Investment scams consist of making a juicy offer of investment in which you are guaranteed to get excessive returns. This article presents the types of scams, the signals that should alert you, and the means to protect yourself.

Types of investment scams

Scams can take many forms. Although the hook may change, the most common scams tend to fit into the following general patterns:

Pyramid schemes

A pyramid scheme is when fraudsters claim to be able to turn a small investment into big profits in a short time. But in reality, participants earn money by bringing new participants into the program. Pyramid schemes eventually collapse when it becomes impossible to recruit new participants, which can happen quickly.

Ponzi scheme

This type of scam is part of the pyramid schemes. It is a fraud that involves collecting money from new investors and using it to pay supposed returns to previous-stage investors instead of investing or managing the money as promised. Ponzi schemes require a steady stream of money to stay afloat, but you don’t have to recruit new investors to get a share of the “profits.” This type of scam tends to collapse when new investors are no longer attracted or when too many investors try to withdraw their money, for example, in times of economic turbulence, as was the case with the Madoff affair.

Pump and Dump

This scam involves a fraudster deliberately buying shares of a small, publicly traded company at a very low price and then spreading false information in order to generate interest in the stock and increase its price. Investors believe that getting a good deal on promising security creates a demand for purchases at higher prices. The scammer then sells his shares at a high price and disappears, leaving many people with worthless shares.

Fee advance scam

This type of scam is based on an investor’s hope that they can reverse a previous investment mistake of buying stocks at a low price. The scam usually begins with an offer to pay a very high price for worthless shares. You must send an initial sum to pay for the service to accept the agreement. But if you do, you’ll never see that money again.

Real estate investments

The promise of making a quick buck from real estate-related investments continues to attract investors. A scammer may, for example, defraud potential investors by misrepresenting the value of the property or the expected profit potential. Fraudsters can also misappropriate borrowed or invested funds or seek out unwitting investors by using legitimate investors’ names and credit ratings to facilitate their scams.

Cryptocurrency scams

Cryptocurrency investment scams can happen in different ways, but all are full of false promises and guarantees. Scammers can create investment sites that look real, but then you find that you cannot withdraw the money you have invested. Others impersonate famous people and distribute generous promises of multiplication of the cryptocurrencies you send. Scammers also use online dating sites to trick people into making fake cryptocurrency investments.

Social media scams

Investment promoters are increasingly using social media to find investors. But fraudsters also infiltrate these networks. By joining and actively participating in a social network or community, the scammer builds credibility and gains the trust of other members of the group. The scammer has immediate access to potential victims through their profiles and takes advantage of the ease with which people share personal information to deliver a skillful and highly targeted pitch.

Clues to detect investment scams

If you do not want to fall victim to investment scams, we recommend that you pay attention to the following warning signs so that you can detect them in time:

· Guaranteed (too) high returns.

· Low to no risk.

· Invitations to join exclusive investment organizations.

· Unsolicited approaches by phone, email, text, or in person.

· Aggressive selling and big promises.

· No way to call back or follow up with the seller.

· Insistence of a quick decision.

Protection against investment scams

There are several ways to avoid falling victim to this investment fraud:

1. Ask questions. Scam artists rely on you not to do your research before investing. Take time to find the answers to your questions.

2. Protect yourself on the internet. Online sites and networks offer a multitude of possibilities for scammers to recover your personal information. Consider using a VPN that will effectively protect you while surfing the internet. A VPN meaning is quite simple: It encrypts your internet traffic and disguises your online identity.

3. Beware of unsolicited offers. Be especially careful if you receive an offer to invest in a company but cannot find financial information about it from independent sources.

4. Pay special attention to overseas investment recommendations because it is more difficult to trace the money if something goes wrong.

5. Learn about the different types of scams and the red flags that may indicate an investment scam.