Investment Scams Targeting Groups
Some investment scams target members of identifiable groups, such as older investors, or religious or military communities. The fraudsters involved in these scams often are – or pretend to be – members of the group. They may enlist respected leaders from the group to spread the word about the scheme, convincing them it is legitimate and worthwhile. Many times, those leaders become unwitting victims of the fraud they helped to promote.
These scams exploit the trust and friendship that exists in groups of people. Because of the tight-knit structure of many groups, outsiders may not know about the investment scam. Victims may try to work things out within the group rather than notify authorities or pursue legal remedies.
These scams often involve “Ponzi” or pyramid schemes where new investor money is used to pay earlier investors, making it appear as if the investment is successful and legitimate.
Never let down your guard because someone you trust brought an investment opportunity to your attention.
Tips to Avoid Fraud
- Even if you know the person making the investment offer, be sure to research the person’s background, as well as the investment itself – no matter how much you trust the person who brings the investment opportunity to your attention. To research an investment professional, use the free tool on Investor.gov — you’ll be able to check if they are currently licensed and registered, and if they’ve had red flags like customer complaints or disciplinary actions.
- Never make an investment based solely on the recommendation of a member of an organization or group to which you belong. This is especially true if the recommendation is made online or through social media, as the recommendation may be a fraud.
- Do not fall for investments that promise spectacular profits or “guaranteed” returns. Similarly, be extremely leery of any investment that is said to have no risks. Very few investments are risk-free. Promises of quick and high profits, with little or no risk, are classic warning signs of fraud.
- Fraudsters often avoid putting things in writing. Avoid an investment if you are told they do “not have the time to put in writing” the particulars about the investment. You should also be suspicious if you are told to keep the investment opportunity confidential or a secret.
- Don’t be pressured or rushed into buying an investment before you have a chance to research the “opportunity.” Just because someone you know made money, or claims to have made money, doesn’t mean you will, too. Be especially skeptical of investments that are pitched as “once-in-a-lifetime” opportunities, particularly when the recommendation is supposedly based on “inside” or confidential information.
- Fraudsters may try to tap into your desire to get in on the ground floor of the latest technology, product, or growth industry.