🎯 In 30 seconds: Investment fraud sells certainty: steady high returns, no risk, a secret system. Before you hand money to anyone, look them up in FINRA BrokerCheck and the SEC’s adviser database, and call your state securities regulator. It takes ten minutes and it is free. If you have already lost money, expect a “recovery” offer next. That is almost always a second scam.
The shapes it takes
Investment scams change costumes every year (crypto, AI trading bots, gold, pre-IPO shares), but they reuse a few skeletons.
| Type | How it works | Where you meet it |
|---|---|---|
| Fake platform | A slick website or app shows a balance that grows. The money was never invested; the numbers are typed in. | Online friends, dating apps, “mentors” in chat groups |
| Ponzi scheme | Early investors are paid with later investors’ money, so returns look smooth until new money slows. | Friends, church or community groups, seminars |
| Pump and dump | Promoters hype a tiny stock or token, then sell their own holdings into the rush. | Social media, stock “signal” groups, texts with tips |
| Unregistered seller | Someone with no license sells notes, “guaranteed” bonds or private deals. | Cold calls, ads promising fixed monthly income |
| Impersonation | Scammers copy a real firm’s name, logo and even an adviser’s registration number. | Search ads, fake websites, social profiles |
The FTC says investment scams caused the largest reported losses of any fraud type in 2025: $7.9 billion.
Check anyone in ten minutes
FINRA, the industry’s self-regulator, and the SEC run free public databases. Do these in order:
- FINRA BrokerCheck (brokercheck.finra.org). Search the person and the firm. You will see licenses, employment history and “disclosures” such as customer complaints, firings and regulatory actions. No record at all is a serious warning for anyone selling investments.
- SEC Investment Adviser Public Disclosure. Advisers who manage money for a fee register with the SEC or their state. BrokerCheck links to these profiles when they exist.
- Your state securities regulator. Find it through NASAA’s “contact your regulator” page. States register many smaller advisers and can tell you about complaints.
- SEC Action Lookup. Shows people who have faced formal SEC actions.
- Contact the firm yourself. Use the phone number from BrokerCheck or the firm’s own site, not the one the person gave you, and ask whether the person works there. This catches impersonators who borrow a real adviser’s record.
FINRA also runs a BrokerCheck help line at (800) 289-9999, per its “Ask and Check” page.
A worked example: “only 2% a month”
Marcus, 44, is offered a “conservative” note paying 2% a month. It sounds small. Do the math:
| 2% a month, compounded for 12 months | 1.02 to the 12th power = 1.268, so about 26.8% a year |
| $10,000 after 1 year | about $12,682 |
| $10,000 after 3 years | 1.02 to the 36th = 2.04, so about $20,399 |
| Stocks over long periods | Have averaged far less, with losing years along the way |
A steady 26.8% a year with “no risk” would beat almost every investor alive. Smooth, high returns that never dip are one of the best-known Ponzi warning signs. Marcus searches BrokerCheck, finds no record for the seller, and walks away. For what normal returns look like, see Investing.
Phrases that should end the conversation
- “Guaranteed”, “risk-free” or “principal protected” attached to a high return.
- “Only a few spots left” or “the window closes Friday”.
- “Send it in crypto”, “use this wallet address” or “go to a crypto ATM”.
- “Don’t tell your bank, they block these trades.”
- “You need to pay tax or a fee before you can withdraw.”
- “I’m not registered because it’s a private deal.”
The recovery scam that comes next
Victim lists get passed around. Weeks or months after a loss, someone reaches out claiming to be a lawyer, a “crypto tracing” firm or a government partner who can get your money back for a fee.
The FBI’s August 2025 warning describes fake law firms that use real lawyers’ names, claim to be partners of US agencies, cite made-up regulators, ask for payment in crypto or gift cards, and know exactly how much and when the victim sent money. The FBI states that the US government does not request payment for law enforcement services.
Report losses at IC3.gov, the SEC tip portal, and your state securities regulator. The full where-to-report list is on Money Theft & Forensics, and the friendship-first version of this scam is broken down in Romance scams and pig butchering.
- What two free databases should you search before investing with someone? Answer: FINRA BrokerCheck and the SEC’s Investment Adviser Public Disclosure (plus your state regulator).
- Why call the firm on a number you find yourself? Answer: Impersonators borrow a real adviser’s name and record; only the real firm can confirm the person works there.
- Roughly what yearly return is “2% a month”? Answer: About 26.8%, which is far above normal long-run returns.
- A “law firm” knows your exact losses and wants a fee in crypto. What is it? Answer: A recovery scam. The FBI lists both as red flags.