It's just one example of fraud and hedge fund impersonations taking place across social media using the names of some of the most well-known hedge fund firms and founders in the industry. Investment scams are extremely difficult to police on social media, but hold the potential to harm real-world investors.
Targets of impersonations include AQR, Seth Klarman of Baupost Group, Bill Ackman of Pershing Square Capital Management and Steve Cohen of Point72 Asset Management.
A spokesman for AQR told Pensions & Investments in an emailed statement: “There have been recent fraudulent schemes propagated over social media and messaging applications falsely claiming to be associated with AQR."
In June, "We placed a notice on our website homepage to provide individuals targeted by these schemes with clarifying information and to reiterate that AQR does not engage in any investment activities through social media or messaging apps.”
The statement added, “The notice also suggests that individuals targeted by these schemes should contact their local law enforcement. We continue to monitor and take proactive steps to combat these scams by pursuing their removal from platforms.”
Baupost has a fraud and phishing warning on its website and in recent weeks had the warning as a banner on its website homepage.
“Baupost has been made aware of fraudulent websites and social media accounts purporting to be Seth Klarman or purporting to represent The Baupost Group. The Baupost Group partnerships do not actively solicit or market to prospective investors on any social media or similar platforms, and are generally closed to new capital,” the statement reads.
“We take these matters seriously, are investigating the reports and, where practicable, are taking steps to address them. In the case of fraudulent social media accounts, we suggest that you block and then report anyone alleging to be Seth Klarman or alleging to represent Baupost directly to the relevant social media platform,” it said.
A spokeswoman for Baupost declined to comment. A spokeswoman for Point72 declined to comment on impersonations of its founder Cohen.
Several groups impersonating Ackman and Pershing Square on social media have since been marked or labeled by content moderators as spam. A spokesman for the firm declined to comment.
A request for comment sent to Telegram was not returned by publication. Telegram's founder and CEO, Pavel Durov, was charged criminally in France this month amid allegations that the social media platform is being used for illicit activity.
A growing threat
There's been a meaningful increase in asset managers seeing names copycatted and used in fake scams, impersonations, and phishing, said Peter Greene, partner and co-head of the investment management group at law firm Schulte Roth & Zabel. Managers are beefing up disclosures about potential scams on their websites and some are contacting the Securities and Exchange Commission and the Federal Bureau of Investigation, he added.
“In terms of, what do you do about it? It’s hard,” Greene said. Scams can originate overseas and “it’s probably a fool’s errand to try to find the offending party and do something about it directly.”
Greene advises hedge funds to trademark their names. “It is easier to get an authority or a website operator to act on your copycat complaint if you, in fact, have a trademark,” he said.
Regulators have issued warnings about the scams and warned potential investors to be careful.
The SEC keeps a list on its website of “unregistered soliciting entities” that “falsely claim to be registered, licensed, and/or located in the United States in their solicitation of investors” and its PAUSE Program lists “entities that impersonate genuine U.S. registered securities firms as well as fictitious regulators, governmental agencies, or international organizations.”
In June, the regulator updated its list, adding “24 soliciting entities, six impersonators of genuine firms, and four bogus regulators” and also warned that artificial intelligence technology has “made it even easier for fraudsters to impersonate government agencies, organizations, and individuals in luring investors into scams.”
The Financial Industry Regulatory Authority (FINRA) has also issued warnings. A March statement on imposter investment scams noted that “there are new variants every day” and highlighted that the schemes rely on “source credibility — building trust by claiming to be properly registered and employed by a well-known firm — and they can be alarmingly convincing.” FINRA also highlighted imposter websites and documents and fraudulent products.
And in a recent July alert, FINRA even highlighted the rise in customer support scams.
Scams and impersonations are likely to grow especially amid the rise AI and new technology, said Amy Lynch, founder and president of FrontLine Compliance. Her firm works with institutional money managers and large sell-side firms and offers mock SEC exams and other compliance reviews.
“It’s an issue that is going to come up more and more as AI gets adopted and deep fakes (are created),” Lynch said.
And firms will need to have even more disclosures on their websites.
“For the unsuspecting public, it’s going to very hard to tell the difference between a fake video and a real one,” she said. “So, trying to put constraints around it will end up being the responsibility of the firms themselves and they will have to come up with policies and procedures.”
