The promise of easy money has always attracted scammers, and the rise of cryptocurrency has given them powerful new tools. From fake crypto exchanges to elaborate Ponzi schemes, investment fraud costs victims billions every year. Here's how to protect your hard-earned money.
The Current Landscape
Investment scams have evolved dramatically:
- Cryptocurrency scams now account for over $3.8 billion in annual losses
- Social media has become the primary recruitment channel
- Scams increasingly use AI and deepfakes to appear legitimate
- Average individual losses exceed $50,000
Common Investment Scam Types
Ponzi and Pyramid Schemes
These classic scams promise high returns but pay early investors with money from new recruits. Warning signs:
- Guaranteed high returns with "no risk"
- Returns that are suspiciously consistent
- Difficulty withdrawing your money
- Pressure to recruit new investors
- Unregistered investments and unlicensed sellers
Fake Cryptocurrency Exchanges
Fraudulent platforms designed to steal your crypto:
- Professional-looking websites that mimic legitimate exchanges
- Aggressive social media advertising
- Ability to deposit but not withdraw
- Customer support that becomes unresponsive
- Requests for additional "fees" or "taxes" to release funds
Pump and Dump Schemes
Coordinated efforts to artificially inflate asset prices:
- Heavy promotion of unknown cryptocurrencies or penny stocks
- "Insider tips" on social media or messaging apps
- Rapid price increases followed by crashes
- Celebrity endorsements (often fake or paid)
Pig Butchering Scams
A devastating combination of romance and investment fraud:
- Scammer builds a romantic or friendly relationship
- Gradually introduces "successful" crypto investments
- Victim invests and sees fake "profits"
- Encouraged to invest more until they're wiped out
Red Flags to Watch For
Unrealistic Promises
- "Guaranteed" returns (no investment is guaranteed)
- Returns significantly higher than market averages
- Claims of "risk-free" investing
- "Limited time" opportunities requiring immediate action
Pressure Tactics
- Urgency to invest before "missing out"
- Discouragement from seeking outside advice
- Pressure to recruit friends and family
- Making you feel stupid for asking questions
Lack of Transparency
- Vague or overly complex investment strategies
- Unregistered investments or advisors
- Difficulty verifying company registration
- No clear information about fees or risks
How to Verify Legitimacy
Check Registration
- SEC EDGAR database for company filings
- FINRA BrokerCheck for advisor credentials
- State securities regulators for local registration
- CFTC for commodity and futures registration
Research Thoroughly
- Search the company name + "scam" or "fraud"
- Look for reviews on independent sites
- Check if the returns claimed are realistic for the market
- Verify physical addresses and contact information
Use Legitimate Platforms
- Stick to well-established, regulated exchanges
- Verify website URLs carefully (scammers use lookalikes)
- Never invest through links sent in unsolicited messages
- Use our website checker to verify platforms
Protecting Your Investments
- Never invest money you can't afford to lose
- Diversify—don't put everything in one opportunity
- Get independent advice from licensed professionals
- Be skeptical of unsolicited investment advice
- Take your time—legitimate opportunities don't expire overnight
If You've Been Scammed
- Stop investing immediately
- Document everything—transactions, communications, websites
- Report to the SEC, FTC, and FBI's IC3
- Contact your bank or credit card company
- Beware of "recovery" scams targeting previous victims
Remember: if someone guarantees you'll get rich quick, the only person getting rich is them. Real investing requires patience, research, and accepting that all investments carry risk.