ONLINE LOGIN
ONLINE LOGIN

Better Banking is Here - Learn More

DIGITAL SERVICES

X

How To Identify Investment Scams

Looking at a “scam” key with magnifying glass on laptop

According to the Federal Trade Commission, U.S. consumers reported losing $5.7 billion to investment scams in 2024. This represented the single largest category of fraud loss for the year, and it marked a nearly 25% increase over reported 2023 investment scam losses. 

Knowledge is power for consumers looking to steer clear of investment fraud. The best way to identify and avoid investment scams is with awareness of the latest tactics, including romance, pump and dump, and crypto scams.

How Investment Scams Work

Investment scams work by convincing victims to hand over their money for a dubious investment — one that often doesn’t even exist. Purveyors of these schemes typically make promises of high yields or guaranteed returns with minimal risk. This lack of risk is one of the leading indicators that an offer might be an investment scam. Other red flags include:

  • Pressure to act quickly on an investment
  • Unsolicited offers from people or businesses you’re not familiar with
  • A lack of official business registration or documentation
  • Investment strategies that are highly complex or lack clarity
  • Claims of having insider information or a hot tip about an investment opportunity 

Five Common Investment Scam Examples

To avoid and protect yourself from investment scams, you should stay aware of current tactics​, carefully research any potential investments, be highly skeptical of any “too good to be true” offers, and follow best practices for fraud prevention. When you know how common investment scams work and what to look out for, you can take steps to protect yourself. 

Here are five examples of investment scams currently being used by criminals:

1. Romance Scams

In romance scams, fraudsters seek to build romantic relationships with their victims, often via social media, dating apps, or email, and without ever meeting in person. Once the criminal has gained the victim’s trust and established an emotional bond, they will often share an investment tip requiring the victim to send money. In other scam variations, funds are requested to overcome an invented crisis, such as a medical emergency, legal issues, or a travel-related problem.

Common Warning Signs of Romance Scams

  • A quickly developing relationship, with professions of love or talk of marriage within days or weeks
  • An avoidance of in-person meetings or video calls with evolving excuses for why they can’t happen, and when they are planned, abrupt cancellations just before they materialize
  • Inconsistent stories and a refusal to answer personal questions
  • Urgent requests for money or gifts to be sent via wire transfers, gift cards, or cryptocurrency
  • Emotional pressure to comply with any requests for funds or goods
  • Use of isolation tactics to discourage any discussion of the relationship or money requests with the victim’s friends or family

2. Crypto Investment Scams

Crypto investment scams capitalize on the popularity and fast, easy transfer of cryptocurrencies to trick victims into investing in fraudulent “opportunities.” These scams often involve fake initial coin offerings (ICOs), fraudulent currency exchanges, or other deceitful trading platforms. Because the transactions are digital and often anonymous, recovering lost funds and identifying perpetrators is extremely difficult.

Common Warning Signs of Crypto Investment Scams

  • Unsolicited offers from individuals you don’t know personally, who often claim to be successful traders or influencers
  • A guarantee of high returns on investment
  • Pressure to act quickly or other false sense of urgency
  • Requests for additional funds or fee payments before any withdrawals can be made
  • A lack of any ownership details on a crypto exchange website
  • No indication of legitimate registration; check the Financial Crimes Enforcement Network (FinCEN) website or Financial Industry Regulatory Authority (FINRA)’s BrokerCheck website
  • Requests for personal or financial information, such as wallet keys or login details
  • Indications of early success in an attempt to encourage additional deposits

3. Ponzi Schemes

Ponzi schemes use funds from new investors to pay returns to earlier investors, with no actual profit from a legitimate business or investment ever made. To stay afloat, the scam relies on a consistent influx of new money from new victims. When the flow stops or large numbers of investors seek to cash out, the scheme inevitably collapses.

Common Warning Signs of Ponzi Schemes

  • Promises of unrealistically high or consistent returns on investment
  • Highly complex investment methods and secretive strategies
  • Sellers or investment operators who are not registered with the Securities and Exchange Commission or other oversight entity, or who are not officially registered as an investment adviser firm
  • Pressure or incentives to recruit more investors and reinvest any reported earnings, rather than cash out
  • Impediments to fund withdrawals such as regular excuses, consistent delays, or unexpected fees

4. Pump and Dump Scams

In pump and dump investment scams, criminals spread false information to inflate the price of low-value assets, such as penny stocks or little-known cryptocurrencies. The scammers secretly hold large amounts of the promoted asset, and when the price rises due to widespread buying, they sell their holdings at a substantial profit. The sudden selloff causes the stock’s or currency’s price to tank, often leaving investors with nearly worthless holdings.

Common Warning Signs of Pump and Dump Scams

  • Unsolicited investment tips, typically from unknown individuals
  • Lightly traded assets being sold at low prices
  • Hype-based promotion with little substance to back the investment’s promise
  • Sudden surges in asset pricing and trading volume, particularly when there is no development driving the increases
  • Coordinated online activities promoting the asset on social networks or other platforms
  • Little to no coverage of the company behind the asset in mainstream financial media
  • A lack of filings with regulatory groups or listings on well-known exchanges 

5. Affinity Fraud

Affinity fraud targets members of tight-knit communities, such as religious, ethnic, or professional groups, with fake investment schemes and other fraudulent offers. Scammers capitalize on the inherent trust existing within these communities, often posing as group members or recruiting respected insiders to (knowingly or unknowingly) promote scheme participation.

Common Warning Signs of Affinity Fraud

  • Assurances of high returns with minimal corresponding risk
  • A heavy reliance on emotional appeal or members’ testimonials in marketing efforts
  • Little to no records or proof of investment performance
  • A lack of documentation such as legal disclosures or registration with financial regulators
  • Pressure to keep the “special opportunity” within the group
  • A pushback against questions or concerns, often partnered with an appeal to the group’s trust (e.g. “Why would we cheat our own people?”) 

Committed To Safeguarding Our Customers

At Arthur State Bank, we’re dedicated to helping our customers protect their finances and avoid becoming victims of scammers. We’re committed to sharing the latest banking fraud trends and fraud-prevention tactics, and we have a range of top-level security measures in place. For more information on common scams and how to steer clear of them, explore the Arthur State Bank blog.

Proudly serving South Carolina since 1933, Arthur State Bank offers accounts and services to meet a variety of financial needs. To help you achieve all your financial goals, we offer in-person service and a range of convenient digital solutions. To learn how Arthur State Bank can help you with banking needs ranging from checking and savings to retirement accounts, mortgages, other personal loans, and more, visit arthurstatebank.com.

OTHER RESOURCES

BLOG

SBA Resources

Mobile Banking

Homebuyers Roadmap

Request Mortgage Information

TOOLS

Mortgage Calculator

FDIC Insurance Estimator

Man doing his banking online

AnnualCreditReport.com is the only source for free credit reports authorized by the federal government. Every 12 months, you can get a free copy of your credit report from each agency.

Your credit report has your credit history for all of your credit accounts as well as any credit inquiries and public record court information such as collections. In addition, the report provides personally identifiable information such as your name, address, and employment.

Be sure to carefully review all three reports to identify any problem areas that you may need to clean up prior to applying for a mortgage. If there is any incorrect information, follow the reporting agency’s rules to correct it or add a notation to the report to explain the situation.

Your FICO Score is a score combines data from several areas include payment history, the amount owed, length of credit history, new accounts. Many lenders use this score as a guide. This score is not provided as part of the free annual credit report.

Learn more about how your credit score impacts your ability to secure a loan.

.

Couple looking over finances

Primary considerations for setting your housing budget require an assessment of your income, debt and current savings for the down payment on the home. The following are generally recommended guidelines; however, you should meet with an Arthur State Bank lender to get personalized mortgage information.

.

Couple meeting with lender

The pre-qualification/pre-approval letter is included with any offer you make on a house to inform the seller that you have met with a mortgage lender and you are prepared to make an offer. The letter states that based on certain assumptions, the bank is prepared to lend you up to a specified amount of money for a home mortgage.

When choosing a loan officer, we recommend going local to work with someone who understands your community’s real estate market. This blog on first-time home purchases includes questions to ask your lender that may be helpful when preparing for your meeting.

Helpful Resources:

.

Realtor shaking hands with a client

When a house is sold, the seller typically pays real estate commission to both the listing agent and the selling agent. It is extremely beneficial for the buyer to use their own real estate agent. Loan officers can often recommend selling agents in the area; ask your officer about realtor referrals when discussing your loan.

A good realtor will know the local market and can help you find an ideal home based on your budget, location and desired features. During your search, understand that you will most likely need to compromise on some items, so it’s important to identify your critical needs versus your wants.

.

Couple searching online for a home

Additionally, when you start with the house search and work backwards, homes can often go off the market while you’re completing steps 1-4. While browsing homes immediately can be tempting, we recommend following these steps in order so that, once you find your dream home, you’ll be well-positioned to take action immediately.

When you find the home you want and you think you are ready to put an offer on it, you will want to make sure you have all the information you need to make a solid offer.

  • Evaluate the neighborhood.
  • Drive by the house at different times of the day.
  • Examine how other houses in the neighborhood are maintained.
  • Consider any potential traffic or other disruptive noise.
  • Is there ample parking for you and visitors?
  • Read the details in any Homeowner Association agreements (HOA fees and rules).

Make sure to do a preliminary check of house details:

  • Check the water:
  • Does it have good pressure?
  • How long does it take to get the water hot?
  • Is it well water or city water?
  • Turn light switches on and off.
  • Open and close doors and windows to make sure they work properly.
  • Review previous utility bill expenses.
  • Consider the property tax bill.

.

Family meeting with realtor at new house

When writing an offer contract, be sure to pay attention to all of the details.

Offer Price:

Your agent should do a market analysis that pulls data on recently sold comparable houses. The best comparisons will come from the same neighborhood.

If you are asking for the seller to pay some of the closing costs, remember that this cost plus the sales commission determines the net amount you are offering the seller for the house.

Work with your agent on your negotiation strategy. There are many things to consider, such as how badly you want this particular house, whether it is a buyer’s or seller’s market and an assessment of the seller’s motivation to get the property sold.

There isn’t one best strategy.

Be sure to document in writing everything you want included with the house, such as appliances, etc. Your agent should guide you through the contract step-by-step.

Contingencies:

  • Home inspection.
  • Mortgage.
  • Final walk through (24 hours prior to closing).

Proposed closing date. Typically, this is 30-45 days from an accepted offer.

A good-faith deposit is required for the offer. This is typically between 1-10% of the purchase price of the house. The deposit is kept in escrow until closing and the money is applied to the purchase price of the house at closing. If the house does not close due to one of the contingency clauses, the buyer receives their money back. However, if the buyer decides not to close on the property, the seller may get the deposit money.

Attach your pre-approval letter to the offer.

.

Two people in professional meeting

The clock starts ticking for everything documented in the contract, including mortgage application, inspections and closing date.

.

Woman advising other woman on mortgage application

You will need to decide which mortgage to select prior to the application.

Plan for the following potential fees:

  • Application fee (many banks and mortgage companies charge an application fee; however, there is not an application fee at Arthur State Bank).
  • Credit check.
  • Appraisal (may be paid at closing).
  • Loan origination fee (paid at closing).

Once you have approval for your loan, make sure you don’t change anything that will impact the status of your mortgage. Banks do a final check on credit and jobs just prior to closing, so now is not the time to change jobs or make another purchase on credit such as a car or furniture.

.

Home inspector going over findings with home owner

Depending on the size of the house, an inspection can cost on average between $300 to $1000.

Many real estate contracts specify how problems uncovered in the inspection will be resolved, up to a certain dollar amount. Should necessary repairs exceed that amount, the buyer has the option to cancel the contract without penalty and receive their deposit money back. Another option is for the buyer and seller to renegotiate who will pay for additional repairs.

.

Woman happily holding keys to her new home
  • Homeowner’s insurance is required by the lender prior to closing on the loan.
  • Turn on utilities in your name, effective the closing date.
  • Change your address with the U.S. Postal Service.
    • Make moving arrangements.

Three days prior to closing:

  • You should receive your final Closing Disclosure from the closing agency. The final Closing Disclosure shows a column for the seller and a column for the buyer. All closing charges and credits for both the seller and the buyer are documented in the closing statement.
  • Review the closing statement for accuracy prior to coming to closing.
  • The final amount in the buyer’s column shows you the amount of money you need to pay at closing.

The closing office will provide specific payment instructions. Closing funds have become recent targets for cybercriminals. If you are asked to use a wire transfer, call the office and ask to speak to someone you have been working with to double-check the instructions.

Closing day:

In South Carolina, the closing will usually take place at the attorney’s office. Everyone signing for the mortgage must be present to sign the closing paperwork. Make sure you bring the following:

  • Cashier’s check or proof of payment for wire transfer.
  • Driver’s license.
  • Checkbook, just in case there are any additional items that were not on the closing statement.

Be sure to understand this information:

  • How and when you will pay:
  • Your mortgage.
  • Your property taxes.
  • Your homeowner’s insurance.
  • Any HOA dues.
  • Who to call with any questions.

The best practice is to go through the homebuyer’s roadmap in this sequence. However, if you jumped ahead early in your journey, just circle back to address the steps you missed.

Arthur State Bank’s loan officers are closely tapped into local real estate markets and experts at helping clients get what they need on terms that work for them. We also offer mortgage specials for first-time homebuyers.

To start planning your journey to your dream home, try out our mortgage calculator. If you’re ready to talk to a loan officer, contact Arthur State Bank to request personalized mortgage information today. Don’t forget to ask about our first-time homebuyer offer.

.