We’ve all heard the saying: “If it sounds too good to be true, it probably is.” That’s exactly how most investment scams begin—with an offer that feels impossible to pass up. The FBI’s Internet Crime Complaint Center puts it simply: “Investment fraud lures someone with promises of low- or no-risk investments that turn out to be non-existent.” To avoid falling into this trap, keep that old saying in mind and stay alert for the common red flags that often signal something’s not quite right.
The Federal Trade Commission (FTC) shared that investment fraud was the fourth most commonly reported online scam in 2024. Victim losses in the category came in at $5.7 billion, up $1 billion from the year prior.
When you consider that these figures only count people who filed formal complaints with the FTC, the magnitude of the actual threat could be overwhelming.
But there’s a silver lining to such a large pool of victims: The higher the number of victims—specifically, victims who speak out—the more aware and alert the greater public becomes.
And that’s good news, because scammers literally bank on isolating their prey with shame and threats. Here’s how to spot their investment fraud schemes before they get a dime from you.
The anatomy of investment scams
Investment fraud scammers use fake trading platforms and sites, deceptive schemes, and the promise of high returns on low-risk investments to trick their victims.
They may build a convincing app or website that mimics a legitimate trading platform, complete with options to exchange money, cryptocurrency, stocks, and other assets. Or they might pose as a romantic interest, gaining your trust before pitching a “can’t-miss” investment opportunity.
In some cases, they’ll introduce what appears to be a guaranteed win—only for it to unravel into a Ponzi scheme.
Investment scams often start on social media
Scammers love social media, and the stats prove it. According to the FTC, 70 percent of people who lost money to investment scams first encountered the fraudster on a social platform. Whether it’s a friendly DM or a flashy ad, social media is often the starting point.
How investment scams happen
Scammers don’t just throw together a quick scheme; they invest their time and effort into making their frauds look legit. Why? Because once they hook someone, that person ends up losing money nearly 80 percent of the time, according to the FTC. And with big dollars often at stake, it’s no surprise this type of cybercrime is a favorite among bad actors.
One of the most common scams today is a modern twist on the old-school Ponzi scheme. It often starts with a message out of the blue—a direct message (DM), phishing email, or even a text from a “wrong number.” The scammer strikes up a conversation, builds trust, and eventually pitches a “can’t-miss” investment opportunity.
The victim clicks a link and lands on a site that looks legit. It might even mimic a real trading platform. Since investing usually requires an upfront payment, the person might go ahead and make a deposit.
From there, things seem to go smoothly. The investor receives regular updates showing their money is growing, sometimes even gets to make a small withdrawal. But that’s just part of the setup.
Encouraged by the early success, the investor allocates more funds. Then comes the twist: when they try to withdraw again, they’re locked out. Their contact either vanishes or demands another payment to “unlock” the funds. By then, thousands of dollars may be gone.
An investment that felt real, until it wasn’t
Think these scams sound too elaborate to be real? Just check out the Better Business Bureau’s Scam Tracker and search “investment fraud.” You’ll find plenty of stories like this one:
“Started trading online with Ms. O on her platform known as V*** from February 2, 2024, to June 2, 2025. I invested $8,310. My current accrued profit is $85,550. I was supposed to receive profit checks, but instead, she kept giving excuses and encouraged me to invest more. She said the bigger the deposit, the greater the return.
My profit check was due on June 2, 2025—but it never came. She asked me to buy cash cards from Walmart and CVS and send her the codes. I used cash, debit cards, and cash advances to do it. Now she’s texting me daily, asking for a $1,110 withdrawal fee. I’ve stopped responding because I know it’s just another trick.”
Note: This account was lightly edited for clarity and anonymity. The BBB notes that Scam Tracker reports are submitted by individuals and not independently verified.
Ten investment fraud red flags to run from
A host of state and federal agencies, commissions, and watchdog groups share red flags that signal an investment fraud is likely afoot. Check out this roundup of the common telltales—many from the Commodity Futures Trading Commission (CFTC).
You’re promised a high return on a low-risk investment.
Your tipster says you must act fast or otherwise pressures you to invest.
You met the person introducing you to the opportunity on a dating website.
You connect with the tipster via an “accidental” wrong-number text. (Spoiler alert: The tipster intended to contact you all along.)
You found the can’t-miss opportunity through an ad you saw on social media.
You’re invited into a chat group of other thrilled investors. (Spoiler alert: Your bedfellows are scammers, too, or maybe even bots.)
Your informant initially communicated with you via a public online platform, but once you built up a rapport, asked you to switch to a direct, private channel.
The investment involves digital assets, liquidity mining, forex (foreign exchange currency) trading, or gold.
You can withdraw part of your investment but must pay fees or taxes to access more.
The investment company (or individual) is not registered to trade.
How to verify before you invest
Maybe your potential investment opportunity doesn’t wave any of the aforementioned red flags. In that case, what can you do to safeguard yourself before you pull out your wallet?
Even if an opportunity seems legit, it’s worth doing your homework. Here’s how to vet it:
Perform an online search of the company’s name and its URL, as well as the names of any individuals you’ve “met online” associated with the investment. Look for online chatter mentioning any one of them alongside words like scams, frauds, or other warnings. (In fact, search for the names, URLs, and social media handles along with words like “scam” or “fraud.”)
Check if the person or company you are involved with is a licensed trader. Visit the investment adviser search engine, which is maintained by the U.S. Securities and Exchange Commission (SEC) and the North American Securities Administrators Association (NASAA).
Search for the company and/or individual on various scam trackers. Visit the BBB’s Scam Tracker. You can also search specifically for cryptocurrency fraudsters on the Department of Financial Protection and Innovation’s tracker.
Learn if the trader or investment company is in good standing with their industry colleagues by getting a “BrokerCheck Report” from the Financial Industry Regulators Association (FINRA).
If you have advanced research skills, go on a deep dive into an individual trader’s background to see if they worked at a firm or firms that were kicked out of FINRA, filed for personal bankruptcy, hopped from one investment firm to another, or have had federal tax liens filed against them.
What to do if you’ve been caught in an investment scam
If you fell for an investment fraud scam, you’re not alone. If you're an Allstate Identity Protection member, contact us and we'll walk you through the steps needed to reclaim and secure your personally identifiable information (PII), finances, and good credit.
You can also help restore your losses and protect future potential victims when you:
File a formal complaint with the proper authorities. (The National Futures Association aggregates several important reporting links on this page.)
Register a complaint with the FTC and the Federal Bureau of Investigation’s Internet Crime Complaint Center.
Fill out a victim report on the BBB Scam Tracker.
Investment scams can be sophisticated, but with the right knowledge and tools, you’re more than capable of spotting the warning signs and protecting your finances. Whether you're just starting to explore investment opportunities or you're a seasoned investor, staying alert and informed is your best defense. And remember: if something feels off, trust your instincts.
