Investment Scams: What to Look for & How to Avoid Them

Security and Fraud

Investment scams and get-rich-quick schemes are currently on the rise. In 2023, the FBI’s Internet Crime Complaint Center (IC3) reported $4.57 billion in losses due to investment scams. Scammers prey on the hopes of individuals looking for financial security, potentially leaving them with broken promises and drained accounts. Investment scammers will claim you can make a lot of money, often quickly, easily and without risk. Typically, victims of investment frauds are encouraged to invest in items like cryptocurrency, investment trainings and real estate coaching.

Here’s what investment scams are, common examples of investment scams, how to recognize and avoid them and what you should do if your fall victim to an investment scam.

What Does an Investment Scam Look Like?

An investment scam may look like a new opportunity to make money that has little to no information on how the overall investment and return will work. The investment may sound simple and fun with minimal time and maintenance. You may receive this investment opportunity through an unsolicited direct message via social media, an online advertisement or a dating website. Oftentimes, the fraudster will encourage you to attend a free event to learn the new “secret” method to get rich quickly.

Investment Fraud Examples to Look Out For

Below is a list of investment scams that you should be wary of if you see them online.

Cryptocurrency Investment Scams

Fraudsters often send a website link in a direct message through social media platforms looking to engage you with a fraudulent company that they claim will help invest funds in cryptocurrency. If the recipient engages with the fraudster, they may start receiving fake reports showing growth in their virtual wallet and be encouraged to invest more money. The scammer will move the funds invested into their virtual wallet, which is untraceable, leaving the victim with an empty virtual wallet and no way to recuperate the money they’ve invested.

Investment Training Scams

Stock market scammers conduct investment trainings to engage and teach victims how to make large money investments in the financial market. The stock market fraudster notes there is a “secret” investment approach that will be life changing if followed correctly. They will often promise the victim they’ll be able to quit their job and live solely off their new investments. Once the fraudster receives the funds for the investment, they will communicate to the victim that the program is in its early stages, and that it may take years to build any type of return. The scammer will start to limit communication, leaving the victim with questions on their return and next steps.

Real Estate Investment/Coaching Scams

Property investment scams begin as in-person or online seminars. Fraudsters give guidance to their victims on how to become an investor in the real estate industry. The scammer promotes the training as “risk-free” and offers to help find the best way to invest in up-and-coming properties. Once the training is over, the scammer demands upfront payments and provides the victim with inauthentic documents and fake home listings. Once the money is received from the victim, the real estate investment scammer has little to no further communication with the victim.

Ways to Recognize Investment Scams

  • Promises of high returns with no risk. If it sounds too good to be true, it probably is.
  • Unregistered investments and the inability to verify if the investment and the person offering it are registered with relevant companies.
  • Complex or secretive strategies that lack transparency and details on how the investment works, leaving several questions unanswered.
  • Pressure or a sense of urgency to invest quickly to prevent victims from having the ability to conduct due diligence on the investments.
  • Communications that offer promising outcomes, like “it’s a sure thing”, “you will have security for years to come” or “you can rake in the money by working part-time.”

How to Protect Yourself from Investment Scams

There are several ways you can prevent financial fraud and avoid falling victim to online investment scams.

  • Resist the pressure to commit quickly. Slow down and understand the information.
  • Research the investment. Search the name of the company online and add words like, “review”, “scam”, “fraud” or “complaint” in your search to find any common red flags.
  • Research the person and the company they claim to be with thoroughly online and verify their legitimacy. You can check if an investment company is real on gov.
  • Reach out to your trusted financial partner and consult with their experts.
  • Stay informed and educated about current and common scams and how to protect yourself or minors from falling victim.
  • Recognize that every investment typically has some level of risk and isn’t always guaranteed a return.

Steps to Take If You’re a Victim of an Investment Scam

  1. Stop sending payments to the fraudster immediately.
  2. Gather any documents you have from the scammer—all correspondence, contacts and records related to the investment.
  3. Report the scam to authorities by contacting local law enforcement, regulatory agencies, your financial institution, the FTC and the SEC.
  4. If you believe that your personal information has been compromised, you can also report identity theft at gov.
  5. Research how to recover from the scam on IdentityTheft.gov and the steps you can take to protect your personal information going forward.

At Centris Federal Credit Union, we make sure our members have the right education and are informed about the latest scams and trends to protect themselves, their family members and their businesses. As the economic landscape continues to evolve, we’ll likely see an ongoing rise in investment scams. Scammers will find ways to make the investment seem new, exciting and rewarding. Always use caution before sending funds to a person or a company, especially if you uncover any red flags. Do extra research before investing and/or talk to your financial institution or advisor if you have questions.

<a href="https://www.centrisfcu.org/blog/author/liz-malmberg/" target="_self">Liz Malmberg</a>

Liz Malmberg

Author

Liz Malmberg is a senior marketing specialist at Centris Federal Credit Union in Omaha, Neb. As a co-host of the A Penny or Two for Your Thoughts podcast, Liz enjoys creating educational resources for those wanting to expand their financial knowledge and enhance their financial wellness. She received her Bachelor of Journalism from the University of Nebraska-Lincoln and has worked in marketing for over 20 years. In her free time, Liz enjoys spending time with her husband and daughter and loves to help people live a healthier lifestyle as a certified nutrition coach and a CrossFit Level-2 trainer.

Guest Contributors

Ashley Goodsell

Ashley Goodsell is a BSA fraud investigator at Centris Federal Credit Union in Omaha, Neb. Ashley has been in her role at Centris for five years and has ten years of law enforcement experience. She received her bachelor’s degree in sociology from the University of Iowa and her Master of Public Administration in law from the University of Phoenix. Ashley has a passion for educating Centris members about fraud and contributes to the Centris Cybersecurity Center. In her free time, Ashley enjoys spending time with her kids at various sporting events, reading crime books and listening to podcasts.

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