How to Spot Investment Fraud

Protect yourself from criminals peddling quick ways to multiply your money

Patrick J. Kiger,

Updated February 27, 2026

AARP

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En español

Published December 03, 2018

/ Updated February 27, 2026

a smartphone screen with a down arrow, on a background of hundred dollar bills

Photo Collage: AARP; (Source: GettyImages)

In this story:

About investment scams • Common tactics • Red flags • Protect yourself • Reporting scams • Resources

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 someone you meet online has an uncle who knows of a sure-thing cryptocurrency investment opportunity. But is the deal real? Maybe not.

In 2024, more people lost money to investment fraud than to any other type of scam, with reported losses totaling $5.7 billion. That’s up about $1 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 scammer claims they’ll need to pay a fee to access the money or that technical problems make withdrawal impossible.

A more old-school investment scam 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 trying to lure them into bogus investments. (Sometimes they still work their scams in person.)

Common scam tactics

Financial grooming. Also known as pig butchering, scammers, frequently based overseas, spend weeks or months cultivating emotional connections through dating sites or social platforms, using flattery and shared stories to gain trust. Once the bond forms, 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 scammers usually figure that if they do you a small favor, you’ll feel obligated to invest.

Big promises. Scammers 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.

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 warns, it becomes more difficult to track.

“Inside” information. Don’t jump on inside information posted online that promotes shares of a company that are certain to go up. It could be a “pump-and-dump” — a ploy to artificially drive up the price, 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.

Tell a friend or family member. It’s always good to have a second opinion. If the person proposing the investment tells you not to tell anyone, it’s probably a scam.

Take a pause. Don’t let anyone rush you into parting with your money; scammers want you to make decisions while your emotions are high and rationality takes a back seat.

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 FBI.

More resources

The SEC also issues scam alerts, which you can find on its website’s Investor Alerts and Investor Bulletins.
FINRA has a Securities Helpline for Seniors (844-574-3577).
Register for the FTC’s National Do Not Call Registry online or by calling 888-382-1222 to avoid cold calls.
The North American Securities Administrators Association website has an investor education section that includes information on how to recognize fraud.
If you are a scam victim or have questions about scams and fraud, you can call the free AARP Fraud Watch Network Helpline at 877-908-3360 for advice and support.

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Patrick J. Kiger is a contributing writer for AARP. He has written for a wide variety of publications, including the Los Angeles Times Magazine, GQ and Mother Jones, as well as the websites of the Discovery Channel and National Geographic.