Financial and Investment Fraud

How It Works

Financial and investment fraud involves schemes that trick victims into investing money based on false information and/or promises. These scams often promise high returns with little or no risk, but victims end up losing their money.

Common Methods of Financial and Investment Fraud

• Funnel accounts: Fraudsters use your bank account to transfer illicit funds, making you an unknowing participant in money laundering.
• Investment scams: Fraudsters build long-term relationships with victims to convince them to invest large sums in fake investment platforms. Fraudsters also refer to this scam as “pig butchering.”
• Ponzi and pyramid schemes: Scams that pay investors supposed profits on their investments by using the investments of new participants.

Warning Signs

• Unsolicited investment offers promising high returns with little to no risk.
• Pressure to “act fast” on an investment or miss out on a “once-in-a-lifetime” opportunity.
• Requests to make investments using payment in unconventional forms, like wire transfers or cryptocurrencies.
• Lack of proper documentation, such as prospectuses or disclosure statements for investments.

Ways to Avoid It

• Do your research before investing: Check with the Securities and Exchange Commission (SEC) or your state’s securities regulator to verify the legitimacy of the person or firm involved in the investment opportunity.
• Be skeptical of guarantees: All investments carry some risk. Be suspicious of anyone promising guaranteed or unusually high returns.
• Avoid high-pressure tactics: A legitimate investment professional will give you time to consider the risks and won’t pressure you to act immediately.
• Monitor your financial accounts
  • Regularly review your financial and investment accounts for any unusual or unauthorized transactions.
  • Report any discrepancies immediately to your financial institution and the relevant authorities.

Ways to Report It

Taking immediate and comprehensive action can help mitigate the impact of financial and investment fraud.

• File a report with the SEC
  • Online: File a complaint using the SEC’s online form.
  • Phone: Call the SEC’s Office of Investor Education and Advocacy at 1-800-732-0330 for guidance on how to file your complaint.
• Report to the Internet Crime Complaint Center (IC3)
  • Online: Submit a complaint to the IC3, a division of the FBI.
  • This is especially useful for internet-related crimes.
• Alert your state securities regulator or attorney general’s office
  • Contact your state’s securities regulator or attorney general’s office for local assistance.
• Notify your investment firm or broker
  • Immediately report the fraud to your broker, investment advisor, or the compliance department of the firm where the investment occurred.
  • Many firms have dedicated fraud departments that can assist in investigating and resolving disputes.

Remember: Always be vigilant and report any suspicious activities promptly.