Tips to Identify Investment Scams

Omolabake Fasogbon

The desperation for daily bread amid deepening poverty, and the evolving technological landscape, have continued to expose a lot of persons to scams. 

A lucrative sector worth multi-billion-dollar, scamming has become a global threat. It is particularly gaining ground in Nigeria and defying efforts to tame it. 

Recently, a UK-based data protection company, Siccura ranked Nigeria first among the top 10 most scamming countries globally. The country was also ranked fifth most vulnerable to cybercrime as indicated in World Cybercrime Index. 

Investment scams which come dreadful in the scam bracket have not only brought ruin to the national economy, smartest individuals and corporate victims have equally been counting their losses. 

It involves deceiving people into investing money in fraudulent schemes, promising unrealistic returns, and ultimately disappearing with the funds. Among several others, a case of a Nigerian man who sold ‘fake airport” to a Brazilian bank for $242 million in the 1990s, still comes to mind. 

The Nigeria Deposit Insurance Corporation (NDIC) reports that Nigeria has lost not less than N911. 45 billion to Ponzi schemes or investment platforms in the last 23 years. Meanwhile, Ponzi is just one of several other investment scams wrecking unsuspecting individuals. Nigerians have in one way or another fallen victim to other deceitful schemes such as the pyramid, fake investment opportunities, boiler room scams, cryptocurrency and high-yield investment programmes, amongst others. 

Despite preventive efforts, perpetrators persist and continue to innovate against physical and digital countermeasures. 

Still, progress made in terms of arrests and prosecutions seem to empower offenders’ knowledge arsenal. Day unto day, new cases keep screaming in newspaper pages.

Just recently, the police uncovered an internet fraud academy in Benue State, indicating the deep-rootedness of the anomaly. 

Relevant education and constant enlightenment of the public remain key to outsmart unrelenting predators, co-founder of Penny Tree, Adeleke Awotayo-Ayeni said.

“Financial education will help people understand the modus operandi of ponzi schemes and how they can prevent it,”  he stated. 

A lawyer and Business Consultant, Kingsley Ani, also enlightened about suspicious elements in fraudulent schemes that should not be thrown to the wind. He hinted on some of these red flags below:

Investment opportunities too good to be true; Unreasonable ROI

When something sounds too good to be true, then it probably is. Investment portfolios are grown steadily over time, with reasonable return on investment (ROI) when numerous factors are taken into consideration: general market conditions, market risk, and inflation. However, if the ROI on investment opportunity does not factor in these elements, consider it risky. 

 Limited Time Offer Investments

Limited-time offer investment is a marketing gimmick generally employed by marketers to get a potential customer to commit to a sale, a product, a service, or an offer.  An investment platform mounting pressure on one to quickly invest in an investment scheme with mouth-watering limited-time offers is a serious red flag.

 Track Records Fictitious

Many investment schemes publish stupendously attractive track records of their past returns to the public as they try to woo investors. They capitalise on the fact that a typical Nigerian does not carry out due diligence to confirm the company’s record. It is important to check records, including financial records, past performance, the company’s management, capitalisation, revenue and revenue streams, and business model, amongst others.   A professional may be hired to do this. 

Regulation Claims       

With the SEC clamping down on fake investment companies to safeguard the investing public, many scam investment companies now lay claim to being regulated by regulatory bodies to ameliorate fears and bolster investor confidence in their schemes. It is important to check out these claims. 

Unlicensed Professionals

Scams appear to come from authentic sources, still it’s important to be sure one is talking to a licenced professional or real dealer. As much as possible, verify the credentials of the person offering an investment with relevant authority. 

Unsolicited Offers

Most times, if one is offered an investment opportunity that is not initiated by one, be careful in putting your fund to such. A certified Financial Planner, Christopher McGlynn said, “Generally, investment scam offers come out of the blue without one seeking any information. These messages or invitations come through cold calls or emails. That should alert one to remain cautious. I suggest ignoring such calls or emails.”

Overly Complicated

Avoid an investment offer that is secretive and not in the public domain, it is likely illegal or does not exist. An investment process that is not clear enough or has some elements of secrecy should be reassessed. 

Difficult Payment Methods

Oftentimes, an unreal investment comes with complicated methods of payment such that the receiver is difficult to trace. A party should be bold enough about his compensation and any associated costs, anything short of this should be