Investment fraud: 6 common scams targeting investors

Investment scams are now the costliest form of financial fraud in the US—and among the most common. Investors of all backgrounds, experience levels and income brackets have fallen victim to these schemes.

Modern investment scams often appear to come from trusted sources and use technology to seem more credible, making them more difficult to detect. Understand how these scams work—and learn to recognize red flags—so you can better protect yourself from investment fraud.

How do investment scams work?

Investment scams can happen to anyone—even seasoned investors. In fact, researchers at the University of Pennsylvania's Wharton School have estimated that one in 10 investors will fall victim to investment fraud at some point in their lives.

In 2024, investors reported losses totaling $5.7 billion, according to the FTC—although actual losses are likely much higher. In 2026, the Consumer Federation of America estimated total losses, including unreported scams, at approximately $46.6 billion. As a result, investment scams are now one of the top scams targeting consumers.

One reason for these staggering figures is that modern investment scams are constantly evolving. Fraudsters have begun using technology—including AI and spoofing tools—to carry out their schemes, making them more sophisticated and highly convincing.

While the details of common investment scams vary, most start the same way—with promises of sky-high returns, often paired with claims of little or no risk. Many originate on social media platforms or messaging apps, and investment tips may appear to come from a trusted source, such as a new friend, existing connection or seemingly legitimate investment professional.

Common investment scams

Online investment scams can involve a wide range of assets, from traditional stocks to cryptocurrencies. According to the SEC, some of the most common investment schemes include online scams like pig-butchering schemes, as well as more traditional tactics like Ponzi schemes.

1Relationship investment scams

Sometimes referred to as pig-butchering schemes or sweetheart scams, relationship investment scams have quickly become one of the costliest scams in the US—with many victims losing their life savings.

Using a fake online persona, scammers often initiate contact through dating apps, social media platforms, text messages or messaging apps, often claiming to have the wrong number before striking up a conversation.

Once contact is established, scammers may spend days, weeks or even months building a relationship with their target. They typically use stolen photos to create a convincing persona, but they may even use AI to create realistic videos.

Their goal is to convince their target to invest in a specific asset or deposit money into a fraudulent online trading platform. The scammer may initially talk about their financial success or impressive returns before gradually encouraging their target to invest. To build confidence, they often suggest a small initial deposit. The victim is then shown fabricated reports of strong returns, prompting them to invest increasingly larger sums of money.

In reality, these returns are fake. Once a victim attempts to withdraw their funds, they're typically blocked or told they must pay hefty taxes or fees to access their money—a common tactic to extract even more funds.

2Pump-and-dump scams

Sometimes known as ramp-and-dump schemes, these scams often involve new forms of cryptocurrency or low-priced, low-volume exchange-listed stocks. In 2025, the FBI reported a more than 300% increase in complaints tied to these scams.

In modern pump-and-dump schemes, scammers often pose as investment professionals, promoting access to invitation-only stock groups on popular messaging apps. In other cases, they may generate hype around a particular stock or asset by flooding social media platforms with fake success stories and claims of significant profits.

Once enough people buy in and drive up the price, fraudsters sell their stake at a significant profit—typically leaving other investors to take the loss.

3Rug pulls

While rug pulls share many similarities with pump-and-dump schemes, the mechanics differ. In this particular type of online investment scam, fraudsters create a new asset—typically a new crypto token—then list it on a decentralized exchange and pair it with a more established coin before hyping up the fake opportunity.

Investors are lured in through the promise of outsized returns and the appearance of high demand. Once enough money has been invested and the price rises, scammers will withdraw their own funds or pull the asset out of circulation and disappear with investor funds.

Because it can be difficult to verify the legitimacy of new cryptocurrencies, investors should proceed with caution. If a token's value skyrockets quickly while trading volume remains relatively low, it may be a sign that a rug pull is underway.

4Imposter investment scams

Imposter investment scams rely on presumed source credibility, which involves using real names, credentials or firm details to appear trustworthy. Fraudsters may take over a trusted individual's account and send direct messages or post videos encouraging their contacts to invest.

Criminals may also create imposter websites or documents that mimic legitimate firms or registered professionals. They might offer fictitious securities, banking products, Forex or crypto trading strategies presented as can't-miss opportunities.

Scammers are increasingly using AI to make these schemes more convincing. This can include deepfake videos or voice cloning to impersonate trusted figures, investment professionals or even celebrities.

5Ponzi schemes

Ponzi schemes became one of the more well-known forms of investment fraud in the years following the 2009 conviction of Bernie Madoff. Unfortunately, spotting the early signs of a Ponzi scheme is often quite difficult.

In a Ponzi scheme, the fraudster will give the illusion of sky-high returns by taking new investors' money and giving it to earlier investors while taking some for themselves. While it appears as if the assets are appreciating, none of the funds have actually been invested.

While many assume these schemes only target ultra-high-net-worth individuals, investors of all backgrounds are vulnerable. According to the SEC, many Ponzi schemes target seniors, with one notably brazen scheme amassing $1.2 billion through fraud. Seniors who have accumulated savings make common targets, but everyone is vulnerable—particularly those who are isolated or overly trusting.

6Pre-IPO investment scams

Regulators have seen a rise in pre-IPO investment scams in recent years. In these schemes, fraudsters claim to offer investors exclusive access to shares in a company before it goes public.

In legitimate situations, pre-IPO investments are usually only available to large institutions or wealthy investors. Scammers exploit this by offering everyday investors a chance to get in early on the next big thing. They may claim the company is about to go public, promise high returns or compare the opportunity to well-known companies to make it seem more believable.

These scams are often promoted through unsolicited calls, emails, social media and professional-looking websites. They may focus on trending sectors—like AI or cryptocurrency—to make the investment feel timely and exciting. Scammers may also create a sense of urgency by claiming that the opportunity is limited or exclusive.

In reality, the investment may not exist, the company may have no plans to go public or the person selling the shares may not have the right to do so. Scammers often ask investors to send money to unfamiliar or offshore accounts, making it difficult to recover once the money is gone.

The SEC continues to bring enforcement actions against pre-IPO fraud, including charges in 2024 involving more than $184 million raised through fraudulent offerings, as well as a $528 million pre-IPO fraud case in late 2023.

How to avoid investment fraud

While investment scams are constantly evolving, they often follow predictable patterns—making it easier to spot red flags if you know what to look for.

Be cautious of any opportunity that:

• Sounds too good to be true: Investment scams often promise guaranteed returns with little or no risk—a common tactic used across many schemes.
• Comes via an unexpected message: If a phone call, email or social media message raises any red flags—even if it appears to come from someone you trust—end the conversation.
• Is promoted online: Be especially wary of any investment tips you see online. Scams may be promoted by seemingly legitimate investment advisors, everyday investors or even celebrities and social media influencers, who may be paid to unknowingly promote a scam investment.
• Relies on group chats: Scammers often create invitation-only groups filled with fake success stories as a way to direct their victims to fraudulent websites or trading platforms.
• Creates urgency or exclusivity: Fraudsters may claim that an opportunity is only available for a limited time or to a select group of investors.
• Requires unusual payment methods: Be cautious if you're asked to send money to unfamiliar or offshore accounts or through crypto wallets.
• Appeals to your identity: Scammers may pretend to build trust as a member of a religious denomination, ethnic group or particular workforce, such as the military.

How to protect yourself

Protecting yourself from investment scams starts with researching and verifying who you're working with. Before making any investment, take time to evaluate the opportunity, understand the risks and speak with your financial advisor.

If you're considering working with a new investment professional, verify their credentials using the FINRA BrokerCheck tool. This can help you review their professional background and confirm that they're properly licensed. Legitimate advisors will typically hold licenses such as the Series 7 and Series 66, or the Series 7, Series 63 and Series 65 license.

How to report an investment scam

If you've lost money to an investment scam, it's important to report the matter. While it may be difficult to recoup your losses, the information you share can help regulators and law enforcement pursue the perpetrator and prevent more investors from being scammed.

FINRA suggests taking the following steps if you've been defrauded.

1. Create a record of the details. Include the scammer's name, contact information and a description of the events. Also include any police reports you've filed, as well as a recent copy of your credit report.
2. Report the fraud to regulators. File tips and complaints with the SEC, FINRA and the Commodity Futures Trading Commission.
3. Report the matter to law enforcement and your bank. File a report with local police and the FBI as soon as possible, and notify your bank immediately so they can put safeguards in place to help protect your account from additional losses.
4. Learn about your rights. Contact your state attorney general and local US district attorney to learn about your rights and recovery options.
5. Pursue recovery. File an arbitration or mediation claim. While there's no guarantee you'll recover your money, the SEC and FINRA are authorized to seek financial restitution for victims of investment fraud.
6. Remain vigilant of recovery schemes. Scammers target people who've already lost money to financial fraud, so be wary of unsolicited messages from people who promise to recover your money in exchange for an upfront fee.
7. Follow up. A month after completing these steps, check in with the law enforcement and regulatory agencies you've contacted.

The bottom line

While investment fraud schemes are on the rise, there are simple ways to protect yourself. Stick to established investing platforms or work with a qualified financial advisor, and always verify the credentials of anyone offering financial advice. And keep in mind that if an investment opportunity sounds too good to be true, it probably is.