Romance Scams & Online Investment Fraud  

 

Romance scams and online investment fraud schemes have become two of the fastest growing categories of financial crime in the United States. According to the Federal Trade Commission and the FBI Internet Crime Complaint Center, known as IC3, victims lose billions of dollars annually to scammers who build fake romantic relationships or promote fraudulent investment platforms, often operating from overseas and using cryptocurrency to move stolen funds quickly and anonymously.

 

If you have been targeted by a romance scam, a fraudulent cryptocurrency investment scheme, or a similar online financial fraud, Selig & Associates can help you take immediate, aggressive action to identify the perpetrators, trace and freeze stolen assets, pursue every available legal remedy for recovery, and address the often overlooked tax consequences that follow financial fraud victims long after the scam itself has ended.

 

How These Scams Typically Work

 

Romance scams often begin on dating apps, social media platforms, or messaging services, where a scammer builds trust over weeks or months before introducing a supposed investment opportunity, financial emergency, or business venture. Online investment schemes frequently involve fake trading platforms, fraudulent cryptocurrency exchanges, or so called pig butchering schemes, where victims are encouraged to deposit increasing amounts of money into a platform that shows fabricated returns, only to discover that withdrawals are blocked and the funds have disappeared.

 

These schemes frequently involve multiple layers of shell companies, offshore accounts, and cryptocurrency wallets designed specifically to make stolen funds difficult to trace and even more difficult to recover without immediate, coordinated legal action.

 

Selig Leads the Forensic Investigation

 

The recovery process begins with a detailed forensic accounting investigation led by David Selig. Before any legal remedy can be pursued, it is essential to understand exactly where the money went, how it moved, and what remains recoverable.

 

The forensic process typically includes

 

A complete reconstruction of every transfer, wire, cryptocurrency transaction, and payment platform withdrawal connected to the fraud

 

Tracing of funds through bank accounts, digital wallets, and blockchain ledgers, often working alongside blockchain analytics specialists to follow assets across multiple exchanges and jurisdictions

 

Identification of shell companies, intermediary accounts, and layering techniques commonly used to obscure the ultimate destination of stolen funds

 

Preparation of a forensic accounting report suitable for submission to law enforcement, civil courts, and regulatory agencies

 

Analysis of the victim's tax position, since victims of romance scams and investment fraud frequently overlook significant tax consequences arising from their losses

 

The Overlooked Tax Consequences of Financial Fraud

 

Many victims do not realize that a theft loss arising from a romance scam or fraudulent investment scheme may be deductible for federal income tax purposes under IRC Section 165, 26 U.S.C. Section 165, which governs losses from theft.

 

In certain investment fraud cases, victims may qualify for a simplified safe harbor deduction under Revenue Procedure 2009-20, which allows qualifying investors to deduct a substantial percentage of their loss in the year the fraud is discovered, without the need to establish the exact amount of any potential recovery. ​

 

Alternative deduction strategies may also be available, many of which are not immediately obvious, even to experienced CPAs. In many cases, the difference between recovering little or nothing and securing a substantial recovery comes down to which legal and tax theories are identified early, and how aggressively they are pursued.  

 

Selig conducts a full tax analysis for every client, addressing questions such as

 

• Whether the loss qualifies as a theft loss under IRC Section 165 rather than a nondeductible capital loss

 

• Whether the Ponzi scheme safe harbor under Revenue Procedure 2009-20 applies to the specific fraud at issue

 

• How any partial recovery of funds, whether through civil litigation, criminal restitution, or asset forfeiture proceedings, affects the timing and amount of the deductible loss

 

• Whether amended returns should be filed for prior tax years to claim a theft loss deduction

 

• How state tax treatment may differ from federal treatment

 

Addressing these tax consequences early can materially affect a victim's overall financial recovery, often resulting in significant tax savings that offset a portion of the original loss.

 

Kron Engages Directly With Law Enforcement and Legal Authorities

 

Once Selig's forensic accounting work has identified where the funds went and who is responsible, Daniel Kron, a prominent criminal defense and asset recovery attorney, takes the lead in engaging directly with the legal authorities necessary to pursue both recovery and accountability.

 

Kron's role typically includes

 

Direct communication and coordination with the FBI, the United States Secret Service Financial Crimes Task Force, and IC3 to ensure that the case is properly documented, assigned, and prioritized within the federal law enforcement system

 

Working with local police departments and state prosecutors when the fraud involves in state actors, property, or bank accounts

 

Coordinating with foreign law enforcement and regulatory bodies when funds have been moved offshore, often a necessary step in romance scams and cryptocurrency investment fraud originating outside the United States

 

Petitioning courts for emergency relief, including temporary restraining orders and preliminary injunctions, to freeze assets before they can be transferred or dissipated

 

Filing lis pendens and related encumbrances against real property connected to the fraud, placing the public on notice of a pending legal claim and preventing the property from being sold, refinanced, or transferred until the matter is resolved

 

Pursuing civil asset forfeiture remedies under 18 U.S.C. Section 981 and related statutes, which allow courts to seize property traceable to wire fraud, mail fraud, and other federal offenses

 

Evaluating civil claims under the federal wire fraud statute, 18 U.S.C. Section 1343, and where a pattern of related conduct exists, civil claims under the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. Section 1961 et seq, which permits recovery of treble damages

 

Pressing for criminal referral and prosecution wherever possible, ensuring that perpetrators face accountability through the criminal justice system rather than facing only civil liability

 

A Coordinated Strategy Built on Two Disciplines

 

What distinguishes the Selig & Associates approach is the direct collaboration between forensic accounting and legal enforcement. Selig's forensic tracing establishes exactly where the money is and what tax consequences the client faces, while Kron uses that forensic work to engage law enforcement, freeze assets, and pursue civil and criminal remedies simultaneously. This coordinated strategy is designed to move quickly, before stolen funds disappear into offshore accounts or are converted into untraceable assets.

 

Why Acting Quickly Matters

 

Financial fraud recovery cases are extremely time sensitive. Once stolen funds are converted into cryptocurrency, moved through multiple international accounts, or used to purchase real property or other assets, recovery becomes significantly more difficult and expensive. Early legal and forensic intervention increases the likelihood of freezing assets before they disappear, identifying the responsible parties, preserving evidence for both civil recovery and potential criminal prosecution, and properly documenting the loss for tax purposes.

 

If you believe you have been the victim of a romance scam, a fraudulent online investment platform, or any related financial deception, do not wait. Every day that passes reduces the likelihood of full recovery and may affect the tax treatment of your loss.

 

Call today for a free, legally privileged consultation at 212 974 3435.

 

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