Why smart young investors keep falling for scams

[SINGAPORE] Younger investors may be more tech-savvy, but that doesn’t make them scam-proof. A new survey reveals a striking contradiction: Gen Z and Millennials are the most confident in spotting investment fraud—yet also the most likely to fall for it. As artificial intelligence supercharges scam tactics with fake domains, deepfake videos, and hyper-targeted social engineering, misplaced confidence is becoming a strategic risk in itself. Over a quarter of young investors admit to investing impulsively to keep up with trends, even as global investment fraud tops US$1 trillion. This behavioral blind spot presents a growing challenge not just for individuals, but for platforms, regulators, and financial institutions tasked with safeguarding capital in an AI-accelerated world.

The Context: Confidence Outpaces Caution

Younger generations are entering the market in greater numbers and at younger ages than ever before. According to BrokerChooser, over 30% of Gen Z started investing while still in school—five times the rate of Boomers. This early exposure, coupled with digital-native instincts, has led to a strong sense of self-assurance. Over 76% of investors aged 25 to 34 say they are confident in spotting scams, with nearly a third claiming they are “very confident.”

But the data reveals a worrying disconnect between confidence and behavior. Despite their self-assuredness, Gen Z and Millennials were the most likely to act on scam-prone triggers—such as screenshots of returns, influencer endorsements, and unverifiable testimonials. They were also more likely to interact with “pending approval” platforms or test them with real money, often relying on social validation rather than regulator databases to assess legitimacy.

This is happening against a backdrop of escalating fraud sophistication. In 2024, fake investment websites jumped 25%, with over 13,000 fraudulent domains uncovered. AI is being deployed to generate fake images, videos, and chatbot interactions that mimic legitimate platforms. According to the Global Anti-Scam Alliance, total scam losses have now surpassed US$1 trillion globally.

The Strategic Risk: A Generation Hacked by Design

The prevailing wisdom suggests younger investors—more educated, more online, and more comfortable with tech—should be harder to fool. But that very familiarity may be their Achilles' heel. High confidence fosters risk tolerance, which scammers increasingly exploit using engineered credibility—social proof, flashy UIs, and AI-generated content designed to “feel real.”

This behavior also intersects with platform economics. In a market where user acquisition trumps caution, apps and brokerages may be incentivized to lower friction and feed trend-driven behaviors. The same impulse that drives “buy the dip” memes can nudge a young investor toward a too-good-to-be-true platform—especially when digital culture rewards fast moves and social bragging rights.

There’s also the matter of trust infrastructure. While older generations may default to regulatory institutions, younger investors turn to their networks, influencers, and content streams. This decentralization of trust becomes a vulnerability in an age where virtually anyone can simulate authority with the right tools.

AI is the force multiplier here. OSC research found that people are 22% more likely to invest in scams enhanced by AI. Deepfakes, generative screenshots, and fake user testimonials weaponize trust in ways traditional scams never could.

Implications: Rethinking Investor Protection in the AI Age

This is more than a generational cautionary tale—it’s a structural challenge for the financial system. As fraud evolves into a high-tech arms race, the assumption that digital literacy equals scam immunity is dangerously outdated.

Platforms and brokers must rethink how they design for trust, verification, and user education. Regulators need to evolve faster than fraud actors—perhaps even incorporating AI themselves to detect patterns and anomalies. There’s also a growing argument for regulating not just platforms, but the presentation layer—where fraud’s realism now lives.

For investors, the takeaway is uncomfortable but necessary: if something looks real and feels real online, that may be the very reason it’s a trap. Being “smart enough” is no longer enough.

Our Viewpoint

Confidence is no longer just a behavioral trait—it’s a liability when weaponized by technology. The overconfidence of Gen Z and Millennial investors, while born from digital fluency, is being systematically exploited in a new era of AI-powered scams. This is not merely a lapse in judgment; it’s a structural failure in how trust is built and verified in the digital investment ecosystem. As AI raises the baseline of deception, smarter risk design, faster regulation, and deeper skepticism must become the new norms. If financial systems don’t adapt, it won’t be just young investors who pay the price—it will be everyone who believed tech made us safer, rather than more exposed.