Investment Scams

Investment scams promise easy money with little or no risk—but they only deliver devastating losses. These schemes have stolen billions of dollars from people of all backgrounds, including doctors, lawyers, and experienced investors.

This guide will help you recognize the warning signs and protect your hard-earned savings.

How Investment Scams Work

Most investment scams follow a similar pattern:

Step 1: You encounter an “opportunity” promising unusually high returns

Step 2: You may see testimonials or “proof” of others making money (often fake)

Step 3: You invest and may even see “returns” on paper or in an app

Step 4: When you try to withdraw your money, there are always problems

Step 5: Eventually the scammer disappears with everyone’s money

Many of these are “Ponzi schemes”—early investors are paid with money from new investors. It looks like the investment is working until the scheme collapses, usually when the scammer runs out of new victims or decides to disappear.

What Investment Scams Look Like

On Social Media

“I made $15,000 this week trading crypto! 💰🚀 DM me to learn my strategy—I’m only sharing with a few people.”

“Quit my job thanks to this investment app. Passive income is real! Comment ‘INFO’ and I’ll show you how.”

“My mentor showed me how to turn $500 into $10,000 in 30 days. Life-changing! Link in bio.”

These posts are designed to create envy and FOMO (fear of missing out). The screenshots of profits are often fake or manipulated.

Fake Investment Platforms

Scammers create professional-looking websites or apps that show your “balance” growing. It looks completely real—you can even log in and see your “earnings.” But:

• When you try to withdraw, there’s always an excuse
• You need to pay “taxes” or “fees” first
• There’s a “minimum withdrawal” you haven’t reached
• “Processing” takes weeks, then fails
• Eventually, the website disappears

Pyramid and MLM Schemes

“Join our team and earn passive income! The more people you recruit, the more you make!”

These schemes disguise themselves as legitimate businesses, but:

• Your earnings depend mostly on recruiting new members
• Products (if any) are just cover for the recruitment scheme
• Most participants lose money
• Only those at the top profit

“Pig Butchering” Scams

This disturbing name describes a growing scam type:

1. A stranger contacts you (often on a dating app or social media)
2. They build a relationship over weeks or months
3. They mention they’ve been making money investing
4. They offer to help you invest too
5. You “invest” on a fake platform they control
6. Eventually, they steal everything and disappear

This combines romance scams with investment fraud for devastating losses.

Red Flags: Warning Signs of Fraud

Too-Good-To-Be-True Returns

🚩 “Guaranteed returns” — No legitimate investment can guarantee returns. None.

🚩 Unusually high returns — “10% per month” or “double your money” claims

🚩 No risk mentioned — All real investments have risk

🚩 Consistent returns regardless of market conditions — Real investments go up AND down

Pressure Tactics

🚩 “Limited time opportunity” — Creating artificial urgency

🚩 “Exclusive invitation” — Making you feel special

🚩 “Don’t tell anyone” — Isolating you from people who might warn you

🚩 Pressure to invest more — “Double your investment for double the returns!”

Structural Red Flags

🚩 Unregistered investment — Not registered with the SEC or your state

🚩 Complicated strategy — They can’t clearly explain how it makes money

🚩 You can’t cash out — Fees, minimum thresholds, constant delays

🚩 Payment in cryptocurrency — Very hard to recover if stolen

🚩 Recruiting is key — Most “earnings” come from recruiting others, not actual returns

Types of Investment Scams

Cryptocurrency Scams

Crypto’s complexity and newness make it perfect for scammers:

• “Revolutionary new coin” — Invest early before it takes off! (It never will.)
• Fake trading platforms — Show fake profits, steal real money
• “Crypto experts” — Offer to trade for you, then disappear
• Pump and dump — Hype a coin, wait for the price to rise, sell everything

Forex/Trading Scams

• “Guaranteed profits from currency trading” — No such thing
• Trading bots or signals — Promise automated wealth, deliver losses
• Fake trading mentors — Take your money for worthless “training”

Ponzi Schemes

Named after Charles Ponzi, who ran a famous 1920 scheme:

• Pays early investors with money from new investors
• Appears to work until new money runs out
• Eventually collapses, leaving most investors with nothing
• Bernie Madoff’s $65 billion fraud was a Ponzi scheme

Pyramid Schemes

• Require recruiting to earn money
• Products are secondary to recruitment
• Mathematically impossible for most to profit
• Often disguised as “multi-level marketing” (MLM)

Affinity Fraud

Scammers exploit trust within communities:

• Church groups, ethnic communities, professional groups
• A trusted member promotes the “investment”
• Social pressure discourages questions
• Victims are embarrassed to report, protecting the scammer

How to Protect Yourself

The Golden Rule

Verify Before Investing

Check if the investment is registered:

• SEC.gov — Is the investment registered?
• FINRA BrokerCheck (brokercheck.finra.org) — Is the broker/adviser licensed?

Research the company:

• Search “[investment name] scam” or “[company name] complaints”
• Verify the company has a real history
• Check the Better Business Bureau

Understand how it makes money:

• If they can’t explain it simply, that’s a red flag
• “It’s complicated” often means “it’s a scam”

Be Skeptical of Social Media

• Those “success stories” are often fake or paid promotions
• Screenshots of profits can be easily fabricated
• Real investors don’t recruit on Instagram or TikTok
• Anyone offering to help you get rich is likely getting rich off you

Protect Your Savings

• Never invest emergency savings — Only invest money you can afford to lose
• Never borrow to invest — If it’s so good, why would you need to borrow?
• Never invest money needed for bills — Scammers pressure you to overextend
• Diversify — Never put all your money in one investment
• Talk to a licensed financial advisor — Get unbiased professional advice

Phrases That Should Make You Walk Away

When you hear these, leave immediately:

❌ “Guaranteed profit”

❌ “Risk-free investment”

❌ “Double your money”

❌ “Once-in-a-lifetime opportunity”

❌ “Everyone is making money”

❌ “You just need to recruit friends”

❌ “Can’t lose”

❌ “Exclusive opportunity—not available to the public”

❌ “Don’t tell anyone about this”

❌ “Pay taxes/fees before withdrawing” (to get your own money)

If You’ve Lost Money to an Investment Scam

Immediate Steps

1. Stop investing immediately — Don’t send more money hoping to recover losses

2. Document everything:
   • Screenshots of the website, app, or platform
   • All messages and communications
   • Transaction records and receipts
   • Names and contact information used
   • How you found the “opportunity”
3. Don’t pay “recovery fees” — Scammers sometimes return offering to help recover your money for a fee. This is a second scam.

Report the Scam

• FTC: ReportFraud.ftc.gov
• SEC: sec.gov/tcr
• FBI IC3: ic3.gov
• State securities regulator: Find yours at NASAA.org
• CFTC (for crypto/commodities): cftc.gov/complaint

Consider Legal Options

For significant losses, consult a lawyer who specializes in investment fraud. Some work on contingency (no upfront payment).

Watch for Recovery Scams

After being scammed, you may be targeted again:

• “We can recover your lost cryptocurrency for a fee”
• “Class action lawsuit—just pay filing fees”
• “Government agency needs fee to process your claim”

These are scams. Legitimate recovery efforts don’t require upfront payment.

For complete recovery steps: I Think I Was Scammed →

Remember: Smart People Get Scammed Too

Quick Summary

✓ If it sounds too good to be true, it is

✓ No legitimate investment guarantees returns

✓ Verify before investing — Check SEC.gov and FINRA BrokerCheck

✓ Be very skeptical of social media “success stories”

✓ Never invest money you can’t afford to lose

✓ If you can’t withdraw your money, it’s probably a scam

✓ Report scams — You might help prevent others from losing money