Scam Investments: Navigating The Murky World

Different types of investment scam, and how to spot them…

Trying to understand the world of scam investments sometimes feels like wading through a minefield. Frankly, it can be a little overwhelming.

Let’s say you’re ready to invest your hard-earned cash, but don’t know where to start. The first aspect to get savvy on is scams! Get familiar with the different types. Due to technology, they evolve quickly. If you want to make informed decisions, you must get clued up before you start looking at prospective companies.

To save you precious hours scouring the internet trying to familiarise yourself with different scams, we’ve set up a comprehensive list, below:

  • Ponzi Schemes: A common type of investment scam with little or no legitimate business activity. Funds from newcomers pay investors.
  • Pyramid Schemes: Similar to a Ponzi, but with a hierarchical structure using funds from new members to pay members who are ‘higher-up’ in the scheme

How to spot an investment scam

  • Early Pension Release: Be cautious if you are approached with a glitzy proposal to access your pension before you are 55 years old. There’s much at stake with this particular scam, which may be masked as a ‘pension liberation’ or ‘pension loan’. Generally, taking money from your pension before you are 55 is not a good idea, so don’t fall for any enticing offers
  • Cryptocurrency: Cryptocurrency is a digital currency people use to buy goods and services online. Instead of banks, cryptography verifies transactions. Often scammers will contact people randomly via email, offering an ‘irresistible’ investment opportunity. Once you have paid, the criminals stop communicating and sometimes take down the convincing website they use to trick people. Beware of social media advertisements for cryptocurrency, and AVOID all cold calls

International scams

  • Overseas property scams: Property scammers will often contact you out of the blue, and use shiny brochures to try and sell you land or property you have never seen. They may claim they do not need to be regulated as they are not a collective investment scheme (CIS). However, if investors have no day-to-day control over managing their plot; the scheme involves pooling investor funds; and the operator is generally responsible for managing the scheme, the business is a CIS that should be regulated by Financial Conduct Authority.
  • Unregulated products: Gold, diamonds, wine, hotels, bamboo, parking, and storage to name a few. Investors are often contacted out of the blue, but usually via email, post, in person at a seminar/exhibition. There will usually be pressure to invest quickly for returns that are unusually high and promising. These scams are often based outside of the UK, but claim to have a UK presence, and a prestigious City of London address.

We hope this provides insight into some of the different scams out there. We go into more depth in our most recent podcast which you can find on the ‘Podcast’ page of this website and you might want to listen the whole investment series we have available also. Remember….if it seems too good to be true….it probably is!

Scam Alert

This message serves as a warning against potential online scams, including website scams and investment scams. Please exercise caution and conduct thorough research before engaging in any online transactions or investments. Protect your personal and financial information from fraudulent activities, and consult with trusted sources for advice.

Insolvency and Law Peter Murray is an award-winning consultancy firm specialising in Insolvency, debt purchasing and business rescue.

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