How to Spot a Fraudulent Investment Scheme

A growing number of Pennsylvanians are investing their hard-earned dollars in hopes of getting their money to work for them. While there are many legitimate and worthwhile investment opportunities available, investments have also become fertile ground for scam artists.

Although investment scams come in many different packages, here are some common “red flags” to help you spot fraudulent investment schemes.

  • Watch out for claims of high profits with practically no risk – there really is no such thing. Anyone who tells you an investment is likely to turn a profit quickly should have a basis for the claim. Be especially wary when someone tells you profits will be big enough to offset the risk of investing.
  • Be wary of “now-or-never” or “limited time” offers. That is just a high-pressure tactic to keep you from getting the real “scoop” on the investment scheme. People lose millions of dollars each year in “get-rich-quick” schemes that promise high returns with little or no risk. These could include gemstones, rare coins, precious metals, art, and other ‘investment opportunities.’ Scam artists create the impression that there is a limited amount of the ‘investment opportunity’ available and if you do not invest quickly the opportunity will not be around for you later. This is a scare tactic to get you to make a decision without looking into the company or the possible investment.
  • Be skeptical of testimonials – you are better off reading a written prospectus and checking out the company with the Pennsylvania Securities Commission Be cautious if the company selling you stock, assets, or partnership units has not registered its securities. Companies that register their securities file prospectuses and annual reports with securities regulators.
  • Be sure to understand what you are investing in – it’s hard to make money when you don’t know what you’re doing. Get an independent appraisal of the specific asset, business or venture you are considering. An appraisal offered by the party selling the investment opportunity can be fake. Talk to the previous owners of an asset or a business you are acquiring for its value history. Discuss all investment ideas or plans with an accountant or an advisor you know and trust.

Consumers with questions or complaints may contact the Bureau of Consumer Protection’s Toll-Free Hotline at 1-800-441-2555 or log onto the Attorney General’s website at