Investment Scams

Last updated 11/04/2023


Now and then, I see people sharing some advertised “investment” schemes on social media platforms followed with a question, “Is this legit?” No kidding, I just saw one yesterday!  


The scheme will offer you a high return in a short period. Woooow! It could be a day, a week, a month, and even higher in a year. Who can say no to making over 1000% back in their investment in a year or less? 


And there are so many of them, unfortunately. 


First of all, I am happy you are willing to ask about the legitimacy of a scheme before you dish out your hard-earned money. 


But let’s be serious, for a minute. 


Finance and investment experts are ever telling you that there is no form of investment that will churn out such a return in such a short period! 


So what on earth is the company doing with your money to generate such a high return? Higher than what other investment companies are offering, and by a long shot? 


Do not be a victim of investment scams. First, keep in mind that there is never a shortcut to building wealth. Second, understand some of the investment scam types that exist and all the telltales. 


Here’s How to Choose an Investment Company


Top Warning Signs To Spot an Investment Scam

If you are careful enough and do your due diligence, you cannot miss spotting an investment scam. Most have become savvy and try to look as legitimate as they can get. But there is always a red flag in there if you pay attention to the details.


The devil is always in the details


Below are the top red flags to keep your eye on: 


1. The Promise of Low or No Risk But Super High Returns

When it comes to investment, high returns must be accompanied by increased risk. That’s all—end of the story.


You could lose a significant portion of your capital or all of it altogether. There are actually no two ways about this. So, when some investment companies or individuals promise you a 100% return in a week, month, or year, THINK TWICE!


2. Not Registered and Regulated by the Relevant Bodies

And I do not mean the business registration. Do the right finance and investment bodies regulate the investment? 


These are the bodies that protect investors from fraudulent investment companies and products. So, if any of the regulators do not register the fund or investment company, RUN!


3. Limited Offer! 

This is the best deal you’ll ever get! 


Grab the opportunity when it’s still hot!


These are pressure tactics, nothing more. 


How special do you feel being among the chosen few to embark with them on this limited investment opportunity? 


That’s what they are aiming for, for you to feel special like you are a part of something unique. Soon, you will be rushing into the investment head first. Big mistake! 


If you see any of these, do not even consider pursuing that investment:

  • Limited offer just for you 
  • Invest now before the signup period 
  • Enjoy our special rate for the first *gives a number* investors   


4. Sham Track Record 

How many years of experience do the firm and the team have? Yes, it could be long, by the look of it. However, keep in mind that scammers are trying to look legit, including lying about their years of experience. Some will even go as far as providing testimonials from their “satisfied customers.” 


Do not just take these success claims at face value. Instead, dig deeper and verify every little detail you can about the team and the firm in general. Ask yourself some of the below questions:

  • What is the location of the business? 
  • How long have they been there?
  • What’s the registered business name?
  • Are these third-party testimonials really genuine?


5. Commission based referrals 

A legitimate investment will not ask you to refer a friend, or anyone for that matter, at a commission. 


This is a scheme frauds use to lure in more investors. Then, they use the money from the newly registered investors to pay themselves and maybe the first group of investors and recruiters. 


6. Out of the blue contact with constant bugging

Don’t fall for investments from companies or individuals that cold you out of the blue. Some do this through text messages, emails, phone calls, or social media sites. 


And then they will keep at it, annoyingly so, with constant engagements to pressure you into investing with them. 


Also read: What to Consider Before Making Investment Decisions


Types of Investment Scams To Watch Out For

As you have guessed, there is no one type of scam. Instead, they come dressed in all sorts of styles, savvy as ever, and more advanced. However, most scams will fall into one of these categories:


1. Ponzi Schemes 

The investment company recruits you with a promise of a lucrative return within a short period. You are assured that you have no risk to worry about, and your money will be invested in promising real estate or Forex schemes and other legitimate businesses. 


But, unlike its cousin, the pyramid scheme, you do not have to recruit becomers to start getting your “returns.” Instead, the scam will target a specific group of people. Recruits will see how existing investors are reaping it big time and jump to the conclusion that it is a safe and lucrative investment. 


In reality, your money is going into the pockets of the fraudsters and the existing investors. That means no one is investing your money in any assets for a return. And that’s where the math stops mathing!  


If no new investors sign up or many current investors withdraw their money, the scheme will undoubtedly meet its definite death. 


And it is a long-existing con! Did you know that the name Ponzi comes from the mastermind Charles Ponzi? His scam dates back to the 1920s when he convinced people to invest in a complicated mail coupon scheme for a 50% and 100% return in a few months. 


And, long before Charles Ponzi, there was Sarah Howe, who promised women to double their capital in a few months. 


2. Pyramid Schemes

With pyramid schemes, you have to recruit new people into the business, whether selling services or products. That’s how you make money, by recruiting new people. It looks like a legit multi-level marketing business, right? 


Wrong. The scammers will do everything possible to make you think that. The problem is that there is usually no legitimate business behind all of this. So, if you see recruiters focusing more on recruitment than selling their products or services, which should be a revenue stream, that’s a red flag. 


Apart from this, you can also check how easy it is to sell the said service or product. If it is proving to be a challenge, you may be dealing with a pyramid scheme. Another telltale is having to pay some form of fees before you can start making the sales. 


3. Offshore Schemes 

These come in various forms, from foreign investment accounts (mutual funds and stocks) to properties. Whatever the case, the scammers will want you to send the money outside your country. Some will even promise you some tax-saving strategies so that you can see you will not lose your investment return paying Uncle Sam. 


The money you send will never buy any investment assets, even properties. While they might give you access to an online platform where you can keep track of your investment, the money is being channeled from their accounts to individual accounts or other offshore accounts. Sooner or later, the company closes or says they are broke and are liquidating, and down the drain goes your money! 


4. Pump & Dump Schemes 

Be careful when buying company shares. You could be falling for a pump-and-dump investment scam. These involve manipulating the market, where the scammers buy low-trading equities of small and not actively traded companies. 


They will convince buyers that the increasing stock prices and interest in the company are legit, leading to increased demand. Then, of course, the prices for the shares will go up, and the scammer will dump all their shares. They will make a profit out of it, but investors will be left with worthless shares. 


Social Media Scams and Impersonation

Social media has become a breeding ground for investment scams. Fraudsters leverage these platforms to reach a wide audience and exploit the trust people place in online connections. A prevalent tactic involves impersonating financial advisors, investment managers, or even representatives of legitimate financial institutions.


These imposters may create fake profiles or hijack existing accounts to appear credible.  They then exploit social media features to promote fake investment opportunities or spread misleading information that drives people towards fraudulent schemes.


When you look closely, they will most likely redirect you to a website that’s not related to the individual or company they are impersonating. A closer look at the service or product they are offering will also show you their service or product has all the telltale signs of a scam.


Here’s how to protect yourself:

  • Be wary of unsolicited investment advice or offers received through social media
  • Verify the authenticity of any financial professional profiles you encounter online. Legitimate professionals will have verifiable credentials and affiliations through various professional bodies.
  • If you suspect an account may be impersonating a real financial institution or individual, contact the institution or the individual directly through their official channels to confirm.


@enidkathambi SCAMMER ALERT ‼️ Please note that this is my one and only TikTok Account. Someone is impersonating me and offering personalized financial services. Please note that I am currently not offering personalized financial coaching or advise. Be very vigilant!! Don’t fall for scammers. Please report the account. Thank you! #fakeaccount #scamalert🚨 #scammeralert ♬ original sound – FA Enid

In Conclusion 

While the above are the most common scams, we see many investment scams cropping in many forms. For instance, scams like forex trading and cryptocurrency scams are quite rampant. 


Yes, we all have certain dreams and hopes when it comes to our financial and overall lives. I want to be stable enough with multiple revenue streams, retire early, and be a professional globetrotter. Perhaps you want to buy a house, pay off that massive load of credit card debt, buy the latest model of your dream car, or just shoot into space *rolls eyes*. 


But, whatever your dreams and hopes are, you are going about it the wrong way if you keep falling for scam investments. Do your due diligence, don’t fall for those high-return promises, and NEVER invest in anything you do not understand. Most importantly, talk to your financial advisor. They are better suited to analyzing investments and can tell you what is real or not. 


How Can I Check If An Investment Offer Is Legitimate?

Verify the registration and licensing status of the offering party through the Capital Markets Authority (CMA’s) official website or directly contact them for confirmation.


How Can I Educate Myself About Safe Investing?

Consider attending investment seminars, reading up on financial literacy from trusted sources, and consulting with licensed financial advisors.


Are There Legal Protections in Kenya Against Investment Scams?

Yes, there are legal protections in place. However, recovery of lost funds can be challenging and lengthy, so prevention is key.


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