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Investment fraud

Investment fraudsters lie to investors about deals to get money from them. Such scams often include offers for investment opportunities that are low- to no-risk with a guaranteed return, never-before-seen strategies, loopholes, or unregistered securities.

Investment fraud simplified

You may receive an amazing investment offer from a person with whom you are connected on social networks, but don’t know in person. Often fraudsters seek to victimize affinity groups—such as groups with a common religion or ethnicity—to utilize common interests to build trust to effectively execute investment fraud against them. The fraudster’s ability to foster trust makes these schemes so successful.

Probability

Chances of becoming a victim of investment fraud are low (1 in 7).

Types of investment fraud

Pyramid schemes

A pyramid scheme is when a scammer claims he can turn your small investment into a large profit fast. What sets a pyramid scheme apart is that the fraudsters keep attracting investors without offering a product or service. The initial investors get paid with the money that new investors bring. This scheme continues on until the fraudsters can’t pay their investors anymore or attract new ones.

Pump-and-dump

Pump-and-dump involves scammers who buy shares of small companies for a very low price. They then spread false information that this company is a good investment opportunity to inflate their stock prices. Once the stock prices go up, the fraudsters sell the stocks they bought for low prices at a profit and abandon the scam.

Advance fee

Advance fee, like the Nigerian prince scam, is when scammers ask people for money, promising to return more at a later date but never do. Such scams often include fake stories and false investment opportunities like “wire me  $400 dollars for plane tickets and I’ll pay you $2,000 when I return.”

Offshore scams

Offshore scams often target US investors and can be carried out via any other type of investment fraud. The idea here is that the US law enforcement has difficulty investigating fraud outside of the US. Fraudsters know this and target US investors with investment frauds.

Tips to prevent investment fraud

Be inquisitive

Ask about full terms and conditions of the deal or how the business is going to work. If the person sounds sketchy or keeps avoiding your questions, there’s likely something going on.

Do your research

Background check the person or agency and make sure they are legit. Look up their name, reputation, and affiliations. Does it makes sense that they’re contacting you?

Remain skeptical

If it sounds too good to be true, then it probably is. Be extra cautious, especially when the deal comes to you without any context, faces, or official companies behind it.

Investment fraud stats

According to the FBI Internet Crime Reports, here's how devastating investment frauds were from 2015 to 2024:

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Lost to cybercriminals
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People were victims to investment fraud
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Investment fraud cases have reached record numbers with 47.9K yearly victims (around 131 victims per day) in 2024.

Victims have reported the highest average financial loss to investment frauds in 2024 ($137.1K per victim).

Despite the increasing awareness of online crimes, daily financial losses to investment frauds have grown around fifty five times from 2015 ($326.5K per day) to 2024 ($18M per day).

On average, there were 44 complaints per day related to investment frauds from 2015 to 2024.

Learn more

FBIReport Fraud (US)Internet Crime Complaint Center (US)Report cybercrime (EU)