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How to Spot Investment Fraud

Protect yourself from criminals peddling quick ways to multiply your money

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Photo Collage: AARP; (Source: GettyImages)

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 gold and silver mines. Or maybe you get an email urging you to buy shares of a company whose stock price is sure to go through the roof. It sounds too good to be true — because it is too good to be true.

In 2023, investment fraud was the costliest type of crime tracked by the FBI, with nearly $4.6 billion in losses reported. That’s a 38 percent increase from $3.3 billion in 2022.

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This crime isn’t new. In the early 1920s, to name one famous example, a con artist named Charles Ponzi fleeced scores of Americans by promising 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.

Ponzi has since entered the vernacular. You may remember the Bernie Madoff case; he set up a Ponzi scheme to steal the life savings of his victims. In 2023, The Perfect Scam podcast detailed a Ponzi scheme selling phony green energy.

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Have you seen this scam?

  • Call the AARP Fraud Watch Network Helpline at 877-908-3360 or report it with the AARP Scam Tracking Map.  
  • Get Watchdog Alerts for tips on avoiding such scams.

Today criminals have many ways to reach ordinary people (robocalls, email, TV, social media) and convince them to hand over their money. And with investment fraud complaints fairly evenly spread among people ages 30 to 60-plus, according to the 2023 FBI figures, anyone of any age can be exploited by phony investment schemes.

Common scam tactics

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

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Big promises. Con artists 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. These days, crooks 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.

Scammers have also impersonated executives from the Financial Industry Regulatory Authority (FINRA), a nongovernmental group that watches over U.S. broker-dealers. The organization says its officers and employees would never ask investors for money.

Video: Ways to Avoid Investment Fraud

Red flags

High pressure. A caller who pressures you to send money right away to take advantage of a supposedly once-in-a-lifetime opportunity.

Extravagant claims. A caller who uses phrases such as “incredible gains,” “breakout stock pick” or “huge upside and almost no risk!” The SEC says such claims suggest high risk and possible fraud.

International investments. Recommendations of foreign or “offshore” investments from someone you don’t already know and trust. Once your money is in another country, the SEC cautions, it’s more difficult to keep watch over it.

“Inside” information. Don’t jump on inside information posted to social media, chat rooms or forums promoting shares of a company that are certain to go up. It could be a “pump-and-dump” — a ploy to drive up the price artificially, enabling scammers to sell their shares for a big profit before the stock crashes and the remaining investors take a loss.

How to be a smart consumer

Hang up. FINRA recommends rehearsing some stock lines to cut short a caller’s high-pressure pitch, such as, “I’m sorry, I’m not interested. Thank you.”

Ask questions before you make any investment, including:

  • Is the financial product registered with the SEC or state securities agencies?
  • What are the fees?
  • How does the investment company make money?
  • What factors could affect the value of the investment?

Do your homework. If you’re considering investing in a publicly traded company, look up information about its finances and operations in the SEC’s EDGAR database. Don’t make investment decisions based on TV commercials, phone calls or email solicitations.

Consult trusted advisers. If you have a lawyer or a financial adviser, have a conversation with them about what you’re considering.

Know who’s handling your investment. Do a background search in FINRA’s BrokerCheck, an online database.

If you’ve been targeted

File complaints with FINRA and the SEC as well as your state or provincial securities regulator.

Report scams involving precious metals or commodities fraud to the Commodities Futures Trading Commission.

Report fraud to the FTC and the FBI .

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spinner image cartoon of a woman holding a megaphone

Have you seen this scam?

  • Call the AARP Fraud Watch Network Helpline at 877-908-3360 or report it with the AARP Scam Tracking Map.  
  • Get Watchdog Alerts for tips on avoiding such scams.