Do you know how to identify and avoid investment fraud?

Have you ever heard of investment fraud? Although it is always valid to look for good forms of investment , this search must always be done carefully, especially so that that financial application does not become a problem.

In this sense, investment fraud is a constant danger. And the best way to get around them is knowing how to identify them and keeping your full attention during the process of choosing any application.

With that in mind, we have separated all the information about what you should observe to avoid inconvenience. I want to know? So, read on!

How to identify the most common investment frauds?

Most square scams involve asking for an amount in exchange for a promise of a future return.

Although the creativity of fraudsters in the financial market is practically infinite, it is possible to indicate the main types of scams applied and even trace the main characteristics of each one of them. This is exactly what we do in the topics that follow. Check out!

Financial pyramid

Pyramids are almost a synonym for scam and financial fraud. In these practices, also called Ponzi schemes, different levels of investors are formed. With each new member in the structure, more people are recruited.

These new participants must make a payment or buy a product, with the promise of getting back the money invested in the future, as long as new people join the scheme.

The amount raised is used to pay the old members of the pyramid (who are at the top of the structure).

However, this form of scam sooner or later runs into a mathematical problem: there comes a time when it becomes increasingly difficult to recruit new people.

That is, the financial resources stop coming in and those who were waiting their turn to receive their money are left to see ships, leaving at a loss. At that time, the pyramid collapses and the fraud becomes explicit.

Are you in doubt if an investment is hiding a financial pyramid? Some simple points can clarify, for example:

• the promise of high and guaranteed profits, almost always linked to the indication of new participants;

• lack of transparency both in the company and on the marketed product.

The formation of financial pyramids is illegal. According to Law nº 1.521/51 , such a scheme constitutes a crime against the popular economy.

Multi-level marketing

It is not uncommon for pyramid schemes to hide behind multi-level marketing practices. Although this second practice is legal, it manages to harbor a type of fraud very similar to the one we described in the previous topic.

In short, a pyramid scheme, as we’ve already mentioned, depends on bringing new players into the structure so that more resources feed those at the top.

Already in a multilevel marketing dynamic this should not happen. For example, the funds raised must come from increasing the number of sales of a certain product, which must be at the heart of the company’s activities.

However, many times the multi-level marketing structure becomes a cover for pyramid schemes. This is done by placing value-added products, most of the time irrelevant, in negotiations and linking possible gains to recruiting and charging new participants.

Forex market

Forex is a decentralized virtual market, in which investors from all over the world make foreign currency exchange operations and profit from it.

Although it is not illegal, this form of application has many risks, mainly because the financial authorities do not regulate it. Some threats are:

undue exposure of sensitive personal data;
the lack of reliable information to make investment decisions;
difficulties in redeeming the invested money;
come across scams in which the alleged companies do not even exist and only maintain a front operation to apply fraud against investors.

When should you pay extra attention when investing?

Every investment decision must be taken calmly, based on as much information as possible and without getting carried away by the anxiety of making money quickly. Moreover, certain characteristics should trigger warning signs. Check out some of them!

Unreal promises

Be wary of any promise too good to be true. Even though there are excellent forms of investment on the market, none of them guarantee easy money. In addition, good market practices usually prevent companies from promising future profitability.

Indicators outside what is practiced in the market

Serious investments are always linked to indicators recognized by the market, such as interest rates or inflation . So, run away from opportunities that stipulate parameters that are not recognized or that cannot be easily followed.

Few customer references

Finally, be careful if the company in question does not have references given by other customers. Use the internet to your advantage and look for comments on social networks and websites that gather consumer complaints.

What is the impact on the lives of those who suffer from investment fraud?

Those who suffer from fraud, in addition to the financial loss, have to deal with a series of inconveniences that compromise their planning, even in the long term.

People who fall victim to this type of practice may have a hard time regaining their confidence and putting their money into future investment opportunities.

In any case, every victim of financial fraud must file a police report, denouncing the person responsible for the fraudulent practices. This attitude allows the responsible authorities to map the origin of these crimes.

Why choosing a reliable company is essential?

It is worth reinforcing the importance of a company with an established reputation in the market to prevent the most diverse types of investment fraud. Right off the bat, these companies will always act according to the rules stipulated by the market.

Another care taken by reliable companies is to establish relationships with their clients based on transparency.

This involves not promising unrealistic gains, not hiding essential information so that those who are deciding are able to make informed decisions and provide the necessary support whenever requested.

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