Security Corner Blog

In recent years, confidence scams have exploded into a multi-billion dollar industry, devastating the financial well-being of countless victims. A recent hearing led by Chairman Blaine Luetkemeyer, of the House Financial Services Subcommittee on National Security, Illicit Finance, and International Financial Institutions, sheds light on the severity of this issue. These scams, often dubbed “romance confidence scams,” prey on vulnerable individuals, manipulating them into sending money to fraudsters who pose as trustworthy companions. The economics of this industry are staggering, with billions of dollars lost to scams that rob victims of their savings and financial security.

What Is a Confidence Scam?

Confidence scams, as described in the hearing, operate on a simple but effective principle—trust. Scammers reach out to potential victims, often using friendly or familiar-sounding messages to initiate a conversation. Whether it’s a misdirected “How have you been?” text or a targeted message on social media, the goal is to engage the victim in a dialogue that feels natural and innocent.

Over time, the scammer builds a relationship with the victim, slowly gaining their trust. For example, if the victim is a man, the scammer typically poses as a woman, and vice versa. After weeks or even months of daily conversations, victims feel they truly know and trust the person on the other end of the interaction. One victim in particular mentioned during the hearing expressed how they felt absolutely certain that they knew everything about the scammer, believing the connection to be real.

The Lure of Cryptocurrency

Once trust has been established, scammers begin weaving an elaborate story involving cryptocurrency investments. They claim to have insider knowledge or a successful track record in crypto trading and offer to share their expertise with the victim. This phase of the scam is particularly damaging because the victim is never directly asked to hand over money. Instead, they are coached into setting up their own cryptocurrency accounts or wiring money to seemingly legitimate platforms, often controlled by criminals.

The fraudsters even go so far as to show fake screenshots and videos of their own “crypto portfolios” and may allow the victim to cash out small amounts at first to maintain the illusion of authenticity. This tactic, along with detailed instructions on how to bypass U.S. banking regulations, persuades victims to invest more and more of their savings.

As the scam progresses, victims are pressured to liquidate retirement funds, savings accounts, and other assets, believing their investments are secure. In reality, the funds are being siphoned off to international crime rings, often operating out of Southeast Asia.

The Scope of the Problem

According to Professor John Griffin from the University of Texas at Austin, confidence scams have generated an astonishing $75 billion for Chinese criminal organizations from January 2020 to February 2024. These scams primarily target the most vulnerable individuals, preying on their trust and hopes for financial success, especially in the cryptocurrency space.

In 2023 alone, investment fraud, largely driven by confidence scams, resulted in $5.6 billion in losses—a 45% increase from the previous year. The psychological toll on victims is immense, with many too embarrassed to report the crime, which allows these scams to continue operating in the shadows.

What Can Be Done?

As Chairman Luetkemeyer pointed out, education is key to combating this growing threat. Victims need to understand the warning signs of confidence scams and be wary of anyone who reaches out unsolicited, particularly those who push for investment opportunities in cryptocurrency.

Financial institutions and government agencies must also step up efforts to educate the public and provide clear guidance on how to avoid falling victim to these sophisticated scams. This includes promoting the importance of verifying the identities of online connections, being cautious with cryptocurrency investments, and recognizing the red flags associated with high-pressure tactics.

Confidence scams are a pervasive issue, affecting people from all walks of life. By raising awareness and encouraging victims to come forward, we can begin to dismantle the industry that profits from deception and fraud.

How to Protect Yourself

1. Be Skeptical of Unsolicited Messages: If you receive a message from someone you don’t know or someone who claims to have mistaken your identity, proceed with caution.

2. Verify Before You Trust: Take time to verify the identities of people you meet online. Conduct reverse image searches on profile photos and look for inconsistencies in their stories.

3. Avoid Sharing Personal Information: Never share sensitive personal or financial information with someone you’ve only met online, no matter how much you trust them.

4. Be Wary of Investment Opportunities: If someone offers investment advice, particularly around cryptocurrencies, consult with a trusted financial advisor before making any decisions.

5. Report Suspicious Activity: If you suspect you’ve been targeted by a scam, report it to your financial institution and relevant authorities as soon as possible.

By staying informed and vigilant, you can protect yourself and your loved ones from the devastating financial and emotional impacts of confidence scams. Let’s work together to build awareness and ensure that no one falls victim to these heartless schemes.

Learn more about confidence and imposter scams. Report scams to the FTC at ReportFraud.ftc.gov.

View press release - Luetkemeyer Delivers Remarks at Hearing to Examine the Economics of the Multi-Billion Dollar Romance Confidence Scam Industry

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