When it comes to your money, it’s important to always be on the lookout for bad actors.

In 2024 alone, the FBI’s Internet Crime Complaint Center (IC3) received nearly 50,000 complaints about investment crimes, and more than $6.5 billion in losses were reported. Investment scams continue to be one of the top financial scams.

These types of scams are on the rise, and they target the full spectrum of investors—from those with big, well-established portfolios to those who haven’t started investing. Scammers lure people in with promises of guaranteed returns, fake trading platforms and insider crypto schemes.

In this guide, you’ll learn about common types of investment scams, how to spot investment scams, what to do if you’ve been scammed and more. The goal? To safeguard your hard-earned money.

What Are Investment Scams?

Investment scams happen when fraudsters lure individuals with promises of high returns and minimal risk, often using fake opportunities like stocks, cryptocurrency or real estate to steal money, as defined by the FBI. But their goal obviously isn’t to grow your wealth; it’s to take your money and disappear. 

These schemes can be incredibly convincing, making it difficult to distinguish between a legitimate opportunity and a fraud. 

Who Is Most at Risk for Investment Scams?

Investment scams can target anyone, but certain groups are more vulnerable than others.

New investors, for example, are  often at higher risk because they might not yet recognize common red flags (see more below). 

Older adults are also frequently targeted, especially with retirement-focused or income-generating investment offers. In 2024, those aged 60+ reported to the FBI a loss of $4.8 billion—more than any other age group.

People who are interested in cryptocurrency, alternative investments, or the “latest” or “most exclusive” opportunities may also face more risk since scammers like to operate in less regulated spaces.

Common Types of Investment Scams

Investment scams are on the rise. From 2023 to 2024, reported investment scams jumped 24%, according to data from the Federal Trade Commission. 

Before diving into the warning signs, it’s important to know some of the most common types of investment scams out there:

• Ponzi schemes: This type of scam pays returns to earlier investors using the money from new investors. There’s no actual profit-making investment happening—it’s just a money shuffle. This doesn’t just happen with cash; the SEC has issued alerts about Ponzi schemes using virtual currencies.
• Pyramid schemes: Similar to Ponzi schemes, pyramid schemes involve recruiting others to invest. These scams rely on continuously bringing in new people, and once the recruitment stops, the scheme collapses.
• Pump-and-dump scams: Fraudsters inflate the price of a stock by spreading false information. Once the price spikes, they sell their shares, leaving other investors with worthless stock.
• Advance fee scams: You’re asked to pay upfront fees for an “investment opportunity” that never materializes.
• Cryptocurrency scams: Fraudsters promote new or unknown cryptocurrencies as the next big thing, but these digital currencies often vanish overnight. The most recent FBI internet crime report detailed its Operation Level Up, which notified more than 4,300 victims of cryptocurrency investment fraud. Of those individuals, 76% were unaware they were being scammed.
• Affinity fraud: Scammers target groups that you belong to, such as religious organizations, professional associations, or social clubs. They leverage trust within the community to promote fraudulent investments.

Red Flags: How to Spot Investment Scams

Spotting an investment scam is your first line of defense. Here’s what to watch out for:

• Guaranteed high returns: Legitimate investments always involve some risk, so if you’re being guaranteed profits—especially not sky-high returns like “double your money in a week”—that’s a big red flag. As a rule of thumb, if it sounds too good to be true, it likely is.
• Pressure to act quickly: Scammers create a false sense of urgency. Whether it’s a “limited-time offer” or an “exclusive opportunity,” they don’t want you to think critically before handing over your money.
• Lack of transparency: Scammers will often avoid giving you clear answers on how the investment works or how they’re generating profits. If you can’t get detailed information, walk away.
• Complex or confusing investments: Fraudsters often use jargon or complex language to make an investment sound sophisticated. If you don’t understand how the investment works, don’t invest.
• Promises of insider information: Some scams offer “exclusive” or “insider” information, making you feel like you’re getting in on a secret opportunity. Be wary—this is often a trick to lure you into a scheme.
• Fake endorsements: Scammers might use fake testimonials or claim that they are endorsed by celebrities, well-known companies, or government agencies to appear more credible. Always look into these.

To go deeper, learn about the psychology of financial fraud and the psychological tricks scammers use.

How to Vet an Investment Opportunity

No red flags? If you’ve spotted a potential investment opportunity, it’s crucial to conduct thorough due diligence before making a commitment. Take these steps to avoid scams:

• Research the company. Start by researching the company offering the investment. Look for online reviews, news articles and discussions. Check their website and social media accounts for transparency in operations and past performance.
• Verify registration and licensing. Make sure the company is registered with the relevant financial authority. For example, in the U.S., you can check the SEC’s EDGAR database to see if the company is properly registered. Licensing is equally important. You can use tools like FINRA’s BrokerCheck to verify if the person offering the investment is licensed.
• Ask for detailed investment materials. Request official documentation, such as prospectuses, and read them thoroughly. Be wary of any reluctance to provide documentation or overly simplified materials that gloss over risks.
• Check track records. Look into the company’s past investments and performance history. Established firms should have a verifiable track record. If the company or individual has little to no history, consider it a red flag.
• Understand the fees and charges. Legitimate investments will have clear, upfront fees associated with them. If fees are hidden or seem excessive, that could indicate an investment scam.
• Consult with a financial professional. If you’re unsure about an investment, talk to a licensed financial advisor who can provide unbiased advice. They can help you evaluate the risks and decide if the opportunity is legitimate.

What to Do if You’ve Been Scammed

If you’ve been scammed, the first step is to stop all payments immediately. If you’ve set up automatic payments or are committed to recurring fees, contact your bank or payment provider to halt these transactions. Freezing any future payments is essential to prevent further losses.

Next, report the scam to the relevant authorities in your country. In the U.S., you can file a report with the FTC or submit a complaint or tip to the SEC.

Informing your bank or credit card company is also crucial. They might be able to help you reverse fraudulent transactions or prevent more unauthorized withdrawals. Many banks have fraud protection services that can help you recover lost funds.

While it’s normal to feel panicked, staying calm is important. Scammers often use fear tactics to rush victims into making poor decisions. Evaluate the situation, and avoid making hasty moves that could further complicate matters.

Be methodical in gathering evidence of the scam, such as transaction records and communications with the fraudster.

Finally, if you’ve lost significant money, consider seeking legal assistance. If applicable, consult with a lawyer or financial fraud organization that can provide you more information on how to pursue legal action or participate in class-action suits.

Specialized legal help may also assist in recovering your money, especially if the scam involves complex schemes like offshore accounts or cryptocurrency fraud. Taking these steps promptly increases your chances of minimizing your losses and possibly recovering some of your funds.

Tips to Protect Yourself from Investment Scams

When it comes to investing, one of the best ways to protect yourself from scams is to use reputable investment platforms.

If you’re not sure where to start, turn to KashKick. KashKick is a rewards platform that pays members when they play games, take surveys, and try out products and services—including investing apps.

For example, Grifin will automatically invest $1 into a company each time you make a purchase there. Order Starbucks? Grifin will automatically invest $1 in Starbucks stock. Shop on Amazon? You’ll invest $1 in Amazon stock with every purchase. Plus, when you subscribe and make your first investment, you can get a $5 KashKick reward.

There’s also Ark7, which allows you to invest in shares of real estate—and when you purchase your first share of $100 or more, you’ll get a $40 reward through KashKick.

KashKick vets all the offers you’ll find on the app, and you can always look up online reviews and ratings, too! You’ll notice these deals can change, so to check out the latest opportunities, tap over to “Deals,” then filter by “Investing.” This makes it super easy to find the best fit for you and your money goals.

Additional tips to keep you protected from investment scams include keeping up-to-date on the latest scams in the news and monitoring your accounts. Being proactive can help you stay ahead of the bad actors!

Final Thoughts

Avoiding investment scams doesn’t have to feel like a chore—it’s all about staying smart and being a bit of a detective. If you keep your eyes open, trust your gut and do your research, you’ll be way ahead of the game.

Want to learn more about making smart investments? Start with this beginner’s guide to investing.