Thousands of people are getting robbed each day through investment and numbers keep increasing. Because of the latest technologies, it becomes harder to identify scams. It is a serious issue that has devastating financial outcomes.
It includes a broad range of dishonest tactics that have been designed to induce investors into making poor financial decisions. Investment scams may take many forms, from Ponzi schemes to pump-dumps, but they only get more advanced as technology advances.
Fortunately, there are some warning signs which help you to identify online investment scams and how you can avoid them. This is what we’re going to discuss as we proceed further with the article.
Investment Scam
An investment scam is when someone tries to trick you into investing money in some scheme that appears to be legitimate. They’ll connect you through mail pretending to be a telemarketer or financial advisor. They’ll try to gain your trust by acting friendly and charming so you invest your money in their suggested scheme as soon as possible without many inquiries.
Investment scams have become more complex because of the evolving internet and digital interactions. Some of these frauds are so realistic that they have managed to fool seasoned investors.
Types of Investment Scam
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Ponzi Scheme
In this scheme, scammers promise their victims guaranteed high returns at minimal risk. They use the investment of new clients to pay their earlier investors rather than from legitimate investment profits.
When there aren’t enough new investors to maintain the returns, the scam falls apart, leaving those involved with large losses.
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Affinity Fraud
Here scammers target members of the group that has formed based on characteristics such as age, religion, or ethnicity. They will pretend as if they are part of the group to gain the trust of group leaders and members. Scammers hope that if the group leader will invest others will do the same as well.
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Pump and Dump Scheme
In this type of scam, scammers typically spread inaccurate or misleading information in an attempt to lure people into investing in a specific coin by saying they have insider knowledge and that a certain development will cause the price of the share to increase.
As soon as buyers enter the market, the culprits sell their shares, drastically decreasing the price. New investors then lose their money.
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Advance Fee Fraud
In this type of scam, scammers demand advance payment in return they promise high returns and that never comes around the corner. After receiving the payment fraudsters disappear with the investors’ money leaving them with significant losses.
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Unregistered Securities
Some scammers try to trick naive investors by offering them unregistered securities, which are frequently fake or misrepresented. These offers are used as an excuse for investment fraud since they are not as closely monitored as registered securities.
How to Identify Online Investment Scams
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High-guaranteed returns with minimal risk
If someone is promising you high-guaranteed returns, get alert as it’s nearly impossible to predict anything in the financial world. They just try to attract you with promising words to convince you to invest money.
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Pressure to Invest Quickly
Scammers often pressure their clients to make hasty decisions. They’ll tell you or give excuses that the offer is only for a limited time and if you don’t invest you may miss the opportunity to make good money.
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Unlicenced Sellers
Always verify the authenticity of the person or firm offering the investment. In most countries, investment firms and their representatives are registered with some regulatory body such as SEC in the United States. If that factor is missing watch out it can be a red flag for you.
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Unsolicited Offers
Be wary of offers without having been asked for. They’ll reach out to you via mail, social media, or phone calls. Legitimate firms rarely do the cold calling and reach out to people randomly.
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Request for Personal Information
If you’re asked for sensitive or financial information at the early stage of the process, get alert as it is very uncommon for a legitimate firm to ask for any confidential information regarding you, they only require these pieces of information until or unless it’s necessary at a later stage and only through secure channels.
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No Physical Address or Contact Information
If the business doesn’t offer a physical address or trustworthy contact details, proceed with caution. To avoid being discovered, scammers frequently conceal their true whereabouts and contact information.
Steps to Avoid Online Investment Scam
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Research before investing
Getting into some scheme offered by someone or a firm without research is the same as going to swim without a life jacket when you don’t know how to swim. Always thoroughly research the background, online resources, regulatory databases, and independent reviews to gather information about the company.
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Ask Questions
Never hesitate to ask questions if you find something suspicious regarding investment. A legitimate seller always provides clear and satisfactory answers to questions. If the seller is a little doubtful, consider it before investing.
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Consult a Professional
Seek advice from a financial advisor and professional before going for any investment. Speak with trustworthy advisors such as accountants, lawyers, or stockbrokers.
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Report Investment Fraud Immediately
For immediate assistance, contact the Securities or some regulatory body if you believe you have been a victim. Your chances of getting back some or all of your investments increase with the timing of your fraud complaint.
