Many people think they’re above falling for a scam. And while we would all hope that’s
the case, these scammers become increasingly sophisticated. AI tools only make it
more challenging to tell facts from fiction, and we’d best believe they’re using every
avenue to fleece their victims!

In uncertain economic times, scams are only more prevalent. They primarily prey on
emotions, including financial fears, to lure people in. So, stay vigilant! Here are four key
characteristics to consider when evaluating any investment opportunity. They will reveal
the truth.

The 4 Key Features of Scam Investments

#1 – Ambiguity

Be wary when details are scarce. Scams can’t offer legitimate information, so the
deeper you dive, the murkier the details become. They often avoid specifics, fail to
provide credible evidence, and may dodge questions. They won’t be able to tell you
where your money’s going.

#2 – Urgency

Limited time offer! Act now!

We see these high-pressure tactics in retail. And while it’s one thing to snag a deal on
an item you want, it’s another to feel the pressure to invest. Here’s the thing: scammers
don’t want you to have time to think. They want you to make impulsive decisions based
on emotion. Don’t fall for it if someone isn’t happy to give you time to do due diligence.

#3 – Cold Calls

Are you getting cold-called? Random people reaching out to tell you about an “amazing
investment opportunity”? Yeah…no. Don’t consider it your lucky day. It’s just desperate
scammers looking to woo their next target.

#4 – Guarantees

Investors know nothing is guaranteed. Even the best investments come with risk. It’s
unavoidable. If there’s a guarantee, there’s something they’re trying to hide.

Further Reading: 5 Steps for Investors to Guard Against Rising Real Estate Fraud 

8 Types of Scams Investors May Encounter

#1 – Ponzi Schemes

How It Works: Returns to earlier investors are paid using the capital of new investors,
not legitimate profit. It’s the real-life version of “robbing Peter to pay Paul.” A notable
example is Bernie Madoff's $65 billion Ponzi scheme.

The Red Flags:

• Consistently high returns with little or no risk
• Difficulty withdrawing funds
• Unregistered investments
  
  

#2 – Pyramid Schemes

How It Works: You earn money primarily by recruiting sellers rather than selling a
product or service yourself. You’ll see modern examples referred to as “multi-level
marketing” or MLMs. Those at the top usually do make bank but at the expense of those
left to struggle at the bottom.

The Red Flags:

• Emphasis on recruitment (your “downline”) over actual investments
• No real product or a vaguely defined one
  
  

#3 – Pump and Dump

How It Works: Scammers hype up a low-value stock to inflate the price, then sell their
shares at the peak.

The Red Flags:

• Unsolicited stock tips (especially for penny stocks)
• Overly optimistic or aggressive marketing
• Little company information available
  
  

#4 – Advance Fee Fraud

How It Works: Victims are asked to pay a fee upfront to “secure” an investment that
conveniently never materializes.

The Red Flags:

• You must pay extra fees before seeing returns (this is not money being invested in an opportunity, but additional fees)
• Promises of large payouts for little effort
  
  

#5 – Offshore Investment Scams

How It Works: Swindlers offer "tax-free" or "secret" investment opportunities in foreign
countries. You’re just asking to get in trouble with Uncle Sam.

The Red Flags:

• Lack of transparency or regulation
• Difficulty verifying legitimacy
  
  

#6 – Cryptocurrency Scams

How It Works: These include fake coins, wallet scams, Ponzi-like DeFi projects, or
fraudulent exchanges. Don’t let your Bitcoin boom FOMO get you into trouble.

The Red Flags:

• Guaranteed returns
• Anonymous teams
• Pressure to invest quickly
  
  

#7 – Social Media or Celebrity Impersonation

How It Works: Scammers pose as influencers or celebrities promoting bogus
investments. This will become more common as AI can generate fake endorsements
with deepfake videos and replicated voices.

The Red Flags:

• Investment offers in your direct messages
• Requests for crypto or wire transfers
• Profiles with small followings or recently created accounts
  
  

#8 – Real Estate Scams

How It Works: Fake listings, title fraud, or unlicensed developers selling property that
doesn’t exist.

The Red Flags:

• Deals that sound too good to be true
• High pressure to sign or send money
• No access to physical property or records
  
  

None of us are immune to these tactics. Be vigilant—know the red flags, vet and verify,
and rely on facts, not emotions.

Start investing with REI Nation, where you invest and we handle the rest!