I’m tired of the financial scammers. A few months ago John Oliver did a great show on how these scammers operate what is known as pig butchering. A typical pig butchering scam works as follows.
First, a scammer poses as someone else online, typically someone prominent in the financial space. They then use their fake financial persona to convince unknowing victims to invest their money with them. The scammers have a few different ways they do this.
One involves pumping thinly-traded penny stocks that the scammer already owns and then dumping their shares for a profit after their victims have boosted the price enough. This is your classic pump and dump scheme.
Another method they use is cryptocurrency fraud. The victim typically downloads an app (sent by the scammer) and starts trading according to the scammer’s instructions. And, as they do so, they see their “balance” on the app start going up. Before they know it, they are gaining “wealth” rather quickly.
What they don’t realize is that the app is controlled by the scammer and the wealth isn’t real. But, the scammer doesn’t let their victim withdraw any money yet, because it’s too soon. They need to fatten up their pig a bit more before they butcher them.
To do so, they convince the victim to deposit more money into the app and take part in even larger trades. This continues until either the victim asks for their money back or the scammer decides to bail. At that point, all the victim’s money disappears. The scam is complete.
The crypto version of this scam works because the transactions occur on the blockchain where they are both anonymous and irreversible. After all, what could be better for scammer? You can’t call the scammer’s bank to get your money back because there is no bank for you to call. Unlike the traditional financial system, you can’t undo the transaction.
And if you decide to go after the “person” you were talking to, you will soon realize that it wasn’t actually them. While there are variations of this scam that don’t involve impersonating individuals in the financial space, this is the version I am most familiar with.
What makes these scams even worse is that they are run by people in foreign countries who may be involved in human trafficking. They imprison people against their will and force them to become scammers in order to buy their freedom. It’s truly an awful system.
But as bad as the scammers are, the parties I’m more upset with in this ecosystem are the social media platforms. In particular, Meta. Of all the social media companies out there, they seem to be the worst offender in allowing these scams to proliferate. For the record, I’ve been a fan of Mark Zuckerberg for a long time and think he has built an incredible company. However, I also believe that certain problems at Meta have gotten out of hand and the incentives to fix them just aren’t there.
Pig butchering is one such problem. I wouldn’t be as hard on Meta if this was just a problem with scammers in general. After all, the number of scammers creating accounts daily is likely in the hundreds of thousands. Hiring armies of people to do the tedious work of manually reviewing every single account is a huge, costly headache. I can understand why Meta wouldn’t spend their money trying to fix this problem.
However, the issue I have is that Meta is partially profiting off of this behavior. And they do so in two ways. First, they allow these scammers to run advertisements to target unknowing victims on their platform. Here is an example that impersonates Josh Brown on Facebook to sign up for a fake stock trading club:
After we reported this fake advertisement, we got the following message a few days later:
I guess scamming doesn’t go against Meta’s community guidelines.
This is the first way that Meta makes money off this. They earn revenue directly from the ads run by the scammers.
The second way Meta makes money off this is through their verification badge on Instagram/Facebook. By allowing these scammer accounts to proliferate, Meta has incentivized creators who are being impersonated to pay for verification. After all, wouldn’t you rather just pay $14.99 a month to get verified rather than deal with all these impersonators? This was my experience.
For years I had impersonators on Instagram. While it was cool the first time it happened (i.e. “Haha look I made it”), it quickly became an annoyance. I hated having to tell my audience that I didn’t have a “private stock picking club” or an “exclusive crypto community.”
But then Meta rolled out the verification badge for $14.99 a month and it solved all my problems. Since getting verified over a year ago, I can think of maybe two Instagram accounts that have tried impersonating me. This is nothing compared to handful I used to get every single week. While I am happy with the end result, it’s unfortunate that Meta’s only legitimate solution to this involves me paying a monthly subscription.
The frustrating part about this whole situation is that Meta doesn’t seem to care about clearly fake content that is trying to take advantage of others, even when multiple people have reported it as such. For example, there is a Facebook post about Josh Brown’s “exclusive stock picking club” that was up for months despite being reported dozens of times. It was only after contacting a mutual contact who works inside Meta that the post was taken down.
I used to wonder why these platforms care so little. Don’t they want a better user experience? Don’t they want people not to get scammed? Don’t they care about their platform’s reputation? Then it finally clicked. They don’t care because caring won’t generate profits right now. It reminds me of that Upton Sinclair quote:
It is difficult to get a man to understand something, when his salary depends on his not understanding it.
And Meta is getting paid to not understand it. Unfortunately, they are being compensated to turn a blind eye to people getting robbed out of their life savings.
Maybe you don’t sympathize with these victims because you would never fall for these scams. But that’s not fair. You are reading a financial blog right now, which means that you are likely in the top 20% of people in terms of financial sophistication. But, what about your friends? What about your family? What about your broader community? They aren’t as financially sophisticated as you are, yet they are the ones being targeted!
That’s the real tragedy here. The people being scammed out of their money are the ones who need it most. The victims of these schemes aren’t multi-millionaires losing a small fraction of their net worth. No, the people that are attracted to these scams likely don’t have much to begin with and want a better life as a result. They are losing money that they can’t afford to lose.
I’m tired of seeing these things and hearing these stories. It’s not right. We all know it’s not right, yet few are doing anything about it. Maybe this will change one day, but the incentives simply aren’t there.
Thank you for reading.
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This is post 415. Any code I have related to this post can be found here with the same numbering: https://github.com/nmaggiulli/of-dollars-and-data
