday, March 18th. I'm J.R. Whelan for The Wall Street Journal. The fraudsters are at it again. They're luring individuals into stock market scams. And this time, they're posting ads on social media pretending to be successful investors and hedge fund managers.
Which high-profile investors are scammers impersonating on social media?
The biggest one is Steve Cohen, who's worth $20 billion and owns the New York Mets. He's a big-time hedge fund manager. But they also have Ray Dalio of Bridgewater, Kathy Wood of Bark Investments, who had like a 150% return a couple of years ago.
We'll talk to Wall Street Journal contributor Randall Smith about how the scam works and how to spot a fake ad after the break.
Fraudsters posing online as well-known billionaires and investment gurus are luring people into stock market scams. Wall Street Journal contributor Randall Smith has been looking into this and joins me. Randy, these scammers have chosen some big names to impersonate. Who's on the list?
Where do fake billionaire investment ads appear and what do they look like?
The biggest one is Steve Cohen, who's worth $20 billion and owns the New York Mets. He's a big-time hedge fund manager. But they also have Ray Dalio of Bridgewater, Kathy Wood of ARK Investments, who had like a 150% return a couple of years ago, and Bill Ackman, who's a well-known activist investor, and Peter Lynch of Magellan, the guy who used to be the Magellan fund manager at Fidelity.
Where do these scams typically show up, and what do they look like?
They're on Facebook and Instagram, but they're also on other social media platforms. I'm told the scammers go for social media where the people have money and they may be less sophisticated. And they will look like, hey, I'm so-and-so big-time investor and I want to share my skill at making money. Sign up for my group and I'll help you make 87% in a month.
How do fake-investor scams recruit victims and use WhatsApp groups?
So how do the scams typically work beyond that point?
You might click on one button and it'll ask you about your investment history, what stocks have you bought in the past, and then it'll say if you want to join the group or if you want to open a portal to wealth, there'll be a button to join a WhatsApp group. And from there, they introduce themselves and make you feel like you're part of an exclusive investment club.
And then they ask for personal information?
There's a million scams for how to get your money. But the one that I found was people who had signed up in the fake Cathie Wood group were basically taken, hold your hand, make this stock trade, make that stock trade. And the first few stock trades make money and then they lure you into fraud. putting up more and more of your money and you're actually buying stocks, it's still your money. But eventually what happened with these people is, you know, and I talked to several of them, they wound up trading in Hong Kong penny stocks and there was something called a pump and dump where they manipulate the price of the stock way up into the stratosphere and then they lure you into buying right at that moment.
What tactics do scammers use to execute pump-and-dump stock schemes?
And they're the ones who are selling. So you buy... And they sell, and the stock goes down 90%, and that's how you lose your money, and that's how they make their money.
How effective are these scams, and how much money have victims lost?
I've talked to a group of victims that had 29 members and they've lost a collective $3.2 million. And some of them have lost $100,000 or $45,000, but others have lost more. And I talked to somebody who had lost $1.3 million and it was all the money she and her husband had. And they're going to have to take Social Security early and maybe even go back to work. They were retired.
Have the real-life investment experts like Cathie Wood been able to stop these scams from happening?
You would think, with all their billions of dollars in net worth, that they would be able to get these fake ads taken down immediately. But in truth, when they go to Facebook, it's not as easy. And it might take weeks and weeks for Facebook to take down the phony ads. And as soon as it happens, there'll be a new phony ad that pops up.
How much money have victims lost and what are real-life consequences?
So the people at Ackman's company found 90 different scam ads and they say it's like whack-a-mole.
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Chapters
7 chapters
1
What is the main topic discussed in this episode?
0:03–0:23
2
Which high-profile investors are scammers impersonating on social media?
0:23–1:17
3
Where do fake billionaire investment ads appear and what do they look like?
1:17–2:09
4
How do fake-investor scams recruit victims and use WhatsApp groups?
2:09–3:25
5
What tactics do scammers use to execute pump-and-dump stock schemes?
3:25–4:30
6
How much money have victims lost and what are real-life consequences?
4:30–5:41
7
How can you spot fake investment ads and get them taken down?
5:41–6:49
Speakers
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