Historically when times are uncertain and large numbers of people are unemployed, as they are during this pandemic, there is a rise in crime, including investment scams. According to the United States Securities and Exchange Commission (SEC), investment scam complaints regarding Ponzi schemes, fake CD scams, bogus stock promotions and community-based financial scams are on the rise.1

The Federal Trade Commission reports that the typical American loses more money on investment scams than any other type of income fraud, with the median loss reported at more than $16,000.2 That loss figure jumps to $24,000 for those in the 50 to 60-years-of-age group. In a December press release the SEC outlined ways to avoid falling victim to these scams.

Ponzi schemes are on the rise. A Ponzi scheme is where money taken from later investors is used to generate returns for earlier investors.3 When you get a return on your investment in a Ponzi scheme it is actually money that is taken from new investors who have also been victims of the fraudulent scheme.

You should be wary if the investment you are contemplating has a guarantee of high investment returns, often with a guarantee of little or no risk involved. All investments carry risks. Investments with high returns realistically come with high risks. Many times these schemes are offered by unlicensed or unregistered sellers.

If the person making the offer isn’t listed on investor.gov,4 they are not licensed or registered and legally can’t make the offer. Another hallmark of a Ponzi scheme is receiving overly consistent returns, as investment values tend to fluctuate over time due to market conditions.

Fake certificate of deposit (CD) scams are also proliferating in these uncertain times as investors seek out fixed rate returns. These scams often originate online and if you click on the link that you are shown you may end up at a website that appears to be a legitimate company but is actually a “spoofed” website that mimics the actual site of a legitimate financial institution.

There are several ways to detect that you are receiving a fraudulent offer. Again, a high rate of interest is a red flag, as is the offer of no penalty for early withdrawal. If the website offers no additional financial products, you should be wary. You also should never wire funds abroad or to an account that has a different name than the listed financial institution. Finally, if the website list “clearing partners” that they claim are registered with the SEC, you should investigate further before investing your hard-earned money.

Fraudulent stock promotions involving companies claiming to offer COVID-19 services or products have also grown, with the SEC ordering dozens of trading suspensions and even fraud charges against a number of these companies. The companies involved in these fraudulent stock and microcap stock promotions make claims that they are developing products or services that can prevent, detect or cure COVID and so investors will soon make significant profits on their investments.

These stocks are often promoted through social media sites like Facebook and Twitter as well as through spam emails and unsolicited phone calls. Investors can lose all of their investment if trading in the company is suspended due to inaccurate or unreliable claims.

The SEC is also seeing an upsurge in community-based financial scams, or what is known as affinity fraud. Thieves target and exploit people with a common-bond such as ethnicity, nationality, religion, sexual orientation, military service or age. The thieves are part of these groups (or claim to be a part of a group) and use the group and its leader to spread word about the scheme. Hearing about a great investment from a trusted friend or leader makes it easier for people to invest, but even if you trust the person pitching the investment take the time to check the person’s background and current licensure on investor.gov.

The SEC has recently brought enforcement actions against those that targeted U.S. military service members, African immigrants, seniors, small business owners, and members of the Amish, Mennonite, Hispanic, Haitian and deaf, hard of hearing and hearing loss communities.5

Another way to check out brokerage accounts or investments if you are a senior is to call the FINRA Securities Helpline for Seniors toll-free at 844-574-3577.6

Stay informed and know your rights as an investor. This means do your research an seek the advice of an experienced Securities Attorney. They are happy to answer your questions.

If you have questions about your investments, your broker’s management of your account or feel you have been a target of investment fraud our Securities Law Firm in Detroit can help. With more than 20 years of experience our attorneys have the knowledge and expertise to recover your losses and protect your rights as an investor. We have successfully represented hundreds of investors in stockbroker mediation, arbitration, and litigation claims. Call today.


1,5 Investment Scam Complaints on the Rise – Investor Alert, 12/14/2020
Link: https://www.investor.gov/introduction-investing/general-resources/news-alerts/alerts-bulletins/investor-alerts/investment-0

2 Ponzi Schemes, Other Investment Fraud on Rise During Pandemic, SEC Says by Greg Iacurci, 12/15/2020
Link: https://www.cnbc.com/2020/12/15/ponzi-schemes-other-investment-fraud-on-rise-amid-pandemic-sec-says.html

3 Ponzi Scheme Definition
Link: https://www.investopedia.com/terms/p/ponzischeme.asp

4 Check Out Your Investment Professional
Link: https://www.investor.gov/

6 FINRA Securities Helpline for Seniors Link: https://www.finra.org/investors/have-problem/helpline-seniors#:~:text=%20FINRA%20Securities%20Helpline%20for%20Seniors%20%201,refer%20you%20to%20another%20regulator%20or…%20More