An Investment Scam is a fraudulent scheme that entices people to invest money with the promise of high returns, but with the real intention of theft.
Scammers use various tactics to deceive investors, by making unrealistic promises and offering guaranteed high returns with little to no risk. Remember, the higher the promised return, higher is the risk involved. Scammers may rush you into making a quick decision before you can do your own research.
Using fake or misleading information: Scammers may lie about the investment itself, the potential return, or even the qualifications of the people involved.
Targeting specific groups: Scammers often prey on retirees, senior citizens, or people with limited financial knowledge.
How does an Investment Scam happen
Fraudsters impersonate legitimate brokers or investment advisers or spread market related misinformation on social media/the internet. For example, fraudsters may set up an account name, a profile, or a social media handle designed to mimic a particular individual or firm. They may go so far as to create a webpage or even an app that uses a real firm’s logo, link to the firm’s actual website, or references the name of an actual person that works for the firm. Fraudsters may also direct investors to imposter websites by commenting on the social media posts of brokers, investment advisers, or advertise other kinds of market misinformation.
Common types of Investment Scams include
Ponzi schemes: These schemes pay existing investors with funds collected from new investors, creating the illusion of success. Eventually, the scheme collapses once it runs out of new investors.
Pump-and-dump schemes: Scammers artificially inflate the price of a stock using false or misleading information. Then, they sell their own shares at a high price before the price of the stock crashes.
Phishing scams: Scammers send e-mails or text messages that appear to be from legitimate financial institutions, tricking you into revealing your personal, confidential, or financial information.
Scalping: Fraudsters will recommend a stock to drive up its share price and then sell the shares of the stock at an inflated price to generate profits.
Touting: The process of promoting a stock without properly disclosing the compensation received for promoting it.
Here are some tips to protect yourself
Never invest in anything you do not understand. Do your own research and ask questions before investing money.
Be wary of unsolicited offers. If someone you do not know, calls, or e-mails you about an investment opportunity, it is probably a scam.
Do not be pressured into making a quick decision. Take your time and do your research before investing.
Get advice from a trusted financial advisor. A qualified advisor can help you evaluate investment opportunities and make informed choices.
Be careful if someone claims to offer you an investment opportunity that is exclusive or based on ‘insider information’ or confidential information.
Do not let anyone encourage you to make an investment through what appears to be a third-party website or app. The website or app may be owned by the fraudster, and it may be a scam.
Also, be wary of any ‘opportunity’ that requires you to use ‘crypto’ assets (for example, Bitcoin or BTC) to purchase an investment.