Recent Forbes Article Highlights Fraud Risks Facing Individual Investors

A recent article on Forbes.com highlights many of the types of investment scams that target individual investors. While many of these scams target inexperienced investors and individuals who may not have previously been considering investing at all, several recent high-profile cases have shown that even savvy investors who understand the markets and who know how to evaluate investment opportunities can fall victim to investment scams as well.

As the author writes, investment scam artists, “tend to focus on [certain] types of scams and follow certain patterns of behavior.” This is certainly the case. While scam artists are always looking for new ways to victimize unsuspecting investors, there are types of scams that have been around for decades, and even newer investment scams will usually share one or more of the hallmarks of traditional investment frauds.

4 Hallmarks of Investment Fraud Scams

There are several warning signs for investment fraud, and we covered some of the ways investors can protect themselves in our review of the Securities and Exchange Commission’s (SEC) 10 Tips for Safe Investing. Here are four of the hallmarks of investment fraud scams, as highlighted on Forbes.com:

“Get Rich Quick” Promises

Unless you are prepared to risk an extraordinary amount of money, the ability to “get rich quick” through investing is virtually non-existent. Yet, many people remain allured by the prospect, and an “investment opportunity” offering quick and substantial returns can seem too good to pass up. Scam artists know this, and they rely on investors’ financial aspirations to trick them into buying fraudulent investments.

Promises of Guaranteed High Returns

Just as there is no such thing as a get-rich-quick investment opportunity, there is also no such thing as an investment with guaranteed high returns. As a general rule, in the investment world, risk and potential reward to hand-in-hand. Once again, these promises play on investors’ desires to secure financial independence, and they often lead to financial ruin.

Needing to “Act Now”

While investment opportunities come and go with fluctuations in the market, if someone is telling you that you need to “act now” in order to avoid missing out on a can’t-miss opportunity, this too could be a sign of fraud. Any legitimate broker or advisor will make sure you have the time and information you need in order to make a calculated decision about how to invest your savings.

Targeting Members of Affinity Groups

Another tactic that is common among investment scams is to target members of certain affinity groups. While the hallmarks discussed above play on investors’ emotions, affinity frauds rely on investors’ trust. Scam artists know that people are more likely to trust those who are in positions of authority and who share similar backgrounds and beliefs, and they use this to convince individuals to invest, often without any other warning signs of fraud.

Speak with a Securities Arbitration Lawyer at Zamansky LLC

If you believe that you may have lost money in an investment scam, we encourage you to contact us for a free consultation. We can help you understand what happened, and we may be able to recover your investment losses through securities arbitration. To speak with an attorney about your situation in confidence, please call (212) 742-1414 or request an appointment online today.