Investment Fraud Explained


What is investment fraud?

Investment fraud can cover a large variety of scams but it mainly refers to criminals pushing fraudulent investment opportunities as legitimate in order to essentially steal money. Scammers pretend to be investment service providers, financial advisors, investment professionals, etc., in order to push people to “invest” large sums of money into companies or services that do not actually exist.

Scammers use various tactics to trick users, including flashy websites and advertisements, emails, phone calls, forum posts, fake success stories, promises of huge earnings, etc., to convince people to transfer their money. A common example of investment fraud is a Ponzi scheme, advanced fee fraud, and pyramid schemes.

When it comes to investment opportunities, the old saying “if it’s too good to be true, it probably is” applies. To attract the attention of possible investors, scammers promote the “get rich quick” schemes that promise unrealistic profit. Most of the time, the promised profits are very obviously “too good to be true”. Nonetheless, many people, particularly novice investors, still fall for this, believing they will become rich. It’s not uncommon for people to lose thousands of dollars to these types of scams.

In some cases, in order to successfully carry out investment fraud, scammers need to build a trust-based relationship. They often target groups of people and utilize common interests to approach potential victims. Some of these investment scams can be quite sophisticated and long-term but that is not always the case. Investment scams can also be very low-effort and not actually involve any personal contact. Scammers may create posts of various forums inviting people to invest and simply wait for victims without putting much effort in.

In recent years, many people have turned to investments as a way to earn extra income. Those who successfully invest share their success stories, which attracts many inexperienced investors who are much more gullible. The rising popularity of cryptocurrencies has also attracted a lot of new investors who are much more likely to fall for cryptocurrency investment scams.

If you are a new investor, it’s important that you take your time to become familiar with the field and not rush into anything simply because you read one or two success stories. Below you can find a few tips to help you avoid investment fraud.

Tips to avoid investment fraud

  • Do not judge a company/investment professional by its website.

Keep in mind that flashy websites are not difficult to create so just because a site looks professional, it does not mean the company/person is legitimate.

  • Before investing, make sure to do extensive research.

It goes without saying that you should research an investment opportunity extensively before even considering investing. Always verify credentials when approached by investment professionals and check the companies before investing or doing any kind of business with them.

  • Unsolicited emails or phone calls with investment opportunities should be ignored.

Scammers often make unsolicited phone calls and send emails to people about investment opportunities. If you ever receive such a phone call or an email, do not engage. Scammers usually pitch their scams as legitimate opportunities that would allow one to make a significant amount of money in a short period of time. But the more amazing an investment opportunity appears, the more likely it is a scam. And every single unsolicited phone call or email promoting investment opportunities will be a scam. Investment professionals will never make unsolicited contact, pressure you to invest, and demand that you make an immediate investment.

  • Be skeptical of investment opportunities that promise significant profits.

Investment scams often claim that even a smaller investment would guarantee significant profits. You should be very skeptical of such claims because profit is never guaranteed. These claims are often encountered on various forums and Reddit subreddits. Scammers create a number of profiles and then start posting about supposedly amazing investment opportunities. They also pretend to be investment professionals and approach people with promises of huge profits.

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