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Investment Scams: How to Identify & Avoid Them


Once upon a time, people only had to be on their guard for investment scams through the mail, over the telephone, or when approached by strangers. But in today’s technology-saturated world, fraudsters can now peddle their scams from a whole range of devices and platforms.

What is an Investment Scam?

An investment scam involves a fraudster offering someone an opportunity to turn a profit in return for an initial sum of money. The investment will likely be described as a low risk-high reward. A once-in-a-lifetime moment that will be gone tomorrow.

The most common types of scams are: fabricated, non-existent investments; legitimate investments that do exist, but the scammer simply pockets the money instead; and those where a scammer claims to represent a trusted firm, but in reality has no affiliation whatsoever.

How to Identify an Investment Scam

The best way to learn how to avoid investment scams is by becoming familiar with the different types fraudsters are peddling around the world. Here are some of the most common scams to watch out for:

  • Ponzi/Pyramid Schemes. Scams that use collected funds from new investors to pay existing ones. Bottom line: no real investment exists, and these schemes quickly fall apart.
  • Cryptocurrency. A scammer tries to lure you into investing in a virtual peer-to-peer currency – but it’s either fake, is an ICO (Initial Coin Offering) that won’t ever exist, or is merely a ruse to lead you to a malicious, malware-injecting website. 
  • Unregulated Products. Refers to products like diamonds, gold, wine, bamboo, hotels, student accommodation, storage and parking.
  • Binary Options. Involves betting on whether the price of gold, stocks or oil, for instance, will rise or fall – you can win or lose.
  • Early Pension Release. Schemes offering to make money available from your pension before you turn 55. Be on high alert; you could suffer huge losses and receive a big tax bill.
  • Land Banking. Whereby you’re offered a small plot of land which will reap a huge profit when it’s sold on to a developer.
  • Vacation Properties. Refers to holiday properties overseas which are often suspiciously cheap or affordable. The problem: they don’t exist, or conveniently ‘haven’t been built’ yet.
  • Graphene. Scammers will aggressively push this promising material, a form of carbon, which could be used by the electronics industry in the near future.
  • Forex Trading. Whereby unauthorized traders offer guaranteed profits, with victims receiving a small initial return – but it’s merely a ruse to erase doubts.

How to Prevent Investment Scams

Nobody wants to experience that realization they’ve been duped and now have to fight to reclaim their losses. Here are several ways to help steer clear of scammers so your finances, identity and data remain protected:

  • Pressure Tactics. Putting pressure on the would-be victim is Scammer 101. Above board companies should never try to pressurise clients into investments, and so, if you’re dealing with an aggressive pitcher, it’s time to walk away. Period.
  • Totally Unexpected. Life is full of unexpected opportunities, sure. But if you receive out-of-nowhere, unsolicited contact regarding an investment, this is a bona fide red flag situation – especially if you’re unfamiliar with the caller/company.
  • Dreamy Opportunity. Unbelievably low risk, unbelievably high reward; if you’re being pitched a seemingly too-good-to-be-true opportunity, pinch yourself because you’re probably dreaming. If you’re not, then you’re no doubt dealing with a scammer. Use your better judgement and DON’T get sucked in.
  • Excessive Contact. This leads on from the pressure tactics mentioned above, with the scammer repeatedly contacting you in the hope that you’ll remain engaged and will hastily make the right decision – well, for them at least.
  • Not FCA Registered. If the investment company is not registered with a financial conduct/regulatory body like, for example, the FCA (UK) or CFPB (US), there’s good reason to be suspicious. Listings can be found on each authority’s websites.
  • Silence Requested. You receive an incredible investment opportunity that’s ‘just for you’, but are told it would be best to keep it on the down-low. This is because most peers would tell you it’s nothing more than a scam. Which it probably is.

Celebrity Endorsements/Images. Don’t be taken in by an advert/email just because it appears a celebrity/esteemed business figure is endorsing it. It’s rare for public figures to discuss their investments so openly; meaning that, in all likelihood, the image has been used without permission, and the endorsement is therefore fake.