Tips to Spot Investment Scams and Identify Potential Fraud

Navigating investment scams is challenging, even for the most seasoned investors. The recent surge in artificial intelligence (AI) use within the public sector provides con artists with new and innovative opportunities to commit sophisticated, high-level fraud, to dupe investors of all levels, and scam unsuspecting people on a personal level.

But here’s the good news: there are steps you can take to arm yourself with the skills to help you identify fraudulent schemes. Whether investing with personal funds or a self-directed IRA, making informed decisions is crucial. The more knowledgeable you are, the better you become at spotting investment scams and AI fraud, avoiding it, and confidently investing in legitimate opportunities that pave your way to success.

Perform Due Diligence to Avoid Investment Scams

Due diligence starts with researching the investment and qualifying the people behind it. Don’t be afraid to ask hard questions that deliver the answers you need to make informed decisions. A legitimate investment partner or sponsor understands the necessity of your questions and the importance of transparent responses and explanations. As fellow investors, they want to avoid scams as much as you do.

Use these tips as a guideline to vet real estate deals, startups, business ventures, multifamily syndications, and more.

    • Use Google and outside sources for your research.
    • Ensure the investment complies with legal and regulatory requirements.
    • Ask for references and talk to mutual contacts and other investors.
    • Scrutinize documents illustrating past performance, if available.
    • Compare investment firms or brokers to their competitors.
    • Consider the benefits vs. risks of the investment.
    • Analyze revenue, market, and margin patterns.

Learn Tips to Avoid Investment Scams and Fraudulent Tactics

The following points provide tips on how to detect and avoid investment scams. Establishing clear and consistent practices can help you identify and avoid them.

    • Do not participate in telephone solicitation.
    • If possible, physically inspect tangible investment options like real estate.
    • Remember, “get rich quick” schemes are as real as unicorns. Avoid!
    • Be wary of “guaranteed returns.” Nothing is guaranteed.
    • Never provide personal information over the phone to a stranger.Blue image with the words "fraud prevention" as it relates to investment scams.
    • Transfer sensitive information like personal details and investment contracts via secure servers or software.
    • Don’t rush. Although time might be of the essence sometimes, trust your instincts if things are moving too quickly for your comfort.
    • Resist high-pressure sales tactics such as the classic “everyone’s investing in this!” Chances are, everyone’s not.
    • Beware of AI-generated scams, such as voice cloning and phishing attacks. As artificial intelligence evolves, AI fraud will become more prevalent. Staying informed is essential.
    • Frequently review investor alerts issued by the U.S. Securities and Exchange Commission (SEC). Their resources are a treasure trove of information on investment scams that everyone should be aware of and avoid.

Final Words from Advanta IRA

While learning to detect fraud is critical for any investor, it is an essential responsibility for people using self-directed accounts. Self-directed investors choose the assets for their plans—no third-party broker or advisor makes these decisions for them. And they can invest in alternative assets, like private equity and real estate, which aren’t governed like the stock market. So, self-directed account owners must educate themselves and learn how to properly vet opportunities and to detect investment scams.

If you have questions about this article or want to learn more about self-directed IRAs and solo 401(k)s, contact Advanta IRA today.

Additional resources:

Investing in AI with a Self-Directed IRA (SDIRA): Opportunities and Risks

Invest in Real Estate in an IRA: A Beginner’s Guide

Self-Directed IRAs vs. Traditional IRAs: Which Plan Is Best for You?


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About Scott Maurer

Scott Maurer, Vice President of Sales for Advanta IRA, is a recognized expert in the field of self-directed IRAs. With a law degree from the University of Florida and as a designated Certified IRA Services Professional (CISP), Scott’s keen understanding of rules and regulations fuels his passion to educate others on the power of investing in alternative assets using self-directed IRAs. Scott is a frequent guest on retirement and investing webinars and podcasts, and he has shown thousands of individuals how to achieve financial freedom by teaching them how to use their retirement funds to invest in private placements, real estate, private lending, and more. Throughout his two decades in the industry, he has watched numerous unique investments unfold, giving him great perspective of what is possible when people take control of their retirement funds and investing decisions.