Money · Investing and retirement
Investment fraud red flags
There's no such thing as a high guaranteed return; every investment has risk. Walk away from anyone who pushes you to act fast, contacted you first by DM or a "wrong number" text, wants payment by gift card, crypto, a payment app or wire, or isn't registered. Look up the seller free on Investor.gov before you send a dollar, because getting money back after a scam is hard, and "recovery" offers are often a second scam.
You'll need
- The full name of the person and firm pitching you
- Five minutes on Investor.gov
What to know
- Treat "high returns, little or no risk" as the biggest red flag. Every investment involves risk; scammers dress it up with fancy websites, videos and pictures of rich lifestyles. Source: Investor.gov1
- Slow down when someone rushes you: a short deadline, a deal for "only a few investors," or "inside information" before others find out. Source: Investor.gov1 Any reputable professional will let you take your time. Source: Investor.gov3
- Don't take investing advice from anyone who contacted you first online, through a messaging app or by text, no matter how friendly they've become. Relationship scams often start with a social media message or a "wrong number" text and build trust over time. Source: Investor.gov1
- Check how they want to be paid. Be wary of credit cards, gift cards, overseas wires, payment apps or crypto; checks or wires to an individual; paying a different company than the one you're investing in; or a P.O. box address. Source: Investor.gov1
- Look the seller up, even if you know them personally. Investor.gov's search tool shows whether a professional is currently licensed or registered, Source: Investor.gov1 and you can check brokers' and advisers' disciplinary history free through SEC and FINRA databases. Source: Investor.gov2
- Make sure it's really them. Scammers copy real advisers' names, profile photos and firm logos. Find the firm's contact information yourself through its Form CRS and reach out that way. Source: Investor.gov1
- Get it in writing and research it yourself. Avoid any investment the seller won't describe in writing; sloppy documents with typos are a red flag. Source: Investor.gov3 Look up a company's financial statements on the SEC's EDGAR system. Source: Investor.gov2
- Keep your info to yourself. Don't give a stranger your bank or brokerage details, Social Security number, tax forms, ID, birthdate or even your phone number or email. Source: Investor.gov1
Classic schemes to recognize
From the SEC's fraud guides. Source: Investor.gov4
| Scheme | How it works | Tell-tale sign |
|---|---|---|
| Ponzi scheme | Early investors get paid with new investors' money; often nothing is really invested. It collapses when new money dries up. | Returns that are steadily positive no matter what the market does; trouble cashing out |
| Pyramid scheme | You make money mainly by recruiting people who pay to join. All pyramid schemes eventually collapse and most people lose money. | More pay for recruiting than for selling a real product to outsiders |
| Relationship ("romance" or "wrong number") scam | A stranger builds trust online, then steers you into a fake investment, often crypto sent straight to their wallet | They contacted you first, and the conversation turns to investing |
Before you invest a dollar
- Is the seller registered? (Investor.gov search) Source: Investor.gov1
- Did I find the firm's contact info myself? Source: Investor.gov1
- Do I have it in writing, and do I understand how it makes money? Source: Investor.gov3
- Am I being told to keep it secret? That's a red flag. Source: Investor.gov3
- Is the payment going to the company itself, by a normal method? Source: Investor.gov1
If a stranger pitches you
"I don't make investment decisions with people I meet online. I'm not interested." Then stop replying and block.
See it done
Video by FTCvideos Government
Red flags to spot investment scams
2026 · Checked October 3, 2026
Video won't load at school or work? No problem. Everything you need is in the steps; the video's just a bonus. Watch it on YouTube later.
If it doesn't work
- Think you've been scammed? Report suspected securities fraud to the SEC at sec.gov/tcr; questions or complaints about your investments go to help.sec.gov. Source: Investor.gov1
- Paid with a gift card? Contact the card company right away and keep the card and receipt. Source: FTC6 Then follow What to do if you got scammed.
- Expect a second scam. Scammers buy and trade lists of people who've been scammed, then pose as a government agency, law firm or the original company offering to get your money back for an upfront fee. Anyone who asks for a fee or your account numbers to recover money is a scammer. Source: FTC7
Good to know
The details, if you want them. Tap a line to open it.
Compare with real returns
Compare promised returns with well-known stock indexes. Anything claiming much more could be highly risky or a fraud. Source: Investor.gov2
Common bonds
Scammers may claim to share your faith, culture or community, or recruit someone in your group to vouch for them. Research anyway. Source: Investor.gov1
Offshore and hot tips
Be wary of foreign or offshore investments, and of hyped stocks with no independent financial information; that can be a "pump and dump". Source: Investor.gov2
Take it with you
Printable cardDownload card (PDF)Sources
- U.S. Securities and Exchange Commission Protect your money: how to avoid investment scams (Investor.gov)
- U.S. Securities and Exchange Commission What you can do to avoid investment fraud (Investor.gov)
- U.S. Securities and Exchange Commission 10 red flags that an unregistered offering may be a scam (Investor.gov)
- U.S. Securities and Exchange Commission Ponzi scheme (Investor.gov)
- U.S. Securities and Exchange Commission Pyramid schemes (Investor.gov)
- Federal Trade Commission Avoiding and reporting gift card scams
- Federal Trade Commission Refund and recovery scams
Lesson M9.5 · Last checked October 2, 2026 against the sources listed.
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