The Fraud Examiner

Friend or Fraudster? How Scams Are Plugged Through Social Media

May 2012

By Catherine Lofland, CPA

How well do you really know your abundance of Facebook "friends"? How about your LinkedIn connections and the people you follow on Twitter? Many social media users are connected to people they have never met or barely know, and now these so-called friends and connections not only have access to your personal information, but they also have the ability to send you personalized and private messages.

Additionally, these sites frequently allow you to observe the activity of your friends and vice versa. Since we typically trust our friends, it makes sense that we would be open to checking out products or services they are using. Users of social media instinctively let their guard down when it comes to interacting with people in their online networks, and people who might be strangers in reality become familiar online.

Affinity fraud refers to investment scams that target members of identifiable groups, such as a church, alumni association, or professional organization. Online versions of these groups are often easy to join, and scammers purposefully infiltrate them to establish a bond with their victims. The false sense of security created by these online connections coupled with the ability to contact many different people at a relatively low cost makes social media sites easy outlets for fraudsters to tout their schemes.



Facebook is one of the most popular websites on the Internet today and boasts more than 900 million active users as of April 2012. Individuals, organizations, and companies can create profiles and add others as friends, exchange messages (both private and public) and advertise products and services. Users can also join common-interest groups.

Fraudsters can use Facebook to set up phony profiles to perpetrate their schemes. Since many people put details about themselves and their families on the Internet, it might be simple for someone to set up a phony profile pretending to be a relative, such as your Uncle Joe. Alternatively, the fraudster might be able to hack into Uncle Joe’s actual profile by figuring out his password. A common scheme is for someone to impersonate a close friend or relative (in this example, Uncle Joe), and contact the victim. Uncle Joe then claims that he knows someone who just died, and they have millions of dollars in the bank. This deceased person’s widow needs your help to move the money out of a Nigerian bank. The scheme continues on as the classic 419 fraud or advance-fee fraud.

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