Business and Investment Fraud
Investment or business fraud schemes will try to lure you in with the promise of low- or no-risk investments.
Scammers often ask for upfront cash in exchange for guaranteed future returns. There is no such thing as a guaranteed return on investment. It’s a scam.
Learn what to look out for, how to protect yourself and your family, and what to do if you’re a victim.
Advance fee schemes ask you to invest upfront money for a larger return later, such as a loan, contract, or gift.
Nigerian Letter or 419 schemes ask someone to share in a percentage of millions of dollars that the author—a self-proclaimed government official—is trying to transfer illegally out of Nigeria.
Ponzi schemes use current investors’ money to pay previous investors. They inevitably collapse.
Pyramid schemes ask you to bring in new investors to make a profit or recoup your investment.
Telemarketing fraud schemes try to steal your money over the phone, whether by telling you won a prize, are in legal trouble, or some other approach.
How to Protect Yourself
If it sounds too good to be true, it is.
- Do your homework and thoroughly research any investment opportunity independently of what any salesperson provides you.
- Never rush into an investment opportunity. If you are rushed or told not to discuss it with others, you’re being scammed.
- There is no such thing as a guaranteed return.
- Federal Trade Commission
- U.S. Securities and Exchange Commission
- How to Avoid Fraud (U.S. Securities and Exchange Commission)
Related FBI News and Multimedia
- 01.18.2023 Former Bellevue, Washington Resident Pleads Guilty to Securities Fraud for Defrauding Investors and Marijuana BusinessesJustin Costello of Las Vegas, who previously lived in Bellevue, Washington, pleaded guilty to securities fraud.
- 01.17.2023 El Paso Man Pleads Guilty to Operating Ponzi Scheme Disguised as Crypto Investment FirmAbner Tinoco of El Paso has pleaded guilty in federal court to five counts of wire fraud.
- 01.17.2023 Cary Man Indicted on 23 Counts of Wire Fraud and Money Laundering in Ponzi SchemeKumar Arun Neppalli of Cary has been arrested upon the unsealing of a 23-count indictment in connection with an investment fraud scam.
- 01.12.2023 Victims of BitConnect Scheme to Receive More Than $17 Million to Compensate for LossesA federal judge has ordered Glenn Arcaro to pay $17,646,801 dollars in restitution to approximately 800 victims from over 40 countries.
- 01.12.2023 Former Chief Financial Officer of Email Security Company Pleads Guilty to $50 Million Scheme to Defraud Investors and LendersNihat Cardak of Clifton, Virginia, pleaded guilty in Manhattan federal court in connection with a scheme to defraud investors and lenders of millions of dollars.
- 01.11.2023 Worcester Investment Advisor Sentenced to More Than Eight Years in Prison for Fraud and Witness TamperingJames Kenneth Couture, a Worcester-based investment advisor, was sentenced in connection with a scheme to steal more than $2.8 million from six clients.
- 01.06.2023 Maryland Man Sentenced to More Than Six Years in Federal Prison for His Role in a $28 Million Ponzi Scheme Involving ‘1st Million Dollars’ Wealth Management CompanyArley Ray Johnson of Bowie has been sentenced to 78 months in federal prison for conspiracy, wire fraud, and securities fraud charges.
- 01.06.2023 Unlicensed Vancouver, Washington Investment Advisor Sentenced to Six Plus Years in Prison for Ponzi SchemeCharles Richard Burgess, an unlicensed ‘investment advisor’ from Vancouver, Washington, has been sentenced to 75 months in prison for mail fraud.
- 01.05.2023 Digital Advertising Business Owner and Operator Sentenced to Prison for $5 Million Ponzi SchemeRobert Cortez Marshall, a Las Vegas business owner and operator who pleaded guilty to wire fraud, received 34 months in prison for fraudulently soliciting investments.
- 12.22.2022 United States Attorney Announces Extradition of FTX Founder Samuel Bankman-Fried to the United States and Guilty Pleas of Former CEO of Alameda Research and Former Chief Technology Officer of FTXOfficials announced the extradition of Samuel Bankman-Fried from the Bahamas.
How to Avoid Fraud
A basic understanding of how scam artists work can help you avoid fraud and protect your money. Learning how to invest wisely can help you reach your financial goals. Here are some ways to help avoid being scammed:
- Be aware before you share your contact information in response to an investment promotion.
- Learn what you can do to avoid investment fraud including red flags to watch for and where to go for help.
- Learn how to protect yourself online, and how to protect your social media accounts.
- Learn about the different types of investment fraud, including those found online and in social media.
- Review our Investor Alerts
Remember: if you have a question or concern about an investment, or you think you have encountered a fraud, please contact the SEC, FINRA, or your state securities regulator to report the fraud and to get assistance.
Protect Your Social Media Accounts
The Internet has made our lives easier in so many ways. However, you need to know how you can protect your privacy and avoid fraud. Remember, not only can people be defrauded when using the Internet for investing; the fraudsters use information online to send bogus materials, solicit or phish.
Phishing is the attempt to obtain financial or confidential information from Internet users. This phishing expedition usually begins with an email that looks as if it is from a legitimate source, often a financial institution. The email contains a link to a fake website that looks like the real site. Fraudsters want you to provide account and password information, and then they have access to your account.
Here’s what you can do to protect yourself when using social media:
Privacy Settings: Always check the default privacy settings when opening an account on a social media website. The default privacy settings on many social media websites are typically broad and may permit sharing of information to a vast online community. Modify the setting, if appropriate, before posting any information on a social media website.
Biographical Information: Many social media websites require biographical information to open an account. You can limit the information made available to other social media users. Consider customizing your privacy settings to minimize the amount of biographical information others can view on the website.
Account Information: Never give account information, Social Security numbers, bank information or other sensitive financial information on a social media website. If you need to speak to a financial professional, use a firm-sponsored method of communication, such as telephone, letter, firm e-mail or firm-sponsored website.
Friends/Contacts: When choosing friends or contacts on a social media site, think about why you use the website. Decide whether it is appropriate to accept a “friend” or other membership request from a financial service provider, such as a financial adviser or broker-dealer. There is no obligation to accept a “friend” request of a service provider or anyone you do not know or do not know well.
Site Features: Familiarize yourself with the functionality of the social media website before broadcasting messages on the site. Who will be able to see your messages — only specified recipients, or all users?
On-Line Security Tips
As with all computer and web-based accounts, take precautions to keep your social media account information secure. Here are some security tips:
- Pick a “strong” password, keep it secure, and change it frequently.
- Use different passwords for different accounts.
- Use caution with public computers or wireless connections. Try to avoid accessing your social media accounts on public or other shared computers. But if you must do so, remember to log out completely by clicking the “log out” button on the social media website to terminate the online session.
- Be mindful of accessing your social media accounts on public wireless connections, such as at a coffee shop or airport. It is very easy to eavesdrop on Internet traffic, including passwords and other sensitive data, on a public wireless network.
- Be extra careful before clicking on links sent to you, even if by a friend.
- Secure your mobile devices. If your mobile devices are linked to your social media accounts, make sure that these devices are password protected in case they are lost or stolen.
For more information, see Investor Bulletin: Social Media and Investing – Understanding Your Accounts
Investor Bulletin: Social Media and Investing – Tips for Seniors
Investor Alert: Social Media and Investing – Avoiding Fraud
Red Flags of Investment Fraud Checklist
Can you spot the warning signs of investment fraud?
Protect your investments by watching out for these red flags:
Unlicensed investment professionals
Aggressive sellers who may provide exaggerated or false credentials
Offers that sound “too good to be true”
“Risk-free” investment opportunities
Promises of great wealth and guaranteed returns
“Everyone is buying it” pitches
Pressure to invest right now
Over-the-top, sensational pitches that may have fake testimonials
Unsolicited pitches seeking to obtain your personal information
Asked to pay for investments by credit card, gift card,
or wiring money abroad or to a personal account
Three ways to avoid fraud:
Research every investment opportunity thoroughly
before you invest
Conduct a background check on any investment
professional at Investor.gov
Real Estate and Investment Scams
Investment scams lure you in with promises of teaching you how to make a lot of money quickly, easily, and with low risk — usually by investing in the financial or real estate markets. Sometimes starting with a free seminar, the scammers later will charge you a hefty fee for their “proven” investment tricks. But the real tricks are the lies they tell you.
- Investment Coaching Scams
- Real Estate Investment Seminar Scams
- Precious Metals and Coins Investment Scams
- How to Avoid Investment Scams
- How to Research Investment Opportunities
- Where to Report Investment Scams
Investment Coaching Scams
In an investment coaching scam, the scammer will tell you that their “patented,” “tested,” or “proven” strategy (or something similar) will teach you how to make money investing in stocks, bonds, foreign currency, or tax liens. They promise that their investment approach will set you up for life — and even let you stop working.
What to watch out for
They get your attention with infomercials or online ads, encouraging you to attend free events or to watch free introductory videos. But later you find out that you have to pay a hefty fee to get the coaching they promise. They’ll show you success stories of people who have used their coaching program. But you have no way of confirming that their stories are true.
What to know
The truth is that the promoters of investment coaching scams exaggerate the money you can make with their system. They also fail to give you the step-by-step guide they promise, and lie about other people’s success. It’s all part of a marketing scheme to get you to pay thousands of dollars for what turns out to be empty promises.
Real Estate Investment Seminar Scams
In-person and online seminars about how to invest in real estate often promote “risk-free” training or business coaching systems. They may lure you in with big promises or guarantees of financial freedom, saying they’ll teach you how to make lots of money. But many real estate investment seminars are scams.
What to watch out for
The promotional materials and sales pitches used for real estate investment seminars often make over-the-top claims:
- Scammers say you can earn big money fast, regardless of your experience or training. But that’s not true.
- Scammers promise their deal is a “sure thing” that will give you security for years to come. It won’t.
- Scammers say you’ll rake in money by working part-time or at home. But most people don’t.
- Scammers promise you’ll be coached to success each step of the way. But there’s often little coaching, and no success.
- Scammers claim the program worked for other participants — including the organizers. And it might have, for a few people, but most people never make their investment back.
Don’t be convinced by ads with success stories of people saying how much money they made with little time, effort, and risk. Or ads that feature celebrities praising the program. Those kinds of claims aren’t reliable and don’t mean the program works. Real estate investment scams often use fake testimonials and pay people to endorse their programs.
What to know
For most people who invest in these real estate investment seminars — some of which cost thousands of dollars to buy into — the pay-off doesn’t match the promise. In fact, most people never get back the money they invested.
Precious Metals and Coins Investment Scams
In these scams, “metal dealers” or “rare coins merchants” tell you that there’s no better time than now to invest. Their goal? To create a sense of urgency and get you to act quickly.
What to watch out for
The scammers lie about their credentials and experience in these markets, and often don’t deliver what they promise. Instead, they take the investors’ money for themselves.
What to know
Before investing in precious metals like bullion, bullion coins, collectible coins, or gold, read the Commodity Futures Trading Commission’s precious metals fraud alert, and find out what questions to ask before you invest.
How to Avoid Investment Scams
If you’re considering paying for a program that promises to help you invest your money, stop and consider these things first:
- Statistics and testimonials can be faked. Scammers want you to believe their program is always successful. They might show reviews or testimonials by people who’ve used their program and made lots of money. But those could be paid actors or made-up reviews. You have no way of confirming their stories.
- Scammers exaggerate the significance of current events. Scammers follow the headlines and use current events to make their investment opportunity seem exciting, innovative, and timely. They want you to feel pressured to commit now without having fully researched the offer.
- No one can guarantee a specific amount of return on an investment. Scammers might claim that you can make thousands of dollars per day or per month for life. But they don’t tell you the risks. No one can guarantee that an investment will be successful. And if you ask questions about the investment, they might give you vague answers and focus only on how much money you’ll supposedly make.
See the U.S. Securities and Exchange Commission (SEC)’s investor alert for more tips.
Before you pay money
- Take time to research the offer. The promoters want you to think you’re one of the few lucky people who can get in on the program so they can rush you into making a decision. Don’t let them pressure you. Search online for the name of the company and words like “review,” “scam,” or “complaint.” Other people’s experience with the company can tip you off to possible problems.
- Consider the risk. Be particularly suspicious of promoters who play down risk or make written risk disclosures sound like only routine formalities required by the government so you’d sign without thinking much about them. Later, when you try to recover the money you lost, dishonest promoters could use those same risk disclosures against you.
- Independently verify claims. Never invest based solely on what you read in an online newsletter, bulletin board posting, or blog. Scammers often use news stories about the success of legitimate companies as bait. They’ll often claim that their “opportunity” is similar to a proven hot money-maker — when, really, it’s not. Make sure that you research the investment opportunity carefully before you commit.
How to Research Investment Opportunities
Real investments demand time and careful consideration. Before you make an investment, it’s good to take time to consult someone you trust and who you know has your best interests in mind. It’s also important to do some research.
Start by making sure your computer’s security software is up to date, and always practice basic computer security on any computer you use to access financial accounts. Then, once you’re ready to start researching the potential investments, here are some things to consider:
- The company, its officials, and promoters might already have a reputation. Look for published information about the company. Do a search online with the name of the company, officials, or promoters plus words like “review,” “scam,” or “complaint.” Look through several pages of search results.
- Many investment frauds involve offerings of unregistered securities. Generally, offers to sell securities must be registered with the SEC or be eligible for an exemption. To see whether an investment is registered, check the SEC’s EDGAR database and call your state securities regulator for more information about the company and the people promoting it.
- Many securities frauds involve unlicensed individuals or unregistered firms. Check out the background, including registration or license status, of anyone recommending or selling an investment, using the free simple search tool on Investor.gov.
- Find out where the company’s stock trades. Some companies can’t meet the listing requirements of a national securities exchange. The securities of these companies trade instead in the “over-the-counter” (OTC) market and are quoted either directly from a broker-dealer or on OTC trading systems, like the OTC Link ATS. Stocks that trade on the OTC market may have increased price volatility (drastic price changes in short periods of time), less publicly available information, and lack liquidity (the ability to buy and sell the stock quickly without substantially impacting its price). These factors make some OTC stocks more risky and susceptible to manipulation by scammers.
Where to Report Investment Scams
- If you suspect an investment scam, report it to the FTC at ReportFraud.ftc.gov.
- Report possible securities fraud to the SEC online. For tips on investing wisely and avoiding fraud, visit the SEC’s website for individual investors, Investor.gov.
- If your personal information has been misused in an investment scam, visit IdentityTheft.gov for steps you can take to deal with problems that may arise.