Cybercrime is booming. Research by Surfshark makes for sobering reading: since 2001, the number of online crime victims has increased nearly 17-fold – from 6 to 101 victims every hour – while financial losses have surged over 690 times, rising from $2,055 to more than $1.4 million lost per hour.
And amidst geopolitical tensions, turbulent markets, and accelerated AI innovation, this problem is only growing. At the top of the damage rankings sits investment fraud. According to AAG’s compilation of cybercrime statistics, in 2022, investment fraud was the most costly form of cybercrime, with an average of $70,811 lost per victim.
But what is investment fraud, exactly? How easy is it to spot? And most importantly, what can we do to make sure we never fall victim? We spoke with Valerija Jerenkevič, Fraud Manager at ConnectPay – a licensed payment provider whose fraud prevention infrastructure monitors transactions for exactly these patterns – to get the answers.
“Investment fraud is actually the worst kind of scam out there – not just because it drains your bank account, but because it messes with your head too. I’ve seen this up close in my work, and it’s remarkable how sophisticated these scams have become,” Valerija shares.
Table of Contents
What is investment fraud?
Investment fraud involves deceptive practices designed to trick individuals into investing money under false pretences – promising returns that do not exist, through opportunities that are entirely fabricated. It is not a new phenomenon, but AI has transformed its scale, sophistication, and reach in ways that make it genuinely difficult to detect even for experienced investors.
What is investment fraud online specifically? Online investment fraud uses digital channels – social media, email, messaging apps, fake websites, and professional-looking dashboards – to create the appearance of a legitimate investment opportunity. The fraud typically involves either non-existent investments presented convincingly, or real-looking platforms that show fabricated returns until the victim attempts to withdraw funds.
All investment fraud schemes share common characteristics: promises of high returns with little or no risk, urgency to invest quickly, and the eventual disappearance of both the scammer and the victim’s money.
How does investment fraud work?
Valerija explains the typical progression of an investment fraud scheme:
“It starts with a random message or call, social media ad, Viber message – about an ‘amazing investment opportunity.’ They show you fancy graphs, professional-looking dashboards, and act completely legitimate. The clever part? They start small – like ‘just invest €10 to try it out.’ Your fake ‘earnings’ look amazing on their platform, so naturally you put in more money. This continues until you try to cash out – and suddenly there are ‘unexpected fees’, or they simply disappear. Just like that, your money’s gone.”
The process typically follows this pattern:
Initial contact
Fraudsters make first contact through social media ads, cold calls, messages on WhatsApp or Telegram, or email. The approach appears professional – sometimes referencing real financial news or market trends to appear credible.
Trust building
A small initial investment is encouraged. Fake returns are displayed on a convincing dashboard. The victim sees apparent gains and is encouraged to invest more. Fraudsters may position themselves as helpful advisors, maintaining regular contact to build trust.
Escalation
Once significant funds have been committed, the victim attempts to withdraw. At this point, “unexpected fees,” “tax requirements,” or “verification charges” are introduced. Some victims pay these additional amounts before realising the platform is fraudulent.
Disappearance
The platform disappears, contact ceases, and the money is gone. In many cases, the scam does not end there.
“One of the worst things about investment scams is that the scammers are often not happy with just fleecing their victim once, and they come back for more,” Valerija explains. “After you’ve already been scammed, someone contacts you claiming they’re from the police or a recovery service. They say they’ve found your money and can help you get it back – for a fee, of course. And just like that, you become a victim twice over. This is especially psychologically damaging for the victim, as they feel there is no one they can trust. It truly is a tragic situation.”
What are the types of investment fraud?
Investment fraud takes many forms. Understanding the main types helps identify the warning signs before money is committed.
Ponzi schemes
Ponzi schemes use funds from new investors to pay earlier ones, creating the appearance of real returns. The scheme requires a constant flow of new money to sustain itself and inevitably collapses when recruitment slows. Bernie Madoff’s operation – the largest Ponzi scheme in history – defrauded investors of approximately $65 billion.
Pump-and-dump schemes
Pump-and-dump schemes inflate the price of a stock or cryptocurrency through misleading statements and artificial buying activity, then sell at the inflated price, leaving other investors with worthless assets. These are particularly common in cryptocurrency markets where regulation is less developed.
“Pig butchering” scams
Pig butchering – also known as sha zhu pan – is among the fastest-growing investment fraud types. Fraudsters build a relationship with the victim over weeks or months (often through romantic or friendly contact on social media or dating apps), before introducing a “trusted investment opportunity.” Once significant funds are committed, the platform disappears. The name refers to the process of “fattening” the victim before slaughter.
Affinity fraud
Affinity fraud targets specific communities – religious groups, professional networks, ethnic communities – exploiting existing trust relationships to sell fraudulent investments. Members trust the recommendation of someone within their own group, making due diligence less likely.
Advance fee fraud
Advance fee scams require upfront payments – framed as fees, taxes, or processing charges – for promised investment returns that never materialise. The “recovery service” scam Valerija describes is a variant of advance fee fraud targeting previous fraud victims.
Cryptocurrency investment fraud
Cryptocurrency scams promise unrealistic returns through fake trading platforms, fraudulent initial coin offerings, or fabricated crypto exchanges. Legitimate investment opportunities typically do not require payment via cryptocurrencies or through untraceable methods.
Pyramid schemes
Pyramid schemes require participants to recruit new investors to generate returns. They are mathematically unsustainable and inevitably collapse, with only those at the top of the structure benefiting.
What is a common tactic in investment fraud?
Several tactics recur across virtually all types of investment fraud.
Urgency and pressure – fraudsters create artificial time pressure (“you need to invest now before the opportunity closes”) to prevent victims from conducting due diligence. Never let anyone force important financial decisions quickly.
Guaranteed returns – all legitimate investments carry some degree of risk. Promises of guaranteed returns with no risk are among the clearest red flags in investment fraud.
Social proof and testimonials – fake reviews, fabricated success stories, and paid endorsements (including AI-generated deepfakes of public figures) create false credibility.
Professional presentation – AI has transformed investment fraud by enabling the creation of convincing fake websites, professional-looking dashboards, and polished communications that are indistinguishable from legitimate investment platforms.
Unconventional payment methods – requests for payment via cryptocurrency, gift cards, or wire transfers to unusual accounts are strong indicators of fraud. Requests for unconventional payment methods are standard in investment fraud.
Unregistered and unlicensed operators – legitimate investment professionals are registered with financial regulators. Scammers operate without registration, using urgency and professionalism to discourage victims from verifying their credentials.
Who is targeted by investment fraud?
The common perception is that investment fraud primarily targets older or less technologically confident demographics. Valerija pushes back on this directly:
“The common perception is that it’s the more technologically naive groups in society, like the elderly, who fall for online fraud, but as we can see in investment fraud, this is simply not the case. From my experience, most of the time, these are professional people, well educated, and, of course, financially fairly secure, as otherwise they would not be attractive targets. Time and again, I hear the statement, ‘I never thought I’d fall for this kind of thing.'”
The scale of the problem is significant. In Lithuania alone, over €1 million was lost to investment fraud in a single quarter of 2024 – from private individuals, not companies.
“In my practice, I had a case where one individual lost over one million euros. It’s enough to destroy a person,” Valerija says.
The success of investment fraud is also partly explained by psychology. “One of the main reasons these scams are so successful is that they offer us the opportunity to get rich, or richer, quickly. We all love the idea that money would flow without effort. Then there is the fact that sometimes these scams come when we are financially vulnerable and in need of money. They play on our weaknesses in both cases.”
What are examples of investment fraud in practice?
Real-world examples of investment fraud illustrate how the tactics above operate:
- A victim receives a WhatsApp message from an unknown contact claiming to be a financial advisor. After weeks of friendly conversation, they are introduced to a crypto trading platform showing exceptional returns. After investing €50,000, they are told they owe €8,000 in “taxes” before withdrawal. The platform disappears after payment.
- A social media ad featuring a well-known public figure (using an AI-generated deepfake) promotes a “government-backed” investment scheme. Victims who click through reach a professional website requesting an initial deposit. The scheme is entirely fabricated.
- A member of a local community is approached by a fellow member about an investment in a real estate fund promising 15% annual returns. The fund operator is unlicensed and the investment is not registered with any regulator.
In each case, the pattern is the same: professional presentation, high promised returns, pressure or trust tactics, and eventual loss of funds.
How to protect yourself from investment fraud
Valerija’s guidance is clear and practical:
“First of all, and most importantly, we need to be vigilant and never trust any kind of offer without really digging into the information. Google the company, check its recommendations, look for mention of it on fraud forums. Basically, take nothing for granted – check, check, check. You should also never give any of your information to unsolicited contacts, and you should never download any apps or software that companies tell you to, unless you’ve checked everything out beforehand. And if anyone promises you amazing fast returns, you should be extremely sceptical. One of the other strategies that these scammers love to use is to place urgency on everything. Never let anyone force you to take important financial decisions quickly – always take your time.”
Key protective steps:
- Verify the operator – check that any investment professional or firm is registered with the relevant financial regulator. In the EU, check national financial supervisory authority registers. In the US, use FINRA BrokerCheck to verify the background of financial professionals.
- Check for registration – legitimate investments are registered with securities regulators. Avoid investments not registered with the relevant authority (SEC in the US, ESMA equivalents in Europe).
- Research independently – search the company name alongside terms like “fraud”, “scam”, or “complaint.” Check fraud reporting forums and databases.
- Reject unconventional payment requests – cryptocurrency payments, gift cards, or wire transfers to personal accounts are not legitimate investment mechanisms.
- Ignore urgency – any genuine investment opportunity will remain available long enough for proper due diligence.
- Report suspicious activity – in the EU, report to your national financial regulator. In the US, report investment fraud to the FTC at ReportFraud.ftc.gov or the SEC at sec.gov/tcr.
As Valerija concludes: “Our biggest job is to make sure we are educated about the risks that are out there. It’s our responsibility to ensure that we protect our finances. Education is the key, and we can play our part.”
FAQs: Investment fraud
What is investment fraud?
Investment fraud involves deceptive schemes designed to trick individuals into committing money to fraudulent investment opportunities – promising returns that do not exist through platforms, assets, or opportunities that are either fabricated or misrepresented. It is the most costly form of cybercrime, averaging $70,811 lost per victim in 2022.
What are the main types of investment fraud?
The main types include Ponzi schemes (paying early investors with money from new ones), pump-and-dump schemes (inflating asset prices artificially before selling), pig butchering scams (building romantic or social trust before introducing a fake investment), affinity fraud (targeting specific communities), advance fee fraud (requiring upfront payments for promised returns), cryptocurrency investment fraud, and pyramid schemes.
What is a common tactic in investment fraud?
The most common tactics are: promises of high returns with guaranteed low risk, urgency and pressure to invest immediately, professional-looking fake platforms and communications (increasingly AI-generated), requests for payment via cryptocurrency or untraceable methods, and fake social proof through testimonials and endorsements. If an offer sounds too good to be true and creates time pressure, it is almost certainly fraud.
How does investment fraud work?
Investment fraud typically follows a pattern: initial contact via social media, messaging, or cold outreach; trust-building through convincing platforms and small initial returns; escalation as the victim invests larger amounts; and eventual disappearance of the platform and funds. In many cases a second fraud follows, with “recovery services” targeting victims again. The entire process is designed to maximise the amount committed before the victim realises the fraud.
Who is most at risk of investment fraud?
Contrary to common perception, investment fraud disproportionately targets financially secure, well-educated professionals – not just older or less tech-savvy individuals. Fraudsters target people with money to invest. The psychological tactics used – urgency, greed, fear, and trust – are effective regardless of education level or financial sophistication.
