Investment Scams
- Scam Radar
- Aug 30, 2021
- 14 min read
Updated: Apr 18, 2023
Investment scams are another scam that has been on the increase in recent years. If you were to Google “Investment Scams 2021 U.K.” you will see a dozen search articles from Which?, The National Crime Agency (NCA), The Financial Conduct Authority (FCA), City of London Police and Action Fraud etc. All of which report huge rises in investment scams over the last year.
The BBC report found that in April 2020 investment scams rose by 29% over the previous year (1). Action Fraud also reports the same size increase in all reported fraud from 2020/2021 (2). In July 2021 Sky News reported that there were 4.6 million fraud offences reported in England and Wales in the year ending March 2021 (3). That equates to 12,602 reported cases of fraud in England and Wales every day. It’s not just the U.K. that is falling victim to these scams, CNBC in America also report huge increases in reported fraud (4).
The point I am trying to make is that you yourself are more likely than ever before to have either fallen victim to some form of fraud or know someone who has. Investment scams are now ranking as some of the most prevalent scams around, and crypto currency investment scams are forming a large part of this increase (5).
So what are Investment Scams?
An investment scam is a scam whereby the fraudster will offer you an investment in a product / company / stock share / Crypto or something similar that either;
A) Doesn’t exist
B) Does exist but they will take your money and invest it elsewhere rather than investing in the product you actually requested or that they advertised
C) The scammer pretends to work for a company that you are investing with but they don’t actually work for that company. i.e. fake website / company
Often the investments are advertised to make generous returns and the victim is lured in by the prospect of these returns and as such is willing to take on the investment. You might be reading this and thinking “greedy buggers, if it’s too good to be true then it often is, more fool them” but the scammers don’t always advertise crazy returns.
There are many cases whereby the scammer has cloned a legitimate website thereby tricking the victim into thinking they are investing in a legitimate stock or share in a legitimate company with completely normal investment returns such as 5% APY. This is actually a good return over time, and better than most banks can offer and it’s not too ridiculous to make you think it’s a scam.
Often these scammers will speak with you on the phone, send you paperwork with legitimate looking contracts to sign and email you back and forth answering any questions you may have. Its only once the money has changed hands and the lack of communication thereafter does the victim often realise they have made a mistake and when they do their research afterwards they realise the website or product is actually fake.
More recently there has been an increase in Crypto related investment scams whereby the victim is promised huge returns. In January 2017 a single Bitcoin was worth approximately £800 per coin, however, by the end of 2017 Bitcoin was hitting every major news headline as its price climbed northwards to approximately £14,000 per coin around mid December 2017. That’s approximately a 17 fold increase which is crazy returns on any investment. With that kind of increase in one year some people were falling over themselves to invest in the latest trend. As a result, a huge number of scammers pounced on this opportunity to lure people into believing that if you were to put your money in their company they would make you huge returns. Given the latest COVID -19 pandemic and the rise in Bitcoin from around £4000 in early 2020 to £46,188 in mid April 2021 people are once again being lured into opportunities to make life changing money.
How does the investment scam work?
Below is an example of how an investment scam works. It doesn’t always go exactly the same way though. There are many variations in the scam, too many to cover in this website, but I have tried to generalise how the scam will tend to go.
More often than not these scams are initiated on social media platforms whereby the victim makes contact with someone who reports to have made a decent return on their investment. The victim is told to contact “Joe Bloggs” who thereafter informs them that if they send “x” amount of funds to them they will invest it in their online investment platform on their behalf. The victim, who may be cautious, may sometimes provide a small amount of funds, this could be £50 or £100 etc., and within a matter of days their £50 will turn into £150 and the funds will sometimes be transferred back into their account or they may be notified that they can freely withdraw the money if they wish. This is where the scam starts to gain traction. The scammer will then inform you that you should invest more money as you will see greater returns. The victim, after seeing a decent return on their small investment, then transfers more money maybe £1000? Soon this £1000 turns into £5000 profit and the scammer suggests you invest more money, so the victim invests another £3000 and then the money turns into £12,000 profit and so on. Usually the narrative used is that the more money you add to the account the greater the returns will be on your investment.
The scammer will also be very good at pressurising you to invest more money and may become angry and tell you that you are wasting their time if you hesitate. For those of you who have read the Romance Fraud blog you may notice a similarity here. Scammer’s love to use emotion and pressure to prevent you from stopping and thinking about what you are doing. By bombarding you with pressure and emotion you are more susceptible to making irrational actions.
Three of these scams I have encountered within 2021 have all played out in a similar fashion. The victims have spent approximately £30k plus and after empting their savings and in a matter of weeks to months they are now sitting on in excess of £500k profit on this make believe trading platform that was provided by the scammers. Every single one of them have thereafter tried to withdraw their money and were told by the scammers that they need to pay 10% of the total funds in fees. In every occasion the victim is informed that this fee must be paid up front and cannot be taken out of the profit. All three of the victims I encountered had put everything they had into these investments and didn’t have another £50k to provide, the scammers informed them that for every 24hrs they wait they would lose 10% of their funds. As with most scams this is typical narrative as the urgency of losing the funds then pushes the victim to start asking friends and family for assistance and it’s their friends and family that often help them to realise what has happened and what they have done.
The majority of enquiries carried out by police thereafter typically find that the funds were never invested in any online trading platform. Instead the money was laundered through a series of transactions and processes in order to hide the funds or the funds were transferred out into cash at an exchange in a foreign country far outside the jurisdiction of local law enforcement.
What should you do if you are a victim of this type of scam?
If you have been or are presently in the middle of this type of scam then stop what you are doing and do not give any more money to the scammers. Immediately inform the police and provide them with copies of all chat logs, any emails you may have, copies of your bank statements and anything else that the police require to help them with their investigation. As with all police enquiries, the more accurate the information you provide, the better the investigation will go. It may be difficult but try to give them as much information as you can muster and be as accurate as you can in your description of the events.
In addition to contacting the police make sure to contact your bank and inform them that you are a victim of a scam and provide them with any crime reference numbers you have been given by the police. You will also need to enquire on whether or not the bank is willing to reimburse you with regards to the funds you have lost. I won’t go too much into this right now and I have mentioned a bit about this process within the Romance Fraud blog but I will do a future blog on my recommendations as I am aware some people have had great difficulty when dealing with the banks.
So how do I protect myself from Investment Scams?
As with a lot of frauds and scams, the easiest way to protect yourself from investment scams is to do your own research in the company prior to any form of investment. There is no stock, share, Crypto, precious metal that is going to shoot up in value so quickly that you are going to miss out on the investment. All investments, regardless of what they are, go up and down in value like waves in the sea. If you miss one rise in price there will be a dip at a later point and if you are a long term investor there will be plenty of opportunity to make a profit in the future. Time spent carrying out research will also increase your chance in spotting a scam before you hand over any money.
If it’s a website you want to access an investment through then look to see that it has https:// at the start of the web address with a padlock symbol alongside the web address to show the site is secure and encrypted, you will find an example of this at the top of the Scam Radar web address which you can see in the image below.
A HTTP website (without the "s" and padlock symbol) is not secure and any information, such as bank details, that you may submit through this website will not be encrypted and can be intercepted. The HTTPS and padlock symbol isn’t fool proof and scammers are now overcoming this feature, so don’t fully rely on this alone.
In addition to the above check that the investment website has reviews, either on its website (however be aware that this can be cloned), or on review websites such as Trust Pilot but again be aware that this can also be faked. You can also Google the website followed by the word ‘scam’ and see what appears.
It is difficult to the untrained eye to spot a fake website and scammers are becoming more aware of how to bypass security features in order to clone a website and are very good at spamming reviews to make a fake website look legit so please don’t rely on this method alone.
In addition to doing the above checks, don’t make any investments with companies or people that contact you out of the blue via email, social media, telephone or text. The chances are Warren Buffet isn’t going to text, email or befriend you on Facebook asking if you want to make a quick £1,000,000. If someone contacts you saying they can make you rich, chances are it’s a scam.
I have also seen videos on Facebook of famous celebrities saying they earned crazy amounts of money investing in a certain stock or adverts saying the people on Dragons Den missed out in investing this product or more often it’s someone famous getting rich investing in a Crypto coin. I’ve seen videos of Snoop Dog, Kanye West, Ice T and P Diddy. These videos often have links to another website where you too can, allegedly, get rich quick!! Stay clear of these videos, they are all fake. If you see one, report it to Facebook and they will look into it. (6)
Another tool you can use to check the legitimacy of an investment company is to see if it’s registered with the Financial Conduct Authority (FCA). Any firm operating within the UK must be registered with the FCA. If the company is operating outside of the U.K. and is a legitimate company, you won’t have access to the Financial Services Compensation Scheme (FSCS) or the Financial Ombudsman services. If it’s a fake company you won’t get anything. The FCA has a list of cloned websites and fake companies so if you have been contacted by someone reporting to work for one of these companies then stay clear. If it’s not on this list then just be aware that it may not be on this list purely because it hasn’t been reported to them yet.
An investor friend of mine (Siam Kidd) once said that he will spend as much time as he can trying to find evidence of why he shouldn’t invest in a certain product, website, Company, Crypto etc. I personally agree with this method. If you take the time to look at any investments in this manner then you will less likely fall victim to an investment scam. If you are just looking for a safe (I use the term loosely as all investments carry a certain amount of risk) investment then speaking with your bank or contacting a legitimate company such as Hargreaves Lansdown or similar, is a safer option than someone you have met on Facebook or been contacted by via email.
Lastly, if, after everything you have done, you decide to make any investments with this person / company then a good idea would be to make your transactions via a credit card and not via a bank transfer. If the company you have invested in turns out to be legitimate then you can switch to bank transfers at a later date if you so wish. You will have increased protection against being a victim of a fraud through credit card purchases and will likely, with a bit of explaining and strong justification, get your money back.
If you pay through bank transfers then it will be a challenge getting your money back from the banks and you will likely have a long drawn out process, combined with a number of letters back and forth, if you stand any chance of getting any money at all reimbursed to you.
If you purchase any form of Crypto and thereafter transfer that to the scammers then you will have absolutely zero protection and it will be extremely hard to justify to any bank or credit card company that you are a victim of fraud. It’s very likely you will receive no help from any financial institution if you invest in a scam in this manner.
There is a continuation of this scam!!
As with most scams, there is a continuation whereby the scammer will attempt to gain more money out of you. It’s more common with the Crypto side of this scam rather than the stocks and shares scam or investing in companies scam but there are plenty of examples of this continuation in both.
How the continuation works is that once you have been scammed out of your investment money and more often than not, alerted them that the police will be contacted as you are now aware that this is a scam, you will probably be contacted by another "company" reporting to be a private investigation company, or something similar. This supposed private investigation company will amazingly already be investigating the scam company that you dealt with and will be in the process of recovering money back from them. In most examples they state it’s not all of the money but it’s the majority of the money that has been recovered and will often list a figure close to the amount ou lost through the scam. When you engage with this private investigation company they will likely tell you there is a finder’s fee for recovering the money which you will need to pay up front.
Don’t pay them any money as this is just a continuation of the original scam. If you pay them you’ll quickly find that they will stumble upon an issue whereby you will need to pay more and more money or, after you pay them, you’ll find that the communication dries up and you’ll realise the scammers have just gotten away with even more money. In addition to this don’t provide them with your account details as this can lead to further more personalised and targeted scams in future.
Just remember the aim for the scammers is to get as much money out of you as they can. If you fall for just one scam that signifies to them that you will likely fall for another scam, and when one scam fails they will just switch to the other in an attempt to get extra money from you. Once they have finished with you then they will sell your details on to other contacts who will, in turn, bombard you with other scam attempts.
A quick side word about Crypto Currency
I have mentioned Crypto a few times within this blog and rightly so. In the last year many fraudsters and scammers have moved over to Crypto currency and are using this to hide their funds, launder their money or entice you into making large sums of profit as part of their scam.
Bitcoin has been around since 2009. Crypto currency in general has been around in one form or another for longer than that however Crypto currency as we know it in the modern world began with Bitcoin. Many scammers favour Bitcoin as their go to currency of choice. The media, government and to some extent this blog, have done a good job of demonising Crypto currency as a dark dirty scam that criminals use to hide their funds. Whilst this may be partially true to some extent, it’s not the whole truth. There are many arguments that money laundering and criminal actions are just as bad with real money as it is with digital money.
I am a big advocate of Crypto currency and I want to make it clear that the majority of Crypto currency in itself isn’t a scam, yet there may be scam Crypto currencies out there that are scams. Bitconnect is probably the most famous (amongst Crypto fans) whereby investors lost a total of $3.45 billion, however other cryptocurrencies such as Bitcoin, Ethereum and many many others are not scams in themselves. The same goes for Crypto exchanges; Coinbase, Binance, Kraken, Crypto.com, etc. are not scam companies so if you are contacted by Joe Bloggs off of Facebook and he asks you to invest “x” amount of money in Bitcoin through Coinbase and then transfer that to him then it’s not Coinbase that is the scam. It’s the bloke who contacted you from Facebook.
If you do lose any money through a scam in the form of Crypto then keep your log in details to any exchanges you have. If the scammer helped you set up the account then change your password at the first available opportunity to prevent them from gaining further access to your account. Do contact the exchange, be it Coinbase, Kraken or who ever, they will do what they can on their side and believe me they do their work. All the major Crypto exchanges are extremely cooperative with any law enforcement as they are all too aware that Crypto is being used in a malicious manner and they will do everything in their power to help. They cannot, however, reverse the transaction like a bank can so it’s unlikely that you will see the funds shooting back into your account. This is not through choice from the Crypto exchange or some legal decision, this is simply due ot the way Cryptocurrency works. Transactions are one way and cannot be reversed.
If you decide that you are going to invest money into any form of Crypto then please do your research prior to any form of investment. Copy my investor friend that I mentioned above and try and find as many reasons as you can as to why you shouldn’t invest. If you have done your research and still want to invest then only invest what you can afford to lose and not a penny more. If all you can afford is £50 then so be it, that is all you invest.
Lastly, never ever invest money with some unknown person who contacts you on Facebook, Instagram, Twitter or any social media, email or text, who claims they are going to make you richor someone made them rich or tells you that you are going to make huge returns on your investment if you invest with this person / company. If you are contacted in this way then do your research and I will bet that 99 times out of 100 you will find it to be a scam.
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