Investment scams lure you in with promises of teaching you how to make a lot of money quickly, easily, and with low risk — usually by investing in the financial or real estate markets. Sometimes starting with a free seminar, the scammers later will charge you a hefty fee for their “proven” investment tricks. But the real tricks are the lies they tell you.
Investment Coaching Scams
In an investment coaching scam, the scammer will tell you that their “patented,” “tested,” or “proven” strategy (or something similar) will teach you how to make money investing in stocks, bonds, foreign currency, or tax liens. They promise that their investment approach will set you up for life — and even let you stop working.
What to watch out for
They get your attention with infomercials or online ads, encouraging you to attend free events or to watch free introductory videos. But later you find out that you have to pay a hefty fee to get the coaching they promise. They’ll show you success stories of people who have used their coaching program. But you have no way of confirming that their stories are true.
What to know
The truth is that the promoters of investment coaching scams exaggerate the money you can make with their system. They also fail to give you the step-by-step guide they promise, and lie about other people’s success. It’s all part of a marketing scheme to get you to pay thousands of dollars for what turns out to be empty promises.
Real Estate Investment Seminar Scams
In-person and online seminars about how to invest in real estate often promote “risk-free” training or business coaching systems. They may lure you in with big promises or guarantees of financial freedom, saying they’ll teach you how to make lots of money. But many real estate investment seminars are scams.
What to watch out for
The promotional materials and sales pitches used for real estate investment seminars often make over-the-top claims:
- Scammers say you can earn big money fast, regardless of your experience or training. But that’s not true.
- Scammers promise their deal is a "sure thing" that will give you security for years to come. It won’t.
- Scammers say you’ll rake in money by working part-time or at home. But most people don’t.
- Scammers promise you’ll be coached to success each step of the way. But there’s often little coaching, and no success.
- Scammers claim the program worked for other participants — including the organizers. And it might have, for a few people, but most people never make their investment back.
Don’t be convinced by ads with success stories of people saying how much money they made with little time, effort, and risk. Or ads that feature celebrities praising the program. Those kinds of claims aren’t reliable and don’t mean the program works. Real estate investment scams often use fake testimonials and pay people to endorse their programs.
What to know
For most people who invest in these real estate investment seminars — some of which cost thousands of dollars to buy into — the pay-off doesn’t match the promise. In fact, most people never get back the money they invested.
Precious Metals and Coins Investment Scams
In these scams, “metal dealers” or “rare coins merchants” tell you that there’s no better time than now to invest. Their goal? To create a sense of urgency and get you to act quickly.
What to watch out for
The scammers lie about their credentials and experience in these markets, and often don't deliver what they promise. Instead, they take the investors’ money for themselves.
What to know
Before investing in precious metals like bullion, bullion coins, collectible coins, or gold, read the Commodity Futures Trading Commission’s precious metals fraud alert, and find out what questions to ask before you invest.
How to Avoid Investment Scams
If you’re considering paying for a program that promises to help you invest your money, stop and consider these things first:
- Statistics and testimonials can be faked. Scammers want you to believe their program is always successful. They might show reviews or testimonials by people who’ve used their program and made lots of money. But those could be paid actors or made-up reviews. You have no way of confirming their stories.
- Scammers exaggerate the significance of current events. Scammers follow the headlines and use current events to make their investment opportunity seem exciting, innovative, and timely. They want you to feel pressured to commit now without having fully researched the offer.
- No one can guarantee a specific amount of return on an investment. Scammers might claim that you can make thousands of dollars per day or per month for life. But they don’t tell you the risks. No one can guarantee that an investment will be successful. And if you ask questions about the investment, they might give you vague answers and focus only on how much money you’ll supposedly make.
See the U.S. Securities and Exchange Commission (SEC)'s investor alert for more tips.
Before you pay money
- Take time to research the offer. The promoters want you to think you’re one of the few lucky people who can get in on the program so they can rush you into making a decision. Don’t let them pressure you. Search online for the name of the company and words like “review,” “scam,” or “complaint.” Other people’s experience with the company can tip you off to possible problems.
- Consider the risk. Be particularly suspicious of promoters who play down risk or make written risk disclosures sound like only routine formalities required by the government so you’d sign without thinking much about them. Later, when you try to recover the money you lost, dishonest promoters could use those same risk disclosures against you.
- Independently verify claims. Never invest based solely on what you read in an online newsletter, bulletin board posting, or blog. Scammers often use news stories about the success of legitimate companies as bait. They’ll often claim that their "opportunity" is similar to a proven hot money-maker — when, really, it’s not. Make sure that you research the investment opportunity carefully before you commit.
How to Research Investment Opportunities
Real investments demand time and careful consideration. Before you make an investment, it’s good to take time to consult someone you trust and who you know has your best interests in mind. It’s also important to do some research.
Start by making sure your computer’s security software is up to date, and always practice basic computer security on any computer you use to access financial accounts. Then, once you’re ready to start researching the potential investments, here are some things to consider:
- The company, its officials, and promoters might already have a reputation. Look for published information about the company. Do a search online with the name of the company, officials, or promoters plus words like “review,” “scam,” or “complaint.” Look through several pages of search results.
Many investment frauds involve offerings of unregistered securities. Generally, offers to sell securities must be registered with the SEC or be eligible for an exemption. To see whether an investment is registered, check the SEC's EDGAR database and call your state securities regulator for more information about the company and the people promoting it.
Many securities frauds involve unlicensed individuals or unregistered firms. Check out the background, including registration or license status, of anyone recommending or selling an investment, using the free simple search tool on Investor.gov.
Find out where the company’s stock trades. Some companies can’t meet the listing requirements of a national securities exchange. The securities of these companies trade instead in the "over-the-counter" (OTC) market and are quoted either directly from a broker-dealer or on OTC trading systems, like the OTC Link ATS. Stocks that trade on the OTC market may have increased price volatility (drastic price changes in short periods of time), less publicly available information, and lack liquidity (the ability to buy and sell the stock quickly without substantially impacting its price). These factors make some OTC stocks more risky and susceptible to manipulation by scammers.
Where to Report Investment Scams
- If you suspect an investment scam, report it to the FTC at ReportFraud.ftc.gov.
- Report possible securities fraud to the SEC online. For tips on investing wisely and avoiding fraud, visit the SEC’s website for individual investors, Investor.gov.
- If your personal information has been misused in an investment scam, visit IdentityTheft.gov for steps you can take to deal with problems that may arise.