More and more sophisticated methods are being developed by scammers to steal your hard-earned money
Read our guide on the most common investment scams and how to avoid them before you spend any money.
Scammers deceived consumers into thinking they were investing in schemes run by legitimate financial professionals, stealing over 56 million dollars from savers in the first half of 2024.
From unsolicited texts and emails offering opportunities to increase your wealth to social media campaigns on sites like Facebook that are blazoned with phony celebrity endorsements, scammers will do anything to make you believe their investment is genuine.
The financial trade group UK Finance reports that, fortunately, the number of investment fraud cases has decreased by 41% from a peak of 6,224 in the six months leading up to June 2021 during the pandemic to 3,647 in the same period in 2024.
According to UK Finance, the drop is probably due to a combination of declining opportunities for scammers to reach victims after the lockdown and pressures from rising living expenses, which make households less inclined to seek out investment opportunities.
Despite the decline in numbers, savers should continue to exercise caution.
According to Camilla Esmund, senior manager of the investment platform Interactive Investor, social media can be a boon to financial engagement and education, but it can also be a haven for scammers. Keep in mind that if something seems too good to be true, it most likely is when it comes to investment information found online or on social media.
Learn how to avoid falling for scammers' tricks by reading our guide to the most common investment scams.
An investment scam: what is it?
During an investment scam, a scammer will try to convince you to invest in a phony fund or scheme.
They use different persuasion techniques.
You might receive an offer from cold callers to invest in a short-lived opportunity. This makes things urgent and pushes you to take action before giving it much thought.
Fake images and celebrity quotes are frequently used in social media advertisements that promise large returns in an attempt to validate the scam.
The guarantee of a high, market-beating return on your investment that you won't find elsewhere is a warning sign in each of these situations.
You are actually contributing to the criminal's account if you fall for the scam and deposit money into the fake fund or scheme.
Upon receiving the funds, the fraudster will promptly move your savings to multiple accounts, some of which may be located abroad, making it more difficult to track down, before eventually withdrawing them.
Top investment frauds to watch out for.
These are the top five scams you should be aware of, as criminals use a variety of techniques to defraud you of your savings.
1. Frauds involving cryptocurrency
Scams involving cryptocurrency are increasing as scammers capitalize on the excitement surrounding digital currencies.
These scams frequently involve phony investment opportunities that promise low risk and large returns.
Scammers use social media ads on sites like Facebook and Instagram and build websites that look professional to entice victims.
To appear credible, they use fictitious testimonies and pictures of well-known faces.
Between April 2020 and March 2021, 558 investment fraud reports involving phony celebrity endorsements were received by the national reporting center Action Fraud. Of these, 79 percent mentioned cryptocurrency as the commodity they had invested in.
2. Schemes involving pensions
People who want to access their pension funds are the target of pension scammers.
They might provide early access to pension funds, high-return investment opportunities, or free pension reviews.
In order to persuade victims to move their pension funds into fraudulent schemes, leaving them penniless in retirement, they frequently employ high pressure tactics.
As per Action Fraud, pension fraud cost nearly 18 million dollars in 2023, with an average loss of 46,959 per individual.
If someone calls you unexpectedly about your pension, which is against the law, the body advises you to assume it's a scammer and end the call.
3. Scams by clone firms
In clone firm scams, scammers pose as trustworthy financial institutions.
The names, addresses, and Firm Reference Numbers (FRNs) of legitimate businesses that have been approved by the Financial Conduct Authority (FCA) are all used by the scammers.
They use the names of real investment managers and financial advisors to create convincingly fake documents and websites that closely mimic those of legitimate businesses.
Victims are occasionally lured to the fraudulent websites by first seeing an advertisement on social media that, when clicked, directs them to a financial company that appears to be trustworthy. Your personal information will be requested here so that we can send you information about the opportunity.
Victims are eventually persuaded to deposit their savings into the criminal's bank account after a sufficient level of trust has been built.
4. Scams in boiler rooms
High-pressure sales techniques are used in boiler room scams to sell investments that are worthless or nonexistent. They get their name from the fact that these fraudulent telemarketing campaigns were previously operated by teams operating out of basements or boiler rooms.
Potential victims are frequently cold-called by scammers who offer them exclusive investment opportunities with large returns.
They might compel victims to invest by employing persuasive strategies and instilling a sense of urgency.
Last year, a boiler room scam ringleader was sentenced to five years in prison for stealing £12 million from 310 savers.
Among the fraudulent opportunities the team sold were shares, commodities, and cryptocurrency. None of the schemes received any of the invested funds.
5. Investment scams involving real estate
Scams involving property investments guarantee large returns on investments made in real estate projects.
These frauds may involve timeshares, rental schemes, or phony real estate developments.
To trick victims, scammers frequently use slick brochures, expert websites, and persuasive sales pitches.
Additionally, victims who attend a free presentation on how to profit from real estate investing are persuaded to part with their money.
At the conclusion of the sales pitch, participants are informed that they must pay a joining fee in order to join the program. No one is contacted again after the fee has been paid.
Ways to prevent investment fraud.
You can guard against these frequent investment scams by remaining knowledgeable and watchful.
Louise Cockburn, information security awareness and culture manager at wealth manager Quilter, said: "Always take the time to research and verify any investment opportunity before committing your money.
"Check the qualifications of anyone giving financial advice, do your homework on the business, and see if it is registered with the FCA. To confirm the investment details, give the company a call if it is listed on the FCA's registered information.
Before making any investment decisions, especially ones involving large sums of money, consult a reliable financial advisor.
Never fall for offers that look too good to be true. Claims of low risk and large reward are frequently a warning sign of fraud.
It's crucial to be wary of unsolicited investment offers and to avoid making snap decisions.
Be wary of statements that the investment offer is only available to you and that you are being asked to keep it confidential. It's obvious that you're dealing with a scammer because of this.
This is another red flag: scammers frequently only give a PO box or mobile number as contact information.
Never give the company control over your accounts or investments, especially if they involve cryptocurrency.
Any unsolicited callers posing as representatives of your bank, a law firm, or any other entity offering to assist you in recovering your money should also raise suspicions. Hand up right awayit's a scam as well.
Can an investment scam return my money?
You might occasionally be able to recover all or part of your money after falling for an investment scam.
According to UK Finance data, banks, building societies, and other payment and merchant institutions returned slightly more than half of the £301 million that was taken from victims of investment scams in the first half of 2024.
The Payment Systems Regulator, which oversees payment systems in the UK, established regulations on October 7th that pertain to compensating fraud victims in cases where the consumer authorized the withdrawal of funds from their account. We refer to this as Authorized Push Payment fraud.
However, some transactionssuch as payments made using debit and credit cards or to bank accounts located abroadare not covered.
Methods for reporting investment fraud.
It's critical to take immediate action if you believe you have fallen victim to investment fraud. Your money has a better chance of being recovered the sooner you notify the bank or building society that owns the account from which you transferred the funds.
A dedicated fraud team is available to assist promptly at the majority of institutions.
You have 13 months from the date of the last fraudulent payment to notify your bank of the fraud in order to attempt to recover your money.
Using Action Fraud's online form, you should also report the scam. By doing this, the offenders will be deterred from defrauding others.
To report fraud, call the FCA's consumer helpline at 0800 111 6768. Visit the Take Five to Stop Fraud website for additional details and advice.
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