Alabama investment fraud surges in 2023, study finds

A new study suggests Alabama residents are falling victim to a surge in investment fraud.

According to a study from Carlson Law, Alabamians lost $32 million to investment fraud in 2023, up 45.8% from $22 million in 2022.

The study, which used data from the Federal Bureau of Investigation (FBI) Internet Crime Report 2023, found Americans lost an unprecedented $4.57 billion to investment schemes, up 38% from the previous year and 18 times higher than the $253 million lost in 2018.

Alabama ranks No. 28 for total money lost to investment fraud and No. 12 for an average victim loss of $139,899 compared to Montana’s No. 1 rank with an average victim loss of $370,164.

Despite being known for tech savviness, millennials were more devastated by investment fraud than other generations last year, followed by Gen X, according to the FBI. People aged 30 to 50 accounted for about two-thirds of investment fraud victims.

According to the Federal Trade Commission, investment scams lure victims by promising large profits and quick returns.

But state and federal officials warn that emerging schemes are more sophisticated than ever, targeting retirees, business owners, and even first-time investors.

The Alabama Securities Commission handles state securities fraud, to provide “aggressive enforcement actions against any firm or individual who has violated the Alabama Securities Act or other state and federal statutes to the detriment of Alabama investors,” according to its website.

Amanda Senn, the commission’s director, told AL.com that her office collaborates with a national task force that investigates and prosecutes entities outside the U.S. that threaten industries.

“We’ve received a number of reports through the financial exploitation reporting laws,” said Senn.

Senn said the numbers do not include “the hundreds of others we receive from the public and referrals from other law enforcement and regulatory agencies.”

Since 2020, the Alabama Securities Commission received 637 reports of financial exploitation. Senn’s office found instances of elder abuse among 619 reported cases, not including 18 cases that are currently being analyzed.

Senn said the FBI’s 2023 Internet Crime Report on investment fraud “does not fully capture [all cases] though… Elder exploitation is grossly underreported.”

In 2016, government officials strengthened The Protection of Vulnerable Adults from Financial Exploitation Act by mandating reporting to the Alabama Securities Commission and the Alabama Department of Human Resources by “qualified individuals,” such as broker-dealers, agents, investment advisers, and “persons who serve in a supervisory, compliance, legal, or member capacity of a broker-dealer or investment adviser.”

“Whether online or in person, most of the time, a personal relationship is involved, and fraudsters know that trust is currency when it comes to building relationships,” said Senn. “Once they have it, fraudsters go in for the ask, and oftentimes, especially in cases that involve seniors, employ fear tactics,” Senn said.

The ASC prosecuted a notable case involving Jesse Morgan Hinson, who Senn said engaged in routine fraud activity in Butler County.

“Hinson admitted that in March of 2022, he defrauded an individual in Butler County by claiming that he could finance real estate purchases for a 10% down payment,” said Senn.

“Despite having no ability to finance real estate purchases,” Senn said, Hinson obtained about $66,500 from the victim. Most of the cash was used to pay Hinson’s expenses and debts of a woman he had been in a romantic relationship with.

When the Butler County victim demanded Hinson return the money, Hinson impersonated a New York attorney and attempted to discourage the victim from contacting law enforcement regarding the theft.

“Hinson, posing as the attorney, falsely claimed that he would be receiving the proceeds of an $11 million loan,” said Senn. However, Hinson took the deception further by threatening to open businesses to compete with those of the victim and drive them to bankruptcy.

Hinson has been in state prison since April 2022. That same year, Hinson admitted to another real estate scheme in Tuscaloosa involving two victims providing payments totaling $124,028.80 payments between Hinson’s attorney and his then-girlfriend.

In 2015, AL.com reported a similar scheme in Troy, where Hinson was charged with soliciting investments.

The ASC’s website provides recommendations to prevent investment fraud, including broker checks, law enforcement contacts, multiple investor education tools, military communities, and resource websites.

While the ASC warns about rampant investment fraud, Senn said her office is also concerned about the threat of artificial intelligence to aid cybercriminals’ use.

“We recently learned of an individual who Googled the website of what they thought was their bank. It was not. It was a fraudster paying to be listed on the search engine provider,” Senn said.

AL.com reported an increase in financial cybercrime at large in previous years and tips to avoid falling victim to cybercriminals.

Alabama’s Office of Information Technology’s Generative AI Task Force has been working to address concerns in the state. The group announced near completion of a draft of recommendations they said would be submitted to Gov. Kay Ivey’s office by the end of last November.

Senn stresses being cautious when communicating with businesses or individuals and confirming their legitimacy before sharing personal information.

“You can easily lose your life savings and growing numbers of people are experiencing this devastating and cataclysmic event because they are too trusting. Don’t be,” said Senn.