Case Study: Fake Business Investment Scam

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We’re all susceptible to a bit of flattery, so when a wealthy investor tells you they think you have a great business which they wants to invest millions into, most of us would jump at the opportunity.

Not all investment offers are scams of course, but we’re seeing an increasing number of people getting sucked into sophisticated frauds which begin this way.

The initial approach

The scam usually starts when the victim receives an email that is personalised to them and their business.

There are variants of the initial story, but they often follow a similar pattern; victims are contacted by someone claiming to be a ‘representative’ of a wealthy investor who’s spotted their company and is keen to make a significant investment into it or even buy it outright.

The representative claims the investor, who they say is based abroad, i.e. somewhere like Dubai, wants to remain anonymous but they have the authority to act for them.

In a couple of recent cases we’ve delt with, victims have been told an investor wants to hand them £10 million, no questions asked, in return for their business.

This amount of money is a fortune for most people and it’s easy to see why they are dazzled by the figure and keen to explore the opportunity.

The fine detail

If the recipient shows an interest in the proposal, professional looking documents are sent over which outline the deal.

Within these documents is a request for the victim’s bank details, together with a copy of a government issued identity document to prove their identity as part of Anti-Money Laundering (AML) checks.

Once the victim has supplied the required information, the ‘deal’ moves along at pace. However, shortly before the funds are due to be transferred to the victim’s bank account, the victim is told that there’s a final hurdle to overcome.

The scam

In order for the transfer to go ahead, the victim is informed they must transfer a significant percentage of the agreed investment amount to a bank account controlled by the scammers.

Here there are variants of how the scam develops, but some victims are told that it’s needed to prove that the business is financially stable while others are told that the transfer is required to meet certain opaque financial regulations in the investor’s home country.

In the cases we’ve seen the figure requested ranges from £100,000 to £500,000, with various different cryptocurrencies suggested as the preferred payment option.

The victim is then told they need to make payment from a decentralised wallet. They’re first instructed on how to open a centralised trading account on a mainstream platform before converting cash into crypto and sending it to the wallet.

Sometimes the scammers have helped the victim set up the wallet using a screensharing app. This enables them to see the victim’s login information and seed phrase giving them access to the wallet.

Some victims have of course been suspicious at this stage and stood firm against making the transfer until the funds have arrived in their account.

But often the scammers pile pressure on them, claiming they’ll miss out on the opportunity if they don’t make the transfer, and will even show them receipts and documents to ‘prove’ that the money has been sent and is on its way.

Personal risk

We’ve spoken to victims who’ve been asked to meet the scammers in person in order to facilitate the transfer.

This poses multiple risks to the victim, including the risk of robbery potentially with violence to force the victim to hand over funds.

Possible vectors

A couple of the people we’ve spoken to who’ve been caught up in this type of scam have mentioned that they’ve previously advertised on professional networking websites for businesses seeking investors.

The sites they’ve used are legitimate so it’s possible the scammers are scouring them looking for businesses and potential victims.

Under these circumstances, a timely approach from a potential wealthy investor is far more credible and thus the scam is harder to spot until much further along the line.

What to look out for

In virtually all investment processes there’s an extensive due diligence process involved which includes accountants, lawyers and other professional who would almost always be involved in the process.

You should carry out thorough due diligence checks before engaging with anyone claiming to be offering an investment in your business.

Things you should do include:

• Confirm the person’s identity and verify the person/company they claim to represent.
• If it’s a company, check their registration number (if applicable), website, social media channels and reviews among other things.
• Check the domain of the business to make sure it’s a genuine company website. Checking the age of the domain can be useful.
• Never pay any up-front fees or be pressured into completing the deal quickly otherwise you’ll ‘miss out’.
• Engage the necessary professionals, such as a solicitor/lawyer and accountant.

Trust you instincts. If the deals too good to be true, the details about the investor seem sketchy or the details keep on changing, walk away.

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If you’ve been caught up in a crypto scam we can help so contact us today.