Financial Crime World

Rise of Investment Fraud Complaints: A Growing Concern

Introduction

Investment fraud has become a significant concern in recent years, surpassing Business Email Compromise (BEC) as the highest reported dollar loss by crime type. This trend is attributed to various factors, including the growth of retail trading and social media influencers contributing to investment fraud schemes.

Factors Contributing to the Growth of Investment Fraud

  • Increased number of retail traders: The rise in retail trading has led to a greater number of investors being targeted by investment fraud schemes.
  • Social media influencers: Social media influencers have contributed to and facilitated investment fraud by using their large audiences to solicit funds for investment fraud schemes.
  • Traditional types of investment fraud: Real estate and other traditional forms of investment fraud remain stable over the years, continuing to pose a risk to investors.

Investment Fraud Involving Virtual Assets

Investment fraud involving virtual assets has seen a significant increase in both the number of victims and losses, rising 183% between 2021 and 2022.

Types of Investment Fraud Targeting Specific Demographics

According to the FBI and SEC’s investment fraud typology, different types of investment fraud target specific demographics based on age, religion, or ethnicity. For example:

  • High-yield investment schemes: Primarily target elderly victims, aged 65 or older.
  • Criminal targeting of religious or ethnic communities: Leverage built-in trust found in these communities to solicit funds for investment fraud schemes.

Common Types of Investment Fraud

Some common types of investment fraud include:

  • Ponzi schemes: Paying existing investors with funds collected from new investors.
  • High-yield investment programs (HYIPs): Promising unusually high returns with minimal risk.
  • Pyramid schemes: Recruiting members to invest in a program with the promise of high returns, but with no legitimate investment or product.

Protecting Yourself from Investment Fraud

To protect yourself from investment fraud:

  1. Research investments thoroughly before investing.
  2. Be cautious of unsolicited investment opportunities.
  3. Verify the legitimacy of investment vehicles and strategies.
  4. Do not invest more than you can afford to lose.
  5. Report suspicious activity to authorities.

By being aware of these trends and taking necessary precautions, investors can reduce their risk of falling victim to investment fraud schemes.