Fraudsters use various tactics to convince victims to invest their funds with them, including:
Many fraudsters impersonate investment professionals or brokers. They create fake testimonials or use artificial intelligence technologies to make it look realistic; and urge potential victims to act quickly (known as “pressure selling”).
1. They ask for your credit card or checking account number
No one should approach you uninvited asking to share personal financial details (like credit or bank account numbers ) that require sharing information relating to yourself ( such as your credit or bank accounts ). Avoid providing this data unless it has come directly from yourself ( via personal meeting, telephone call, social media page etc ) before doing so; and certainly if they promote an investment program without your prior approval.
Scammers target investors by masquerading as legitimate financial professionals. Be wary if someone offers you guarantees, unregistered products, overly consistent or high returns and complex strategies; also be wary if new posts on social media promote investment opportunities that don’t seem consistent with what information is already known to you; especially posts advertising microcap stocks or “crypto” assets – fraudsters could spread negative rumors to manipulate prices so they can buy shares cheaper (known as market manipulation).
2. They ask you to keep the investment a secret
Swindlers often target vulnerable investors such as seniors or those experiencing financial distress, using social media or telephone to pitch bogus investments schemes that create the impression they are limited or urgent, often by setting deadlines or creating urgency with false claims that investments will soon expire.
If a call or text asks you to keep the details of an investment confidential, that could be an indicator that it could be fraudulent. When investing new funds, always speak with trusted advisors first.
Be wary of anyone claiming to be a broker or financial adviser without proper credentials. Legitimate brokers and advisers typically disclose these credentials on their websites; be wary of sites without an About or Contact page, grammar errors and lack of security features like SSL. Also be wary of websites asking you to send money or crypto assets via personal email addresses or phone numbers that don’t match up with official firm contacts.
3. They promise you a high return
Unsolicited approaches should always raise red flags. Real investment companies typically operate based on referrals from existing clients and prioritize open communication with them.
Fraudsters often use false testimonials to win your trust and persuade you to invest in their fraudulent scheme. They may present fake “proof of profit” documents and other documents which aren’t authentic.
Your broker could create an urgent atmosphere by suggesting the investment “opportunity” will vanish tomorrow or by featuring fake countdown timers in promotional videos.
Remember that all investments involve risk; any promise of high returns with minimal risks should be treated as suspicious. In particular, any investment that relies heavily on “secret” information or insider tips must also be treated with suspicion as sharing such knowledge can often be illegal and breaching privacy regulations can void guarantees or products unregistered with regulators and promising overly consistent or high returns may indicate scamming schemes. Keep an eye out for other red flags such as guarantees, unregistered products, overly consistent or high returns or lack thereof as these may indicate scammers.
4. They ask you to sign a contract
Like payments fraud and identity theft, investment scams pose an additional danger for startups. However, there are certain classic red flags which can help identify fraudsters: for example investors rushing you into signing deals quickly or pressuring you into agreeing to terms which don’t benefit your business are likely fraudulent investors.
An alarm bell should sound if they try to convince you that their investment details are too technical or confidential for discussion, since fraudsters often use this excuse to conceal risky investments and sidestep paying taxes.
Be wary of any investors who try to lure you into an impostor website or use fake contact details; bad actors will sometimes use the name and details of registered investment professionals as bait in boiler room scams. When in doubt, do a quick Google search first before calling their firm using their public phone number from their public website or Form CRS filing to confirm their credibility.
