NFA's Logo
Home > FAQs > Investor Information > Investment Fraud FAQs

Investment Fraud FAQs

  1. What are some of the characteristics of investment fraud?
  2. What are different types of investment frauds?

1. What are some of the characteristics of investment fraud?

Some characteristics of investment fraud include:

  • The use of high-pressured sales tactics;
    Some swindlers may result to insulting or arguing with you if they sense you will not be an "easy-sell," shifting to a "hard-sell" approach.
  • A request for credit card information other than to make a purchase;
    Be careful about providing personal and credit card information for "identification" purposes. Unwanted charges may appear on your credit card bill without your knowledge.
  • An offer that sounds too good to be true; and
    Be wary of investment schemes that promise significant returns. As the age-old saying goes, "If it is too good to be true, then it probably is."
  • A "demand" for an immediate decision.
    Fraudsters are very persuasive and always have an answer that may sound reasonable to you. Never let a swindler pressure you to make a hasty decision.

For more in-depth information about the characteristics of investment fraud, read NFA's Scams and Swindles: An Educational Guide to Avoiding Investment Fraud.

Back to the Top

What are some of the characteristics of investment fraud?

2. What are different types of investment frauds?

Here is a list of some common types of frauds that investors should be aware of:

  • Ponzi schemes or pyramid schemes;
    A swindler will approach a small number of people to convince them of an investment opportunity. Then the swindler widens his or her net, and uses the money received from a second group of investors to pay large profits to the original group. The original group then circulates their success with other investors, while the swindler continues to collect money, then, abruptly disappears.
  • Internet stock tips;
    Also known as a "pump and dump" scam. Swindlers send spam emails recommending that investors buy specific stock now, while the price is still low. Once investors buy the stock, the stock rises, and so does the price. The swindler will then sell his or her share, leaving investors with worthless stocks.
  • Seasonal trading in gas and oil;
    A broker will claim that there are seasonal tendencies in heating oil or unleaded gasoline and that your chances of making money are increased due to high demand.
  • Affinity fraud;
    Swindlers will target groups with common interests in an effort to increase investors trust. It is important not to let these similarities cloud your judgement.

For more information about these different types of investment fraud read NFA's brochure, Scams and Swindles: An Educational Guide to Avoiding Investment Fraud.

For a detailed list of specific industry related frauds, such as foreign currency (forex), weather-related and precious metals scams, visit the CFTC's fraud advisories list.

Back to the Top

What are different types of investment frauds?
NFA is the premier independent provider of efficient and innovative regulatory programs that safeguard the integrity of the derivatives markets.
Site Index | Contact NFA | News Center | FAQs | Career Opportunities | Industry Links | Home
© National Futures Association All Rights Reserved. | Disclaimer and Privacy Policy