How to Spot Investment Fraud

The phone rings, and a friendly, energetic-sounding stranger is on the line asking if you have a minute to learn how to triple your money in just six months by investing in cryptocurrency. Or maybe someone you meet online has an uncle who’s a crypto-investment whiz and can give you some insider tips. But is the advice trustworthy? Not likely.

In 2025, more people had money stolen from them through investment fraud than through any other type of scam, based on reports to the FBI’s Internet Crime Complaint Center (IC3), with reported losses totaling $8.6 billion. That’s up almost $3 billion from the previous year, but still likely only a fraction of actual losses because fraud is notoriously underreported.

Investment scams aren’t new, but these days they often come in a new form: cryptocurrency scams. In these schemes, criminals typically draw people in with promises of quick, high returns on digital currencies like Bitcoin. They might direct victims to fake trading platforms or apps that display phony profits to build trust, then encourage bigger deposits. When victims try to cash out, the criminal claims they’ll need to pay a fee to access the money or that technical problems make withdrawal impossible. 

A more old-school investment fraud still perpetrated today is the Ponzi scheme, named after Charles Ponzi, who stole from scores of Americans in the early 1920s. He promised them lavish returns by speculating in international coupons used by people in different countries to send each other return postage. In reality, Ponzi was using new investors’ money to pay off existing investors. The late Bernie Madoff is the modern-day face of the crime.

Criminals often reach victims through social media, dating sites, and other online forums before proposing bogus investments. 

Common fraud tactics

Financial grooming. Also known as pig butchering, criminals, frequently based overseas, spend weeks or months cultivating deep emotional connections through dating sites, social platforms, and even through text messages that are seemingly sent in error. Once they establish a trust relationship, they introduce an “exclusive” crypto or trading opportunity. Victims of combined romance and investment scams are hit particularly hard when the truth of the relationship is revealed.

Free investment seminars, which often include a free lunch. The U.S. Securities and Exchange Commission (SEC) says criminals usually figure that if they do you a small favor, you’ll feel obligated to invest.

Big promises. Criminals like to dangle the prospect of fabulous wealth to distract you from realizing the whole thing is a scam.

Slick presentation. Don’t judge an investment opportunity by a company’s attractive, professional-looking website. Criminals can easily create a convincing online facade.

Impersonation. Scammers may pose as representatives of financial associations and regulatory agencies to create a false sense of security about an investment and secure an advance fee. In 2024, the SEC warned consumers that scammers were using their Form 4 filing to create the impression that their emails were coming from the SEC.