Understanding Investment Fraud

Investment fraud involves scams that lure victims with promises of low-risk or guaranteed high returns on investments that are, in reality, nonexistent or worthless. Fraudsters often present returns that seem too good to be true—and usually are. It’s important to remember: no legitimate investment offers guaranteed returns. Common types of fraudulent investments include real estate schemes, penny stocks, Ponzi and pyramid schemes, digital assets, and cryptocurrency.


How the Fraud Works

1. Selecting a Victim

Scammers use various methods to contact potential victims, including:

• Social Media: Reaching out via direct messages or deceptive ads promoting fake job or investment opportunities.
• Texting: Sending unsolicited texts pretending to be a wrong number, offering fake job openings, or sharing personal photos to build familiarity.
• Dating Sites: Creating fake profiles to form romantic relationships and gain trust before introducing investment offers.

Red Flag: If someone you meet through these platforms suggests moving your conversation to a different app or phone number, be cautious. In professional-focused scams, you might also be added to group chats filled with fake “satisfied investors.”

Bottom Line: If someone you met online pitches an investment opportunity, it is likely a scam.


2. Building Trust

Scammers work to earn victims’ trust by:

• Using excessive flattery or fake empathy.
• Sending their passports or ID documents, which are photoshopped or simply fake.
• Claiming to share similar life experiences (e.g., divorce, financial struggles).
• Asking for help with a fabricated hardship.
• Sharing photos (often stolen) and promising in-person meetings that never happen.
• Expressing strong romantic interest but avoiding real meetings or video calls.

Bottom Line: A major red flag is if an individual claiming to be a trader, broker, or financial advisor sends you a copy of their passport or talk a lot about your personal life. Legitimate professionals will never share sensitive personal documents like this, even upon request, as it violates standard security protocols, neither they will spend hours talking about weather. This is a common tactic scammers use to fabricate legitimacy and gain your trust.

3. The Pitch

Once trust is established, scammers introduce an “exclusive” investment opportunity, often claiming personal or family expertise. Common fake investments include:

• Binary trading
• Liquidity mining
• Gold futures
• Cryptocurrency schemes

Red Flag: If you were introduced to an investment by someone you just met—or even by a friend who may also be a victim—it could be part of a criminal network.


4. The Initial Investment

Victims are guided through these steps:

1. Open an account on a legitimate-looking (but fake) trading platform.
2. Transfer money from a bank to a crypto exchange.
3. Convert funds to a specific cryptocurrency (e.g., Bitcoin, Tether).
4. Deposit funds into the scammer’s platform.

5. “Growing” the Investment

Early on, scammers may allow small withdrawals to build false confidence. They encourage further investing through tactics like:

• “Matching” funds to help reach investment goals.
• Creating false urgency (e.g., “limited-time opportunities”).

6. Taxes, Fees, and the Final Trap
When victims try to withdraw larger sums, scammers freeze accounts and demand payment of “taxes” or “fees” to release the funds in crypto. However, real trading institutions may charge you fees; these should be deducted from the withdrawn amount itself, as your funds are not subject to restrictions at this time.

Red Flag: Legitimate investments never require additional payments to access your money.
This is the final stage of the scam. Victims often lose everything they invested—and even additional funds paid in a desperate attempt to “unlock” their fake earnings.


Protect Yourself

• Verify Before Investing: Research any opportunity independently.
• Ignore “Guaranteed” Returns: All investments carry risk.
• Don’t Trust Strangers Online: Be skeptical of unsolicited investment offers.
• Report Suspicious Activity: Alert authorities if you suspect a scam.

If you are a victim of an investment fraud, you should immediately report the incident to ECFIU.