Source: 2019-20 Consumer Sentinel Report
According to the Federal Trade Commission (FTC), investment-related scams account for less than 1% of all reported scams. While this number might seem small, it should still be taken seriously.
78% of the people who fell for investment scams also reported losing money. This is higher than any other category of scams, making it one of the top ten fraud categories. Investment scams also have the third-highest average loss per person and the second-highest total loss, right after imposter scams.
In an investment scam, a scammer tries to trick you into investing your money. They could tell you that you are investing in any number of things, including:
They may do this by giving you fake information about a real investment so that the investment looks more lucrative than it really is. Or they could create a phony investment opportunity out of thin air.
An investment scammer may tell you they are a financial advisor or work for a well-known financial company. They will be friendly, charming, and talk to you like they know you in order to gain your trust.
A common tactic the scammer will use is telling you that the investment opportunity is urgent and that you must act immediately or the opportunity will be lost. But the scammer has no interest in helping you earn money—they’re only interested in stealing it.
When you work hard to earn money and want to invest some of your earnings for the future, it is important to be sure you are investing in something real and not just handing your money over to a scammer.
Here are some of the red flags you might see when dealing with a scammer who is trying to steal your hard-earned money:
Investment scams have been around for a long time, and there are several different versions. Modern-day investment scams may involve new technology like cryptocurrency. Or scammers may look to the past for inspiration for their scam.
Pyramid schemes have been around for a long time. They are often called Ponzi schemes after a famous scammer, Charles Ponzi, who took investors for $10 million in the 1920s by promising investors a 40% return on investment.
A pyramid scheme can seem legitimate for a while because early investors get paid by the funds deposited by later investors. But eventually, the pool of new investors stops growing, the scheme collapses, and most of the "investors" lose all the money they put into the scheme.
In a Cash App flip scam, the scammer will tell you they can "flip" your money using the money transfer app, Cash App. They will most often contact you through social media or create a social media ad to lure you in. They will say they will invest the money for you, and you will see huge returns, often double your initial investment or more.
Sometimes they will even get you to invest a small amount like $20 and give you $100 back to "prove" the system works and to gain your trust. Then they will get you to invest even more, which they will then take off with.
In a Bitcoin exchange scam, the scammer will set up a website to look like an exchange for Bitcoin or another cryptocurrency, including current prices that update regularly.
It may even guarantee returns or tell you that you will get free money if you make a large deposit upfront. But once you make the deposit, you will no longer have access to it because the scammer took off with it—the website was not a real bitcoin exchange.
In a pump and dump scam, the scammer will try to sell you legitimate but low-priced stock. The scammer will also own a large amount of this stock but may not tell you this.
As more investors buy the stock, its price will naturally go up. Then the scammer will sell the stock they own to make a profit, the price of the stock will plummet, and you will lose money.
If you are thinking of investing money and notice some of the red flags of an investment scam, don't worry. You can protect your money and keep it away from scammers. Here are some tips to help you do that:
If you have fallen victim to an investment scam, here are some actions you can take to protect your hard-earned money, help catch the scammers, and prevent others from falling victim to the scam in the future.
You will definitely want to report the scam to the authorities to help catch the scammer. Make sure to have any details regarding the scam ready when you do. Here are some places to report it:
If you have been scammed, notify your bank, credit card company, money wire service, or gift card provider, depending on how you made the payment. Request that your charges be reversed or dispute the transaction.
They could be able to help you prevent the loss of your money if you have sent money to a scammer. Many, but not all, credit card companies offer protection against fraud, and you could get all of your money back if you paid with one.
If the scammer contacted you on a specific website or through social media, contact the site owner and tell them the details of the scam. This could help prevent more people from falling victim to it.
If you've received a locked debit card text message from Citibank, it's likely a scam. Don't click on the link and delete the text message.
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