Investor Beware: Recognizing and Avoiding Investment Scams

Promising quick wealth, investment scams are becoming increasingly common among online fraudsters, exploiting a fundamental human weakness. Although the number of victims is currently lower than other types of fraud, such as sales and identity scams, investment scams account for almost half of all online fraud losses. Luckily, there are some signs to look out for that can help you avoid getting scammed.
 

Common Types of Investment Fraud

Affinity fraud refers to a fraudulent activity where scammers deceive individuals who belong to the same ethnic, religious, career, or community-based group as them. Typically, the scammers gain the trust of the victims by initially selling their products or services to a few prominent members of the group.

A Ponzi scheme is a form of fraud where the operators pay off their debts to investors not through real income, but by recruiting more and more people to join the pyramid. The scheme is viable as long as the flow of new investors continues to increase.

A pump-and-dump scheme involves the dissemination of false information to inflate share prices, followed by the sale of shares at inflated prices, causing the share value to fall and investors to lose money.

A recovery room scheme targets previous victims of investment fraud by offering to help recover their losses in exchange for additional payment or account opening. If upfront payment is requested, it's a clear sign of 'recovery room' fraud.

Clone scams use fake websites and literature that look like legitimate companies to sell worthless investments. Fraudsters will try to convince you that they work for a genuine company and use high-pressure selling tactics to get you to buy ‘investments'. These ‘investments’ are worthless and often aren’t even offered by the company they’re pretending to be.
 

How to Recognize Investment Scams

1) The guarantee of high returns at low or no risk

All investments involve risk. The higher the promised return, the higher the risk. Remember that if it sounds too good to be true, it usually isn’t true.

2) High-pressure sales tactics

Pressure tactics, ranging from limited offers to time-limited gifts or discounts, are often used in investment scams. The aim is to get you to commit your money without thinking.

3) Unsolicited contact

Legitimate investment companies do not call people out of the blue to offer them investment opportunities. If you are contacted unexpectedly, this is perhaps the biggest red flag you should be aware of. What's more, such firms do not allow you to call them back.

4) Emails and newsletters with unclear sources

Investment scam emails may often contain spelling or grammatical mistakes. Another warning sign is if they are asking you to visit a URL or open an attachment.

5) Complicated explanations or highly complex terminology

Scammers work hard to fool your instincts with complex documents and arrangements that seem legitimate but don't really make sense.

How to Protect Yourself from Getting Scammed

First, ask questions and request information. If someone is pushing you to invest without giving you enough details, be cautious. Take the time to research the company, including its owners, directors, and management members, to make sure it's legitimate and trustworthy. It is also important to be wary of unsolicited calls, emails, or text messages as these could be attempts to steal your personal or financial information. Never share your account numbers, user names, logins, passwords, or personal identification numbers with anyone. In addition to conducting your own research, it can be helpful to check online reviews and feedback from other investors to get a sense of the company's reputation. Ultimately, consider seeking independent financial advice from a trusted advisor to get an objective opinion on any investment opportunity.

How Scramble Keeps Your Experience Safe

As a platform, we are proud to work with Startup Estonia, LHV Bank, Veriff, TGS Baltic and Grant Thornton. We are backed by founders and senior managers associated with great companies like Wise, eBay, Facebook, Skype, Pipedrive, Starship, Miro, CoffeeMeetsBagel, FJ Labs, etc.

We encourage investors to share their experiences and feedback with our platform by posting a review on Trustpilot. So, you can always get a real opinion from our investors to help you make your final decision.

We are open to conversation. You can contact us through a variety of channels including WhatsApp, email, website chat, Skype and many other social media platforms. Our support team is always happy to help.

Finally, you can read about our founders and their companies on our website. Our recent clients include AirSnax, The Gut Co, Reformed Characters, etc.