Have you noticed an uptick in unsolicited text or social media messages recently? If so, you’re not alone. These messages are the lures scammers use to run investment scams that leave consumers financially and emotionally devastated. Investment fraud led all categories of fraud in 2023, with $4.6 billion in losses — a 21% increase from 2022. The Colorado Division of Securities receives complaints every week from investors that have been scammed out of their lifesavings.
All a scammer needs is one response to their social media message or text. Then they’ve hooked their target and can start to reel them. The scheme often moves to private messaging where a conversation builds into a relationship that can include fake romances, fake profiles and fake websites. It culminates in financial fraud.
In addition to the financial loss, according to the Financial Industry Regulatory Authority (FINRA) Foundation, nearly two-thirds of victims experienced one severe emotional consequence like high stress, anxiety, insomnia or depression.
But you can do something about it: look out for these red flags and take these steps below to protect yourself and loved ones.
What are the red flags of investment fraud?
• Promises of high guaranteed returns with no risk/low risk: Beware. No high return investment is risk-free or even low risk.
• Unsolicited offers: This is how scammers find their victims.
• Unregistered products: Most securities have to be registered. You can verify registration at sec.gov/edgar.
• Missing documentation: Never purchase a security without documentation.
• Complex strategies that are “proprietary” or “too hard to explain”: Legitimate professionals explain their strategies. Scammers don’t.
• Requiring you to sign up to an unverified website platform to see your returns: Scammers are creating online platforms that show huge returns on accounts. It’s all fake.
• Urgency or secrecy: Pressure to “act now” or “don’t tell anyone” are signs.
• Payment method: Mailing gift cards, payment by Zelle or a wire to a personal account are red flags.
How can you avoid investment fraud?
• Don’t respond. Social media is the number one method scammers use to find victims: don’t respond to unsolicited messages.
• Ask questions! If it sounds too good to be true, it probably is. If the sellers’ answers are “complicated” or not clear, don’t invest.
• Do a basic google search on the company, the people, the phone number, the email addresses.
• Get a written copy of the offer.
• Check the salesperson’s background to ensure they’re a legitimate professional at Investor.Gov.
• SLOW IT DOWN. Pause. No legitimate investment is that urgent. It’s your money. If you have experienced investment fraud, file a complaint with the Colorado Division of Securities. As part of the Department of Regulatory Agencies, the Division exists to protect investors and maintain confidence in the securities market.
