The business of investment fraud, investment swindles and scams. Read our free investment guide to avoid being a victim.

Here are some key tactics used by investment swindlers:

Expectation of Large Profits: The profits swindlers talk about are generally large enough to make you interested but not overly skeptical.

Low Risk: Some are so blatant as to suggest there's no risk, that the investment is a sure money maker.

Urgency: The investment swindler may say it's essential to invest right now because the investment opportunity can be offered to only a limited number of people, or because delaying could reduce profit.

Confidence: They sound confident about the money you're going to make so you'll become confident enough to let go of your savings. Con men know that the more they talk, the less chance you have to ask questions.


Avoid investment scams. Here are questions investment swindlers do not like to be asked.

1 Where did you get my name? If the response is that you were chosen from a select list of intelligent and prudent investors, that select list may be the telephone directory, or if you made bad investments previously, you can be sure your name is on someone's alumni list.

2 What risks are involved in the proposed investment? Except for obligations of the U.S. Treasury, which are considered risk-free, all investments involve some degree of risk. If the salesman had knowledge of big-profit investment without risk, he wouldn't be on the phone talking.

3 Can you send me a written explanation of your investment so I can consider it at my leisure? For someone peddling fraudulent investments, that can be a double turnoff. For one thing, most crooks are reluctant to put anything in writing that might cause them to run afoul of postal authorities or provide material that, at some point, might become evidence in a fraud trial. Secondly, swindlers don't want you to do anything at your leisure. They want your money now. 

4 Would you mind explaining your investment proposal to some third party, such as my attorney, accountant, investment advisor or banker? If the answer goes something along the lines of I'd be glad to, but there isn't time for that, or if the salesman snaps back by asking can't you make your own investment decisions? you should consider saying no. 

5 Can you give me the names of your firm's principals and officers? Although some persons who establish and operate dishonest firms change their own names as often as they change their firms' names, even the hint that you are the kind of investor who checks into things can be a fast turn-off for a swindler.

6 Can you provide references? Not just another list of other investors who supposedly became wealthy, but reputable and reliable recommendations such as a bank or well-known brokerage firm you can contact.

7 Do you have any documents such as a prospectus or risk disclosure statement you can provide? This may not be available in connection with all types of investments but in many investment areas, such as securities, futures and options trading, it's required. And there can be requirements that you be provided with this information and acknowledge in writing that you have read and understood it. 

8 Are the investments you are offering traded on a regulated exchange, such as a securities or futures exchange? Some bona fide investments are and some aren't, but fraudulent investments never are.

9 What governmental or industry regulatory supervision is your firm subject to? If the salesman rattles off a list that ranges from the FBI to the Boy Scouts, tell him you'd like to check the firm's good standing before making an important investment decision. Then verify the response. Few things discourage a swindler faster than the thought that his first visitor the next morning may be from a regulatory agency.

10 How long has your company been in business? In any kind of business activity, there can be advantages to dealing with a known, established company. This isn't to say that new businesses aren't starting up all the time or that the vast majority aren't perfectly reputable. Before you accept a salesman's assurance that he can make money for you, you have the right to know what his performance has been in making money for others. And ask to have the information, if there is any, in writing.

11 When and where can I meet with you or with another representative of your firm? Chances are a crooked operator, particularly if he's operating out of a telephone boiler room, isn't going to take the time to visit with you and even more certainly doesn't want you to see his work place.

12 Where, exactly, will my money be? And what type of regular accounting statements do you provide? In many investment areas, such as futures trading, firms are required to maintain their customers' funds in segregated accounts at all times. Any mingling of investors' funds with those of the firm or its principals is prohibited.

13 How much of my money would go for commissions, management fees and the like? And ask whether there will be other costs such as interest or storage charges, or whether the investment agreement involves any type of profit sharing arrangement in which the firms' principals participate. Insist on specific answers and, again, get it in writing.

14 How can I liquidate, i.e. sell the item I'd be investing in, if and when I decide I want my money? If you find that the investment is illiquid, or there would be substantial costs if liquidated, or that you are unable to get straight and solid answers, these are all things to consider.

15 If disputes should arise, how can they be resolved? Short of having to go to court to sue someone, does the company or regulatory organization provide a mechanism for resolving disputes equitably and inexpensively through arbitration, mediation, or reparations procedure? Aside from seeking important information, you may be able to detect whether the salesperson is uncomfortable or impatient with this line of questioning.