Key takeaways
- Guaranteed high returns with no risk is the clearest red flag there is.
- Pressure to act quickly or keep it secret is a manipulation tactic.
- Verify the firm and the person with the regulator, using contact details you looked up yourself.
Red flags
- Guaranteed or unusually high returns with little or no risk.
- Urgency: “act now”, limited slots, secret tips.
- Unsolicited contact by message, social media, a dating app or a “wrong number”.
- Requests to move to a private chat or a platform you cannot check.
- Payment in crypto, gift cards or by wire to a personal account.
- Complex strategies no one can explain clearly.
- Not registered with the relevant regulator.
Pump-and-dump
Promoters hype a thinly traded stock, often a penny stock, to push the price up and then sell their own shares into the buying, leaving everyone else with a collapse. Be wary of sudden promotion through social media, chat groups and paid newsletters.
Fake platforms and “advisors”
Fraudsters build slick apps showing fake gains, encourage you to deposit more, then block withdrawals. Always check that a platform is registered, and that you can withdraw a small amount before putting in more.
Checking before you commit
- Look up the firm and individual on the regulator’s database (FINRA BrokerCheck, SEC, FCA in the UK).
- Find the contact details yourself rather than using ones you were sent.
- Ask for written documentation and read it.
- Talk to someone you trust before sending money.
Report suspected fraud to your national regulator. Real firms welcome questions; scammers push back.
Questions this guide answers
- how to avoid investing scams
- how to spot a stock scam
- is the stock market a scam
- is crypto a good investment
- how to avoid losing money investing
- what is a penny stock
For informational and research purposes only. Not financial advice. Past performance doesn't guarantee future results.