Abstract
Purpose The purpose of this study is to critically examine a prevalent online scam mechanism, with the aim of understanding its exploitation of behavioral finance principles and group dynamics and propose effective countermeasures. Design/methodology/approach This study uses a blend of case study and thematic analysis, drawing from behavioral finance, social psychology and criminology, using primary source testimonies of victims to provide a detailed exploration of the scam’s operations. Findings This research uncovers the strategic use of four key principles: loss aversion, overconfidence, scarcity bias and social proof, within the scam operation. These tendencies are manipulated to induce victims to progressively invest into the fraudulent scheme, even amid growing suspicions. Research limitations/implications While the research elucidates on the workings of one specific online scam, it is necessary to explore if and how these principles are used in various other online fraudulent schemes, to develop comprehensive countermeasures. Practical implications The findings underscore the urgent need for enhanced public awareness, stronger corporate responsibility and robust regulatory oversight. There is a call for concerted efforts encompassing public education campaigns, fortified security protocols and strong legal frameworks for preventing such scams. Social implications The research emphasizes the need for collective action in ensuring a safe online space. This involves the individual user’s prudence, businesses’ proactive education initiatives and stringent legal actions against fraudulent activities. Originality/value This research offers novel insights into the nuanced manipulation of behavioral finance principles within online scams, based on empirical data from victim testimonials. These findings contribute to the understanding of the psychological mechanisms at play in online scams and are instrumental in formulating effective preventive strategies.
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