Investment scams have become one of the most devastating forms of financial fraud, costing Americans billions of dollars annually.

These scams prey on the desire for quick, high returns with little risk, exploiting trust, greed, and sometimes loneliness. Scams evolve with technology — especially cryptocurrency and social media — their core ways that they operate remain rooted in deception.

This article breaks down how the most common investment scams operate and provides practical steps to avoid falling victim.

The Psychology Behind Investment Scams

Scammers succeed by tapping into universal human vulnerabilities:

• Greed and FOMO (Fear of Missing Out) — Promises of guaranteed high returns or “insider” opportunities.
• Trust-building — Romance Scammers invest in long-term grooming through relationships, shared interests, or community ties (affinity scams).
• Urgency and pressure — Claims of limited-time offers or impending market crashes. We’ll be revisiting this issue often in our red flags. Most scams rely on a strong measure of urgency – need to complete the transaction today to receive the “special” terms.
• Illusion of legitimacy — Fake dashboards showing growing balances, small initial payouts to build confidence, or professional-looking websites/apps. Many scam websites are nothing more than video games.

All legitimate investments carry risk. Anyone promising “no risk” or “guaranteed” profits is almost certainly deceiving.

Common Types of Online Investment Scams and How They Work 

1. Pyramid Schemes – Multi-Level Marketing Frauds (MLM)

Similar to Ponzi Schemes, but focused on recruitment.  We’ve seen financial frauds using this method as “affiliate programs”.

How it works: Participants pay to join and earn by recruiting others, who pay upward.  Unlike traditional MLMs, the money in these financial scams only flows up to the scammers.  By the time the victim realizes that something is amiss, the website and illusion of a company are gone.

2. Pig Butchering (Romance/ReIationship Investment Scams)

The fastest-growing scam in 2025, responsible for a huge portion of crypto losses.

How it works – 

The “fattening” phase – Scammers contact victims via dating apps, social media, or wrong-number texts. They build trust over weeks/months — often posing as successful, attractive professionals.

The “slaughter”:    This can happen in a number of ways – 

If it’s a relationship scam, the scammer will introduce a “sure thing” crypto trading platform or opportunity. Victims deposit real cryptocurrency (bought on legitimate exchanges) into fake apps/sites showing massive gains.  

If it’s a romance scam, the scammer may build a “passionate” online relationship and after trust has been built, ask for money to pay for car bills, or to come and visit, all of course as a ruse to get money from the victim.  

All payments are made in harder to trace or return payment methods – wire transfer, cryptocurrency, even gift cards.

These scammers often pretend to be in Eastern Europe, but are actually run by organized crime in Southeast Asia using forced labor. Losses can reach hundreds of thousands per victim.

Pig butchering is a multi-billion dollar business for the scammers, with many victims unaware they were being scammed until it’s too late.  We recommend cyber intelligence technology that can help locate these scammers – please contact us if you suspect that you’re a victim.

3. Pump-and-Dump Schemes

Common in stocks and low-cap cryptocurrencies, although less found today, as the other methods mentioned here have become so much more lucrative for the scammers.

How it works: Scammers hype a worthless asset (via social media, newsletters, or fake influencers) to inflate the price. Early buyers (or the scammers themselves) sell at the peak, crashing the value.  This is sometimes referred to as “Carpet or Rug Pull” schemes.

4. Cryptocurrency-Specific Scams

This method, along with pig butchering, are the most seen online scams today.  Cryptocurrency’s anonymity makes it a scammer’s paradise.

Advance Fee/Recovery Scams: After losing money, victims are targeted again by “recovery experts” demanding upfront fees.  The “investor” at some point after seeing great gains in their fake online portfolio, ask to withdraw some profits.  That’s when the scam is revealed.  When even victims have been “milked”, the scam website goes away, and a new one (or two or five) open from the same scammers, with new names but the same website design.

Red Flags: Warning Signs of an Investment Scam

Quick and easy ways to spot if the website you are looking at is a scam.

• Are they guaranteeing high returns with little/no risk?
• Is there pressure to act immediately?
• Does the website offer complex strategies that can’t be explained clearly?
• Does the website display a reputable license from the country that you reside in?  Unregistered and unauthorized platforms are the largest segment of these schemes.

• Is it a cloned app/website mimicking real bank or law firm (e.g., slight URL changes)?

How Can You Protect Yourself?

1. Verify everything — Search the investment/person + “scam” or “review.”  Is the website listed on our Cloned Firm Registry?
2. Slow down — Scammers want you to act fast.  When you start asking questions, they may run.  Don’t be afraid to get a second opinion from a trusted advisor.
3. Use legitimate platforms — Stick to well-known brokers/exchanges. Never send cryptocurrency to unknown wallets.
4. Be skeptical of relationships — See the pig butchering segment above.

Knowledge is your best defense. Real wealth builds slowly through diversified, regulated investments.   Despite what the scammers want you to belive, there are no overnight miracles – especially not in cryptocurrency. 

If it sounds too good to be true, it almost certainly is.

Awareness is your strongest defense.   

Contact us if you’d like more information on how cyber intelligence can help you locate scammers. 

Please share this guide with friends and colleagues.