Investing in fake investments can be both difficult and expensive, so it is crucial that you conduct due diligence to verify everything is genuine before investing any funds.
Scammers frequently pose as legitimate companies with deceiving promotional materials and websites, so before investing it is wise to consult a financial or legal adviser.
1. They promise high returns
All investments contain risks, so any investment offering high returns with little risk should raise red flags. Be especially wary if its returns significantly surpass market average.
Scammers rely on high-pressure sales tactics like time-limited offers to rush you into making decisions quickly and may suggest they possess special connections or knowledge that could help you make money more quickly.
Ponzi schemes are one of the more infamous types of investment scams, where early investors receive interest checks that come from new investments and/or proceeds of earlier backers. When the fraudster runs out of funds and disappears, leaving you without anything but debts to pay back.
If you lose money to an investment scam, filing a complaint with authorities will minimize damage to your credit file and prevent future fraudsters.
2. They ask you to pay in advance
Scam artists use high-pressure tactics to extort money from you. They may contact you by phone, email or social media and urge you to act now or miss out on an incredible opportunity; highlight fake testimonials; play down risks or present written risk disclosure documents as routine formalities that you must sign without questioning them; etc.
Legitimate investment professionals allow their clients the time and space to do their research before making any decision. If someone pressures you into acting quickly or offers limited-time offers, walk away.
3. They say the money is illegal
Scammers take your money and use it directly for themselves, rather than investing it properly in legitimate investments. Sometimes they even send it overseas making it even harder to recover your funds if any edits or markings on documents indicate any tampering with.
Fraudsters often target inexperienced investors who fail to conduct adequate due diligence on potential investments. Fraudsters may use tactics such as conspiracy theories about government or “secrets of the wealthy” as bait, inducing you into making an unsafe investment decision.
Legitimate financial professionals encourage you to ask questions and verify everything before investing. If you believe you’ve been the victim of investment fraud, file a report immediately with the authorities in order to minimize damage to your credit files and finances while holding criminals accountable. Read more here about why filing reports is so crucial.
4. They suggest you to take more money than what you asked for
Investment fraud affects people of all ages and backgrounds. Scammers typically target older individuals due to their increased trust, lessening of saying no, and available assets after decades of work. With some careful skepticism and awareness of red flags, you can safeguard yourself against becoming defrauded by unscrupulous investment professionals.
Reputable investment professionals always encourage you to ask questions and request details about the investment opportunity being proposed. If they seem hostile or unwilling to provide this information, take note. They might also create an air of urgency by suggesting it’s only available for a limited period or by counting down fake deadlines on their promotional video.
5. They do not give you street address and contact phone numbers
Every year, thousands of people lose millions to investment fraud on the internet, but with some basic precautions and knowledge of red flags you can avoid becoming an easy victim of these schemes.
Avoid unsolicited calls, emails and social media messages offering financial advice or investments quickly. Scammers typically employ high-pressure tactics in an attempt to convince you quickly invest in something they offer.
Legitimate investment professionals will give you ample time and space to evaluate their products and companies. If a company claims it is located near you, Google its address on their website; often fake websites list addresses which lead to residential homes, fields, or other places unrelated to the company in question. You can also use the CSA National Registration Search Tool for background and registration verification of companies.