Most Common Investment Scams And How to Avoid Them

You may have heard of many scams happening in our day-to-day lives, and because of the advances in technology, people are aware of scams and how to avoid them, but con artists find their way to wipe out bank accounts and dupe people all at once.

Speaking about scams, one in every 10 adults falls victim, and yearly, people lose millions of dollars. Out of all scams, investment scams stand out. The investment scam industry is huge; it sucks out millions of dollars every year. This industry is huge because it is not bounded like other scam industries; you can see investment scams happening in every field or sector.

You can see investment scams happening from lower levels, like scammers asking for a small advance fee, to scams where con artists flee millions of dollars. Speaking of scams, investment scams have always topped the list; on the other hand, a very small percentage of people report investment scams.

Generally, people in older age groups are the prime targets of con artists, and people aging between 55 and 64 lose a lot of funds. As the investment scams are deeply rooted, tracking the criminals down can take some time if you report them. It's better to have enough knowledge about it, so today we will see how investment scams work, their types, and how you can avoid them.

How investment scams work?

Investment scams are just a way to lure people into their honey trap and suck out all funds from their bank accounts. Investment scammers generally have a very strong offline connection. If they are into theft and want to circulate the money to stay out of any kind of legal trouble, they can do it easily.

Money laundering is easy for them; that’s why it's a bit challenging to track con artists. If you look at the stats provided by, scammers dupe millions of dollars every year, and this year they have already looted $88,464,625. In three months, they have plundered more than $88 million. The con artists come up with new ideas and approach people who are looking for investments to grow their funds for the future.

If you look at recent investment frauds, the scammers have looted 30,360 people, according to the stats presented by, and these are the ones who reported the case. There could be many more cases of people who were looted in investment scams.

They trick people into investing in currency, stocks, crypto, commodities, real estate, and more. With a positive and convincing approach, they showcase the offer as a once-in-a-lifetime opportunity. In scams like Ponzi schemes, they gain investors' trust by offering a token of profits to them. The fraudster tricks their target by planning, and by studying their cases properly, they try to look more legitimate and hang for a longer period of time. To better understand the workings of investment scams, let's look into the types of investment scams.

Types of Investment Scams

There are various types of investment scams, but scammers usually capitalize on some of the most common ones. These scams are popular, yet people fall for them because scammers work sophistically and execute their plans properly. They come up with new ideas, but the structure of the scam is the same, so if you believe you are falling for a scheme that seems like a scam, you can identify it from the scams mentioned below.

Pyramid Scams

Pyramid schemes have been practiced for over a century. You can read many cases of pyramid scams on Google, where thousands of people were scammed as they were lured and promised a huge profit if they joined them in their business. Some multi-level marketing systems were controversial because they followed a pyramid scheme.

In the pyramid scam, businesses try to enroll investors to join them and invest small funds, and in return, they can get good returns in the long run, but they have to bring new investors on board. Later, as the cycle of adding new investors continues, even the top investors make a profit, but that cash comes from new investors. But the recruitment part is tough, as you have the target of adding new investors and have already contributed a lot to the company. The majority of the time, no one benefits financially from this looping cycle.

Ponzi Scam

The Ponzi Scam is quite a famous and traditional scam that has been carried out for over a century. This type of scheme was even mentioned in the novels of Charles Dickens. These scams are carried out by con artists who claim to own or invest in a legitimate business that can give high returns. They scam many investors by selling the idea of investing in some secret firm that will give high returns. Many investors get lured into this scheme and give their valuable funds to the con artist.

Even though some investors get some returns, this action makes them trust the con artist. But the returns are nothing but the funds received from the new investors. This cycle goes on; they gather new investors and distribute a few funds among old investors as "returns." At some point, the investors coming in will stop, and at that time, the con artist will flee with all the funds.

Real estate

Investment fraud is most common in the real estate business; the history of real estate scams goes back a long way. When you buy any property, the last thing you want to worry about is getting scammed. Many con artists offer properties at cheap returns and present such offers as once-in-a-lifetime opportunities, and an advance payment is necessary.

Investors are scammed in multiple ways; they are tricked into buying false properties, getting into fake listing scams, and even loan flipping is one of the most highly practiced real estate scams. Most con artists set up a trap where they created fake websites and customer service support to dupe people and show false properties for sale. Scammers usually target areas that are already tight, where it's difficult to find any property, and where the area is in demand.

Pump and dump

Pump and dump schemes are the classic example of stock manipulation and stock market scams, and in the 1990s, they were highly practiced as people were scammed by a method known as "cold calling." But with evolving technology, scammers came up with new ideas, such as accidentally sending a tip to an answering machine.

Scammers try to sell stocks of microcap companies and claim it as the next big thing; they will heavily market the stock and start advertising to attract more investors. They play the role of fake investors. When the stock is pumped, they sell their stocks at a higher price, and a gradual surge will occur, causing the stock to come back to its original position and causing the investors to hold worthless stocks.

Recovery Scams

When people are trapped in fake investment scams, they will generally opt for some recovery fund company to help them out and get their funds back. But, during such situations, people are really tense and worried about their lost funds, which leads them to forget to cross-check about the recovery firm and get trapped in another scam.

These fake recovery firms will, as usual, ask for fees upfront and try to get more money from the victim until the victim realizes it is a fake firm. The victims are in great shock, but to get away from these scams, you have to do proper research on the firm and read their policies. Generally, fake firms' policies are not well written. You can protect yourself from these fake recovery companies through background checks and research.

How to check if an investment company is real?

You should check whether the company is registered or not and whether they hold any licenses or not. These are the main requirements that a company should fulfill; if they miss any of them, you can suspect the company of being fraudulent.

You can check the company's registry and license on You will find all the information you need about the company here.

What are the characteristics of a scammer?

Scammers generally have the trait of getting in contact with victims who are widows or people of old age, so they can easily target them and lure them into financial scams. Most scammers target widows on dating sites, showing them their caring nature. After some time, scammers ask them for emergency cash, pretending to be in urgent need, like being trapped in legal matters or needing some medical help.

Scammers initially pretend to be nice and sweet, making the victim believe they are legit and showing them that they are indirectly helping them grab any deal or get some good discounts. People usually believe them because of their sweet nature, but you have to look out for some red flags.

If the person is asking you to pay the advance fee quickly and not giving you any time to think about it, that is a red flag. The con artist will ask for your personal details and location and try their best to gather as much of your information as possible so they can use it for their benefit.

In online scams, phony websites and phishing emails are the ones you should be aware of. Scammers will try to panic you and force you to make the wrong decision by sending emails like "closure of your account" or "last date for paying a bill." In such a situation, try to contact your bank without clicking on the website provided in the email.

How to avoid investment scams

To avoid the investment scam, you first have to be vigilant, avoid being naive, try to gain knowledge on investment, do proper research from your side, and then try to invest. Alongside the steps mentioned below, these can help you avoid any investment scams.

  • Do a background check on the company; check the registry and license.
  • If the person tries to gather your information at first, hang up!
  • Don’t engage if they are offering high returns on low investments.
  • Avoid unsolicited offers.
  • If the person rushes you to grab an exciting offer, hang up. If the offer seems legit, take your time, consult someone, and talk about the offer.


I hope you've learned everything there is to know about investment fraud as we come to an end. Scammers are trying to stay far ahead of us despite improving their intelligence. Scams can be stopped by increasing public awareness of them. If you suspect anything suspicious, try to remain vigilant and double-check every detail. Law enforcement should be contacted right away if you suspect fraud is taking place or if you become a victim, so they can assist you in solving your issue.

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