Too Good to Be True – Investment and Crypto Scams
This month, we focus on investment scams , including the buzzworthy realm of cryptocurrency. Any time there’s an opportunity to make (or lose) a lot of money, scammers will be there trying to cash in. And indeed, investment scams led to an astonishing $5.7 billion in reported losses in 2024 – more than any other type of fraud. Whether it’s a phony stock tip, a Ponzi scheme, or a crypto hustle, remember the golden rule: if it sounds too good to be true, it probably is.
Investment Scams: The Classics & New Twists
- Ponzi and Pyramid Schemes: These scams promise high returns with little risk. Early “investors” might actually get some money (paid from later investors’ funds) which tricks them into recruiting others. But it’s unsustainable – eventually the scheme runner disappears with everyone’s money. Be wary of any investment where returns are guaranteed or unusually consistent, especially if you’re urged to bring in friends. Legitimate investments have risk and normal ups/downs; nobody can magically give 10% profit every month without risk.
- Unlicensed “Advisor” or Fake Brokerage: A scammer might pose as a financial advisor or broker with a special opportunity (oil wells, foreign exchange, rare commodities, etc.). They’ll have glossy brochures or official-sounding firms that aren’t real. Always check that any person or firm offering investments is registered with the appropriate regulatory body (in the US, use FINRA BrokerCheck or the SEC’s adviser database; in Canada, use the Canadian Securities Administrators registry). If you can’t find them in those official databases, don’t give them a dime .
- Pump and Dump (Stock Scams): You might get unsolicited emails or social media messages hyping a penny stock – “This company is the next Apple, buy now!” The scammers likely already own a bunch of cheap shares. As people buy and drive the price up, the scammers sell their shares for profit, and the stock plummets, leaving late investors with losses. Never trust investment tips from strangers or random messages. Use reputable financial news and do your own research.
- Cryptocurrency Scams: Crypto is exciting and has created real wealth for some, but it’s also swarming with scams. One common ruse is “pig butchering” – a scammer befriends you (sometimes via social media or dating apps), talks up how they’re making a killing in crypto, and convinces you to invest through a phony platform or wallet they control. Initially you see “profits” (just numbers on a screen), encouraging you to invest more. When you try to cash out, surprise – you can’t. The money was never actually invested, it went straight to the scammer’s pocket. In 2023, the FBI received thousands of crypto scam complaints from older adults alone, totaling well over $1 billion in losses. Be extremely cautious with any “tip” or invite to invest in a new cryptocurrency or mining opportunity, especially from someone you don’t know well.
Another twist: scammers impersonate crypto support or law enforcement. Example: You get a call or message saying “Your crypto account was hacked, we’re with Coinbase support. We need your 2FA code to secure your account.” – They’re the hackers trying to get in. Real exchanges won’t ask for your one-time codes or passwords via phone or chat.
Safe Investing Principles
- Vet Every Opportunity: No matter who approaches you – even if it’s a friend or family member – do your own due diligence. Check if the investment product is registered with regulators. If someone is pressuring you to act fast (limited time offer, secret tip), it’s a red flag. Real investments will be there tomorrow.
- Avoid “Guaranteed” Returns: All investments carry some risk. If someone promises you zero risk and high reward , it’s likely a scam or at best a misrepresentation.
- Secure Your Accounts: If you dabble in crypto or stock trading online, use strong passwords and enable two-factor authentication on your exchanges or brokerage accounts. This protects you from hackers. Also, be cautious of phishing emails that look like they’re from your investment platform – always log in through official apps or bookmarks, not emailed links.
- Be Skeptical of New Coins/ICOs: The crypto world often has new coin offerings or DeFi projects that promise high yields. Many are legitimate, but many are also rug pulls – projects that vanish after taking investor funds. It’s best not to put money into something you don’t fully understand. Stick to well-established platforms and be extremely careful if a smaller project is hyped by strangers.
Finally, don’t let FOMO (fear of missing out) drive you into bad decisions. Scammers love to create a sense that you’ll regret not investing. In reality, there will always be other opportunities. It’s better to walk away than invest in something you aren’t sure about. Trust your gut – if it feels off or you’re being rushed, say no.
Arm yourself with knowledge. Before investing in anything, consider consulting a licensed financial advisor who can give objective guidance. And if you’re interested in crypto, start on well-known exchanges (like Coinbase, Gemini, or Kraken) and never send crypto to someone who contacts you unsolicited. If you want to explore a new investment, perhaps allocate a small amount of “fun money” you can afford to lose – but keep your serious savings in proven, regulated avenues. Your future self will thank you for being scam-wise in your investing!