Financial

Top 5 Warning Signs of Investment Fraud

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At its core, investment fraud is a white collar con job. The same tricks that schemers use to defraud mainstreet work just as well on Wall Street. Fortunately, because the tricks don’t change, once you know the warning signs of fraudulent investment schemes, you can easily avoid becoming a victim.

Listed below are five real-life warning signs distilled from the time Howard Fensterman filed a formal complaint against the UAE for investment fraud.

If It Sounds Too Good to Be True

If it sounds too good to be true, it is. Period. No one earns a fortune overnight. Even in those “rag-to-riches” tales, wealth is almost always preceded by years of dedication and hard work. Even if the success seems instant, it rarely actually is. The same can be said for making sound investments.

While investing can increase your wealth significantly over time, no single investment will make you rich you overnight — not really. And if someone is telling you otherwise — they’re trying to sell you something.

Even when a stock “gets big” and increases the worth of your portfolio exponentially, keep your initial notions in mind. Remember, you invested in that stock strategically based on your knowledge of market trends and institutions. Don’t confuse foresight for luck.

You Are Offered an Inside Track

When a friend of a friend or worse, a complete stranger from the internet, messages you about a tip on a “low-risk but high-reward” investment, alarm bells should go off in your head. Not only because insider trading is illegal, but because it is unlikely that a relative stranger will share a meaningful business insight with you without an ulterior motive? Slim to none.

In this situation, all the risk is yours and the rewards are mirages meant to lure you into making a shoddy investment. Don’t bite.

“For a Limited-Time Only”

No one likes a nag. And if your friendly neighborhood tipster quickly becomes as pushy and as obnoxious as your college-debt collector about closing the deal — run. No professional leaves dozens of messages trying to manipulate your fear of missing out on a huge reward.

It may be cliche, but good things really do come to those who wait — or in the very least, take the time to do their research before they invest in new player and opportunity. Anyone who pressures you to make an impulse decision over new investment should not be trusted.

The Details are Fuzzy

When clarifying questions about the exact nature of the investment and the players involved are meet with deflections, vague responses or silence, the investment is probably fraudulent and not worth your time. Instead of trying to squeeze water from a stone, cut your losses and search for an opportunity more clarity.

Even if the opportunity is legitimate, a source who can’t provide accurate and concise information on the investment hardly inspires confidence in the future fortune of such a company.

Lack of Credentials and Professional Recommendations

Just like you don’t trust restaurants with a spattering of spammy Yelp reviews, you shouldn’t trust a broker who no one knows or can recommend. While we all have to start somewhere, but if your broker says he has years of experience but has the LinkedIn profile and resume of a rookie, trust your instincts.

If you come to find that the past clients this broker worked with are also suspiciously lacking details on their websites or LinkedIn, you can assume beyond a reasonable doubt that they are suspect.

While the above red flags may seem like common sense, you are forgiven for minimizing them at the prospect of a new deal. But don’t let dollar signs overrule your professional instincts.

And if you experienced deja vu when reading the above warning signs, and suspect that you may be a victim of fraud, contact Howard Fensterman’s office for more information on what options are available to you.

About the author

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Rupesh singh is freelance writer.

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