How to know if an investment option is a fraud scheme

An investment scam is a fake business investment opportunity that fraudsters, masquerading as business owners, present to their unsuspecting victims online or even in person by convincing them to invest in some non-existent business.

While these businesses look legitimate; since they sell genuinity, further scrutiny would reveal the cunning tortoise underneath. Their aim is to sell get-rich-quick schemes, and promise impossible ROIs to investors and abscond after.

Investment scams are getting harder to spot, but there are some signs to look out for to help protect your hard-earned money.

Some of the popular investment scams that have absconded with investors’ funds are MMM, MBA forex, Meco enterprises, Chimark, Pyoyo, Eatrich farms, Ovaoiza farms and others.

In 2022 alone, thousands of Nigerians have lost billions of naira due to investment scams. The internet, rapid development in digital communications, and the get-rich-quick syndrome have made it easy for these scams to go viral quickly.

How to spot an investment scam

Read also: How to identify scam accounts on Instagram

1. Too good to be true

If it is too good to be true then the chances that it is a scam are very high.

RUN! In this instance, listen to the part of your instinct that says ‘do not do it’. Save your money instead.

2. Ridiculous Return on Investment (ROI)

If you come across an investment opportunity that promises you 80% ROI, it is definitely an investment scam. The highest percentage any genuine investment should offer is probably 20% ROI and it has to be on a long term basis.

Any business that promises you 60% ROI every month is a scam, as they are counting on your greed and ignorance and your desire for quick wealth. Avoid investments that promise a heavy and quick return on investment. it is a scam. 

3. Celebrity/influencers don’t confirm the business

There are people, especially here in Nigeria, who seem not to realise that when a celebrity or their favourite influencer makes a video of a product or some business or investment, it is a paid advert.

The target is the huge following of the celebrity or influencer. They hope to sell to followers who believe the influencer is the ultimate determiner of the legality of an investment or a business.

If your favourite celebrity or influencer advertises an investment opportunity that piques your interest, do not rush it.

If you recall the case of Racksterli investment, a purported investment platform that was promoted by some top celebrities and scammed millions of people within nine months, you may want to hear us out. 

Do your due diligence, proper research, and speak to professional investment business advisers before committing your funds to that business.

4. Signup commissions after investment

If they promise commissions to customers who can introduce other people to invest, turn around, as no legitimate investment schemes offer commissions to investors for referrals.

So, whenever you come across “bring three people and get 40% commission” or “invest and stand a chance to win a car” or “everyone is investing” or “only ten spots left, invest now and stand a chance to win an all-expense-paid trip abroad”, please turn around.

5. Not registered with regulatory bodies

Fake investment schemes are usually not registered with regulators or the appropriate agencies.

Before you invest in an investment scheme, ensure they are fully registered by the relevant authorities. In Nigeria, the Securities Exchange Commission is the body that oversees investment companies.

The Securities and Exchange Commission “oversees securities exchanges, securities brokers and dealers, investment advisors, and mutual funds in an effort to promote fair dealing, the disclosure of important market information, and to prevent fraud.”

To check if the company is registered with SEC visit their website http://www.sec.gov.ng, to verify the company you are about to invest with is registered.