Four common investment scams


Getting swindled can be an adverse situation to overcome. You thought you were making a wise choice that could positively affect your financial future, instead a wise-talking investment scam artist manipulated you.

Now, you’ve put up money for a debatable investment – or no investment at all, and in most cases, that money is gone forever and won’t be aiding you in your quest toward a more secure financial future.

There are common tactics these criminals like to use to trick you into poor investment decisions. Some involve a “money up front” technique or the pump and dump scheme. Four common investment scams are as follows.

Advance fee scheme

This scheme is cut and dry, but many investors do fall into the trap, so don’t feel ashamed. An advance fee scheme victimizes the investor by persuading them to pay money up front to take advantage of an investment with a greater return. Often in these cases, the scammer bolts with the money and there is no investment return.

Investors duped into this scheme, are often those who lost money in another risky investment. The scammer will contact the potential investor preaching about an amazing opportunity that will help recover his previous losses if the investor pays a “refundable” fee. Do not fall into this trap. There is no investment and you will not see that refundable fee again.

The boiler room scam

A lot of scammers with set up what’s called a “boiler room.” This is a temporary and sometimes makeshift office, a company website, toll-free number and an address in a respected area to convince you they are legitimate. This company does not exist, the website is real, but the investment information is not.

The foreign exchange (FOREX) scam

The foreign exchange market is large and makes many investors increasingly profitable. Because of this, it can be a dream-come-true for investor’s and scammer’s. In FOREX markets, investors make money by buying and selling different currencies – profiting off the changes in exchange rates. This also makes the market risky and volatile.

The FOREX scam comes in when unregulated firms market their services in hopes to snag investors looking for a big payday. They will ask the investor to wire money into to an offshore account before they start trading. Once you do this, your money will be inaccessible, and you’ll often lose some or all of it. Foreign International banks control FOREX markets with large staffs and innovative technology. Do your research on this “offshore” company before sending your money.

Pump and dump scheme

The term refers to the actions taken by the scammer. The scammer will pull from a large list of potential investors, contacting them to promote an incredible deal on a low-priced stock. The person contacting you already owns a large amount of said stock which may not represent a legitimate business.

The scammer then pumps loads of money into the stock from investors who buy into it. As you would imagine, the price of the stock increases dramatically. Once it hits its peak, the scammer will sell (dump) the joint investor’s shares – the value of the stock crashes and you’re left with a worthless stock and a lost investment.

These are only some of the common investment scams, as there are many ways these criminals attempt to free you of your hard-earned money. Before you invest, trust your gut, but also check the business or individuals’ credentials.