There are a lot of scams out there, but the costliest ones are investment fraud. In 2022, an estimated 106,201 people in the United States were the victims of investment scams. That was an increase of 16 percent from 2021. The monetary loss was more than $6 billion.
Well-Known Investment Scams
Most investors are familiar with pyramid scams and Ponzi scams. A pyramid scam enrolls investors to invest small amounts of funds for large returns. But, these investors are required to recruit other investors. It becomes a vicious loop since the only ones who make money are at the top of the pyramid.Latest Investment Scams More Subtle
Other frauds have become popular with the scammers. One is a cryptocurrency investment scam.Cryptocurrency investment scams often start on social media, in a direct message, or even on a dating app. The scammer claims to have made a lot of money and is willing to show you how. These fraudsters often have a legitimate-looking website or app and encourage you to invest.
They’ll provide you with fake reports on the fantastic returns. But once they have your money, they shut down and disappear.
Another fraud is investment training scams. These criminals claim a “proven strategy” that’s been patented or tested to teach you how to make money. Fake testimonials from people who have had success with the system are presented. But these promises are empty promises and often worthless training.
Real estate investment-training scams work the same way. You receive in-person or online training and coaching. It’s offered “risk free.” According to these scammers, you don’t have to know real estate; just follow the course and put in a little work.
These criminals will offer additional training levels costing thousands of dollars with no win for the investor.
Often called “metal dealers” or “rare coin merchants,” these con artists perpetrate precious metals and coins investment scams. Whether the market is up or down, they'll tell you there’s no better time to invest in precious metals or coins. They want to create a sense of urgency so you invest quickly. They lie about their credentials and experience and often fail to deliver.
Tips for Avoiding Investment Scams
When presented with an investment opportunity, the first course of action is to check if the seller is licensed. This includes researching brokers for their backgrounds and qualifications. Also, research investor advisors. One way to do this is through the Investment Advisor Public Disclosure.Offers Through Email or Social Media
Many scammers use email marketing to reach potential victims. An offer that promises large returns shows up in your inbox. Always consider unsolicited emails touting the latest stock or any investment suspicious.Social media is riddled with illegitimate investments. Be suspicious of anything you read on social media. Many con artists will make enticing ads or videos telling you how much money they’ve made, and you can make it, too. But resist the urge to contact them. It’s probably a scam.
Beware of High-Pressure Tactics
If a seller says “you must act now” or lose the opportunity, this is probably a con artist. Take the time to research the investment. Make an informed decision before you hand over money.Risks vs. Rewards
Greater returns come with greater risks. Understanding this will help you separate legitimate opportunities from scams.Demand Prospectus or Offering Circular
If the seller doesn’t produce a prospectus or offering circular, walk away. These scammers will tell you that they aren’t necessary.Understand the Investment
If you need more clarification on how the investment works, walk away. You should never invest in something you don’t understand. Read the prospectus and disclosure statement. You need to know exactly how the investment will make money.Resist Fear Tactics
Many con artists will present schemes that prey on your fears. They will tout that their investment is a way to eliminate your financial fears for the future. Your fear may cloud your judgment.Watch Out for ‘Reload’ Scams
Some con artists use losses to scare you into a second scam. Victims want to recoup their losses, so they reinvest with the promise from the scammer to make good on the original. Again, the fraudster offers higher returns. But unfortunately, all you end up with is more losses.Scammers and Fake Investments
Many nefarious people are out there and they are only too happy to take your money for no return. The best course is that if it’s touted at no risk, it’s not legitimate. All investments have some risk.“Act now, or you'll miss out” offers are also used by scammers. Take your time to research any investment. And if you’re in doubt, check with the SEC before transferring money to a con artist.
