Scam tactics to look out for before investing according to my algo trading experience and personal research. This post includes no affiliate links and it is merely informative.

Technology has always fascinated me and been one of my favourite topics since I was a little one. In terms of investing it’s also superb, giving us the change to deploy and invest our hard-earned cash with a couple of clicks in an easy and simply way. Just register, validate your account, transfer some money and get ready to get some good returns they say!

Albeit most of these technology companies are legitimate, others may potentially be an utter scam or a “Ponzi scheme” organization. “Unfortunately”, technology is available for everyone, and as the balance of nature states, there will be some demons’ souls hidden behind the scenes sharing the same playground out with the rightful ones (let’s call that equilibrium?). Some of these evils are highly skilled, and they will use not only the latest technology but also the latest mental manipulation techniques in order to get you unconsciously traped. They will dress up professionalism, honesty, friendliness, trustworthiness and harmlessness on a daily basis and will show their teeth and real face at the time of asking for some of your “profits”**. These people are good at dolling up, making it difficult to spot the evil behind, with the danger of you forwarding your hard-earned cash into the wrong hands.

** Check out my Portfolio Update #4 to find out what I mean by “showing their teeth and real face”

Scammers showing their real intentions
Scammers will show their real intentions at the time you claim for your “profits”

In aims of doing my bit to help spread the word about the last scam awareness call from the FCA and Action Fraud, I’d like to lay down in this post the main indicators or signs that should raise some attention among investors before deploying any money.

Statistics for 2018/19 are worrying

  • Over £27million lost to scams involving crypto and forex investments in 2018/19.
  • Victims lost on average over £14,600 last financial year.
  • Reports tripled to over 1,800 from the year before.

What’s a financial scam or fraud?

Financial fraud can be broadly defined as an intentional act of deception involving financial transactions for purpose of personal gain. Fraud is a crime and is also a civil law violation. Many fraud cases involve complicated financial transactions conducted by ‘white collar criminals’ such as business professionals with specialized knowledge and criminal intent.

Source: Central Bank of Malaysia

Scam tactics to look out for before investing

Is the deal too good to be true?

Scams will often promise high returns for very little financial commitment. They may even say that a deal is too good to miss.

Every investment carries some degree of risk, and investments yielding higher returns typically involve more risk. Any “guaranteed” investment opportunity is often considered suspicious, use your common sense!

Be Wary of Pressure to Invest Immediately

A scam artist wants you to invest in what is best for him or her as quickly as possible. Any pressure to invest immediately because the golden opportunity will be gone in a flash is a huge red flag that the investment may be a scam.

They sometimes will offer you a bonus or discount if you invest in a short time span. Be aware of this!

Never proceed unless you are completely certain your money will be safe. Once you transfer, it may be too late to recover your funds, and your initial investing dream may turn into your worst investing nightmare.

Scammers will often try to hurry your decision making, they sometimes will offer you a bonus or discount if you invest in a short time span, so you don’t have time to think through properly about the crazy act that you are about to do. Always take a breath and think things through, please!

A true financial professional should always give you time to make an informed decision. It’s your money after all, and you are the one who needs to be confident with your financial decision.

Unregistered financial companies or unlicensed regulators

Regulation guarantees that there is some cross-check against the broker’s business practices, which is designed to ensure fairness for you. Without its input, the temptation to stray into dishonest and illegitimate practices would be ever-present in the industry.

Bear in mind that regulation doesn’t guarantee you’ve chosen the right investment for you, it does provide an important seal of approval that you’re dealing with a reputable provider – we want to make sure that we hand our hard earned capital over to a trustworthy financial company, don’t we?

Generally, registered and regulated companies must share key information about the company’s management, products, services, and finances to investors. That’s why I personally prefer to invest with companies that are regulated by any major financial regulatory body or display its data transparently.

Fake news

Scammers will often share fake reviews from supposedly happy investors on their website. They may also buy rewards to raise a point of confidence among future victims. Only reviews from trustworthy forums or consumer review websites like Truspilot should be considered, and even so scammers may get people to post fake reviews, so trust those that give a clear argument or proof only. You should also be aware that they may often pay well-known influencers to get over more people. I experienced this with my algo trading loss story, trusting at that time a Youtuber who shared good opinions about the investment. He vanished completely soon after the money laundering scandal with the Danish bank…

Withdrawal issues

If you are facing problems cashing out your money from investments it may be a sign that you are dealing with a Ponzi scheme. They will also encourage you to roll over your investments so you can get higher returns.

Lack of transparency

Financial services offering investments that are difficult to understand and don’t give the full information disclosed to investors is another red flag. Secrets and complex strategies are not welcome. Not sharing their business address on their website should also worry you.

Say no to friendships

Money managers from such financial scams will try to get well with you and built up a relationship that may seem very real just to gain your trust. I am not saying that every money manager who tries to emphasise with you will try to fool you, but before trusting anyone asks difficult and tough questions regarding their investment operations. If you notice a lack of knowledge, nervousness or unclear answers… don’t let them touch a penny!

Social Media Trap

Social media is the perfect tool for scammers to promote their get-rich-quick schemes. Posts often use fake celebrity endorsements and images of luxury items like expensive watches and cars. These then link to professional-looking websites where consumers are persuaded to invest.

Top 6 investment scam tactics to look out for

Finally, this video from a FCA financial advisor will show you the 6 common investment tactics that scammers use to make money out of your hard-earned cash.

Useful links

Reporting a scam in the UK

  • (also to report influencers)

Further info about scams

  • (FCA Warning List)
  • (How scammers win your trust)