How to Know a Fraudulent Investment
Red Stories
May 17th 2022

How to Know a Fraudulent Investment

Esther O.
Esther O.

In the wake of several fraudulent investment schemes making a run with people’s hard-earned money, we think it might be a good time to share with you a few things to watch out for before investing with a company.

Every investment comes with a risk, but these risks are primarily about factors influencing market performance and their impact on the expected ROI (return on investment). It is different when the company simply takes your money and vanishes. We cannot even call that an investment risk or loss. It is outright fraud.

We don't think you are laughable for losing your money. Investing to get your money to yield more money is a decision we applaud. It is a courageous decision, even. And it is to encourage you that we have decided to share the following tips with you on how to recognise a fraudulent investment scheme.

The Fraud Markers

  • High returns and low or no risk
  • High referral rewards
  • No reputable or known partners
  • Sudden boom i.e. no organic growth
  • Not regulated or certified by any regulatory body
  • Complex organisational structure
  • Not incorporated
  • Pressure you to invest
  • No actual products or services
  • Short ROI periods
  • Unverified by the SEC (Securities and Exchange Commission)
  • Restrictions on payout or liquidation of assets
  • Mandatory referral and marketing

Making a decision

There is hardly a company that will check all these boxes, and honestly, they don't need to before you rule them as fraudulent. Many fraudsters put in time, money, and effort to present themselves as legitimate businesses, but there is always a loophole if you look well enough.

When three or four boxes have been ticked already, it is advisable to keep your money until something else comes along. And don't forget to do your research. If you want your money to keep yielding returns without actually doing any work, the least you can do is to research the company before dropping your money.


Celebrity endorsements, business registration certificates, media coverage and advertisements are not proof of legitimacy. Don't be a victim.

To understand more about how fraudulent investment companies operate, check out our article on Ponzi Schemes.

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