Fraud Cleanup

How to Spot an Investment Scam Before You Pay

A pitch that promises big money with no risk is a scam. Learn the types, the red flags, and how to check any offer.

What an investment scam is

An investment scam is a pitch that says you will likely make a lot of money fast or easy, with little to no risk. The FTC says that is the heart of the trick. Real investments do not work that way. The FTC also says all investments carry the risk that you will lose money. So if someone acts like that risk is gone, treat that as the first warning sign.

How investment scams reach you

The FTC says scammers get your attention with infomercials, social media posts, or online ads. Some start with a free seminar. Others reach out directly. The FTC says crypto investment scams often start with a direct message on social media. Dating apps count, too. A stranger who messages you about an investment is not doing you a favor. The FTC says a so-called investment manager who contacts you out of the blue is a scammer.

Common investment scam examples and types

Training and coaching programs. The FTC says these scams often start with free training or seminars that lead to hefty fees for more training or coaching. They claim a patented, tested, or proven strategy will teach you how to make big money. Some say their secret approach will change your life and even let you quit your job. The FTC says the success stories are completely made up or a rare exception. For most people who invest in these trainings, the pay-off does not match the promise.

Real estate. The FTC says real estate investment scams claim a world-class property development is a great investment deal. The training versions often claim their training and coaching programs will make investing risk free and profitable. Their ads often show testimonials. Some come from celebrities. Some promise you will have access to funds without putting in your own money.

Cryptocurrency. The FTC says in these scams the company taking your money is not really investing it and is not real. You will see fake reports showing how much your money is growing. A scammer may pretend to be a celebrity. They say they can multiply any cryptocurrency you send them. The FTC says never mix online dating and investment advice. An online love interest who wants you to invest is running a scam.

Precious metals and coins. The FTC says these scams often involve people calling themselves metal dealers or rare coins merchants. They lie about their credentials and experience. Whether the market is up or down, they tell you there is no better time than now to invest.

The red flags every investment scam shares

The FTC lists warning signs that show up across all of these:

  • Guaranteed profits. The FTC says only scammers will guarantee you'll make over-the-top profits, earn enough income to quit your job, or beat the stock market. There are no guaranteed returns.

  • Little risk, time, or effort. The FTC says scammers claim the investment comes with little risk, time, and effort. Do not trust anyone who plays down risk or treats risk disclosures as a formality.

  • Few details. The FTC says if you aren't given details or documentation about the investment, that's a sign of a scam.

  • A secret method. The FTC says scammers say they will teach you a secret method or use a proven system to make money.

  • High pressure. The FTC says it is a red flag if someone pressures you to act quickly. They might say space is limited or that you are getting a special deal.

  • Do not research this. The FTC says another red flag is someone who discourages you from taking time to do some research.

  • Fake success stories. The FTC says scammers make up stories about how much money people made. They may back the promise with stories of people living rich lives. Those claims are not reliable and do not mean the program works.

  • Trend riding. The FTC says scammers create the impression that their investment opportunity is just like the latest investment opportunities you hear about in the news.

How to check an investment offer before you pay

The FTC gives steps you can take before money leaves your hands.

Search online for the name of the company or program plus words like review, scam, fraud, or complaint. The FTC says other people's experience with the company can alert you to possible problems. For crypto offers, search the company or person and the coin name the same way.

Check if the person or company selling the deal is licensed or registered. The FTC says many investment scams start with unlicensed people or unregistered firms. Most people who sell investments must register them with the SEC. The FTC says a seller can skip this only if they're eligible for an exemption. The FTC says to check the SEC's EDGAR database. Then call your state securities regulator. For precious metals and coins, the FTC says to check with the CFTC database. Avoid investments not registered with the SEC. The FTC also says to visit Investor.gov. That is a U.S. Securities and Exchange Commission website with more advice.

Look for information about the reputation of the investment company, its officials, and its promoters. And before you invest, take time to talk to someone you trust who you know has your best interest in mind.

What to do if you already paid or suspect a scam

Stop sending money now. The FTC says scammers often fail to deliver what they promise and instead take your money for themselves. Most people never get back the money they invested.

The FTC says to report investment fraud and scams to the FTC at ReportFraud.ftc.gov. You can also report to the SEC at sec.gov/tcr. For precious metals or commodities fraud, the FTC says to report to the CFTC at cftc.gov/complaint.

Knowing the tactics scammers use helps you avoid them. If the pitch promised big money with no risk, you already have your answer.

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