How to detect investment fraud at a glance?

(This article is NOT investment advice).

‍

Where there is money, people also appear who want to take advantage of the ignorance of others. And investing in this direction is no exception.

With the boom of online investment platforms in recent years, fraud has increased. Fraudsters are constantly inventing new ways to lure investors into their networks and inspire them to feel that they are making the right investment decisions.

How to detect investment fraud at a glance To avoid the risk of losing thousands or even hundreds of thousands of dollars?

According to data from the Federal Trade Commission (an independent US government agency) investment scams were the most common financial scam of all in 2022. Americans lost $3.82 billion this way.

‍

Beware of risk-free investments

“Value your money by tens of percent a year without any risk.” If you come across such or similar claims, it's high time to put your feet on your shoulders. No investment is risk-free, and when an investment products trader or online platform claims otherwise, he probably has unfair intentions.

Stories about zero risk and at the same time suspiciously high returns (for example, 130% per year) are one of the main signs of a fraudulent investment. This is an effective tactic of scammers, as many novice investors hear about high and quick profits.

The other way around is if you the investment platform shall present sufficient evidence and factsthat it does its best to minimize the risk of investments.

You know that Investown protects investors' money in 3 ways in case the partner (owner of the real estate project) stops repaying? Specifically, it concerns the lien on real estate, notarial registration, the lien on the commercial share and the liability of the members of the statutory body.

‍

Lack of information or domicile in a tax haven

Companies or individuals offering suspicious investments have one thing in common: they try to disclose as little information as possible about themselves so that the police have trouble detecting them in the event of an investigation. Therefore, scammers do not indicate on the site information about the registered office of the company or contact details, which you can contact. Also pay attention to the situation when the company publishes its data, but designates as registered office a country that is considered a so-called tax haven (These include Seychelles, Panama, Belize and Cyprus).

She should warn you, by the way. Unusually bad Czech in the communication of sellers. Many of them come from abroad and use automatic translations.

The notion tax haven It is used as a designation for countries that give tax advantages to foreign companies. Companies around the world tend to have zero or very low taxes in tax havens and often do not have to disclose information about assets or financial transactions.

‍

Also be interested in the license

In order for the firm to provide investments in a given state, must mostly meet strict conditions and obtain a license from the relevant regulatory authority or government body. In the Czech Republic, for example, licenses are issued by the Czech National Bank (CNB), which guarantees the legitimacy of the investment product.

If the company in question does not have a license, this does not automatically mean that it is a scam. In any case, its investment products are much riskier. Therefore, if you have a choice between an investment platform with a license and without a license from the CNB, the first option is more certain.

License from the Czech National Bank also acquired Investown, as the first crowdfunding platform in the Czech Republic. Thus, he affirmed that he achieves the high standards of financial institutions.

‍

Fraudsters like to pressure investors.

The less time an investor has to make a decision, the better for the fraudster. That's why the cheaters also do their best, to entice the victim to invest as soon as possible and use various coercive methods. Most often these are statements such as “the last opportunity to make a profitable investment” or “do not miss a lifetime opportunity to get rich. “

As soon as you feel that you are being pushed quickly to invest in anything at any time, you better make a reverse gear and think carefully about everything. It is better not to miss the alleged opportunity of life than to regret the loss of life savings in a few days.

‍

Bad reputation among investors and in the media

What to do as one of the first steps when you come across an investment product that you hear about for the first time? Find out as much information as possible about him on the Internet. Usually you just need to type the name of the investment platform/dealer into the search engine and the most read references will pop up right there.

When searching for user references, check if there have been any media articles about the platform/vendor in the past. If they are “established fraudsters”, probably someone has already exposed their practices and you can easily avoid the problem. In short and simple: The more information you look for, the better. Ideally, start from multiple sources.

The most common types of investment fraud include the so-called. Ponzi schemewhich is also abbreviated to the terms “airplane” and “pyramid”. This well-known model works on the principle of a constant influx of new investors. The owner of the project promises clients to significantly value their money. However, instead of actually investing the funds, he pays out the funds of new clients who have been involved in the fraud before.
‍
This is how a Ponzi scheme works until new investors stop coming in — at which point the whole project ends and a large number of clients never see their deposit again (typically those who joined last).

‍

Suspiciously profitable investments in cryptocurrencies

A significant portion of investment scams are related to investments in cryptocurrencies. It is no coincidence: scammers exploit the fact that this asset is poorly regulated in most states and that they cryptocurrency transactions provide maximum anonymity. In addition, people often have no idea how cryptocurrencies work, so it is difficult for them to recognize unfair practices.

At the same time, the signs of a suspicious offer are often similar to those of “traditional” investment products: minimal information about the seller, suspiciously advantageous offer, urgency on the part of the seller, or assurances of zero risk.

In addition, in the case of cryptocurrencies, it is common for the offeror to mediate investing in a new cryptocurrencythat you've never heard of before. If you come across such an opportunity, you better avoid it with an arc.

‍

If you are not sure, get advice

Have you come across an investment that looks suspicious at first glance? If you are not sure if it is a scam, you should seek advice from an investment advisor or another expert. There is no shame in asking.

‍

This article is not investment advice

Investown does not provide financial and investment advice. This is an educational article with basic information about investment fraud. For specific advice, we recommend using the services of an investment advisor.

‍