One of the common methods of fraud is investment fraud. Its essence is that a victim is chosen for deception and through fraudulent actions, they are drawn into a scam involving valuable stocks, cryptocurrency operations, or projects related to unknown sources of income.
Investment Frauds
Fraudsters usually pose as successful businessmen or brokers associated with stocks or cryptocurrencies. There are several signs that expose investment fraudsters:
- promise of huge profits;
- evasive answers to questions;
- false promises;
- pressure for quick sales;
- soliciting credit card or account numbers;
- offering bonuses, gifts, promotional discounts;
- behavior of an unprofessional broker;
- allegedly possessing insider information.
These are far from all the signs that someone wants to deceive you. The main goal of the fraudster is to extract as much money as possible from the potential victim and leave them with nothing.
How Investment Scams Work
The main tactic is offering to buy or sell stocks or cryptocurrencies under pressure. Offers of quick purchases at favorable prices within a short time frame, requiring immediate decisions so that the person does not have time to think, weigh all pros and cons, and make a decision. Fraudsters do not give time for this; their main goal is to extract money from the victim and make them sign documents without allowing them to thoroughly examine them - this must also be done quickly.
Investment scammers always avoid direct answers to questions asked by investors. It is not profitable for them; they will turn the question back on the deceived person. One should be attentive in such situations and employ critical thinking rather than imagine sky-high profits.
The fraudster tries to endear themselves to the potential victim, earn their trust to make a deal; one should not sign any documents or contracts.
False Investment Schemes
Commonly used false investment schemes are almost identical. These are Ponzi schemes, pyramid schemes, binary options fraud, advance fee scams.
Ponzi schemes are a long-known worldwide scam, representing a financial pyramid where high returns are promised through investments, but investments are paid out from the contributions of subsequent investors. There is no profit, and each level enriches itself at the expense of subsequent investors; the more people involved in pyramid schemes, the faster the founder of the pyramid enriches themselves.
Fraudsters offer to attract their friends, acquaintances, relatives into the pyramid.
Sometimes fraudsters act in groups, even professionally. They present themselves as investors who have made a lot of money or brokers who earn dividends by investing in cryptocurrency, exchanges, or stocks. By artificially inflating stock prices and urging the potential victim to quick sales, they leave them with nothing while enriching themselves.
Signs of Investment Fraud
The main job of fraudsters is to gain access to other people's money at any cost. Various schemes of deception are developed, but they are always aimed at the earnings and enrichment of the fraudsters.
Fraudsters often offer:
- to transfer money to a safe account;
- to pay for investment or credit insurance offering the best conditions, the shortest terms without giving time to reconsider.
At the same time, they most often involve you in a financial pyramid or leave you completely without a chance to return your investments. Fraudsters can be identified by some signs;
- they find the victim themselves,
- they talk only about money and bank cards, accounts,
- they offer the best conditions or, conversely, intimidate;
- they apply psychological pressure for quick decision-making,
- they are interested in information about bank cards.
High-Risk Investments
Investments in stocks have always been considered the riskiest because stocks do not guarantee deposits and quick growth or payouts. You can also fall victim to fraudsters if you fall for risky stocks with unknown startups, where you can simply be left without profit if the startup fails. Real estate investments without a real estate market survey or with an unverified realtor who promises good profits from real estate investments can also be considered risky. Additionally, you should not invest in low-liquidity goods, meaning those that are not popular and might be unique or collectible. It is very difficult to find a buyer for such goods.
Protection Against Fraudulent Investments
To protect against fraudulent investments, you should keep information about your income private, not share bank card details, and not disclose your passwords to unknown people. Listen carefully to offers, employ critical thinking, and do not jump to hasty conclusions after hearing seemingly profitable offers.