With investment scams now ranking in the top 10 fastest growing scam types, knowing the red flags with investment opportunities can help you to avoid becoming the next victim.
Forex broker experts at BrokerChooser said looking at five of the most notorious scams in financial history can help us to identify the warning signs to look out for and avoid getting caught.
Adam Nasli, head analyst from brokerage and forex expert BrokerChooser, said there were a number of steps everyone should take before investing in a scheme.
He said: “Always verify a company’s licence directly on the official regulator’s website and don’t trust links or contact details from emails or messaging apps.
“Search the company’s name with terms like ‘scam’ or ‘complaints’, read verified reviews, and check for regulatory warnings. Be wary of promises like ‘guaranteed returns’ or ‘risk-free’ profits, which are classic red flags. Real investments carry risk, and legitimate firms will be upfront about that. If it sounds too good to be true, it probably is.”
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The five scams to learn from
Nasli picked these five scams as the ones to learn from.
UK: The London Capital & Finance (LCF) – £237m Mini-Bond Scandal
More than 11,600 investors invested in high-risk mini-bonds promoted as ‘fixed rate ISAs’ with annual returns of up to 8%.
The company claimed funds would be loaned to hundreds of secure, creditworthy UK small and medium-sized businesses, but the bonds did not qualify as ISAs, and money was only funnelled into 12 companies – many linked to LCF’s directors.
Despite being advertised through Financial Conduct Authority (FCA)-regulated marketers, the mini-bonds themselves were unregulated, exploiting a legal loophole that left investors unprotected.
Around £237m of investors’ cash was still inside the LCF scheme when it collapsed in early 2019.
The red flags:
- ‘Safe’ investments with high returns
Low risk and high yield are rare.
- Regulatory smoke and mirrors
Regulated marketers don’t mean the product itself is protected.
- Vague use of investor fund
No visibility is a warning sign.
US: Bernie Madoff’s $65bn Ponzi Scheme
Madoff ran the largest Ponzi scheme in history for nearly four decades, luring investors with the promise of consistent high returns – something no legitimate trader can guarantee, especially in volatile markets.
His so-called ‘split-strike conversion’ strategy was said to hedge against market downturns and deliver steady gains.
In reality, there were no trades. He simply paid earlier investors with new funds – a textbook Ponzi scheme. The fraud collapsed in 2008 during the global financial crisis.
The red flags:
- Consistently strong returns
No investment is immune to market swings.
- Lack of transparency
Vague strategies and resistance to audits are major red flags.
- Blind trust in reputation
Even Wall Street veterans can run scams – always verify.
Global: OneCoin’s $4.4bn Cryptocurrency Scam
Ruja Ignatova – an Oxford-educated, self-proclaimed financial visionary – convinced millions to invest in OneCoin, a fake cryptocurrency she claimed would be the next Bitcoin.
Promising huge returns, it was a multi-billion-dollar con built on a bogus digital currency with a pyramid-style recruitment model. But behind the showmanship was a complete sham. There was no real blockchain, no open-source code, and no way for investors to cash out.
By the time it unravelled, over €4bn had been poured in from 175 countries, and Ignatova remains missing after boarding a flight to Greece.
The red flags:
- No blockchain, no transparency
A real crypto has a public ledger.
- Hype over substance
Flashy events and big promises can mask scams.
- FOMO-fuelled investing
- Fear of missing out can override due diligence and common sense.
Malaysia: SwissCash Forex Pyramid Scheme
SwissCash claimed to invest in equities, commodities and foreign exchange, promising investors returns of up to 300% within 15 months. In reality, it was a Ponzi-style pyramid scheme that deceived thousands of unsuspecting investors before authorities shut it down.
The scheme ran as an internet-based investment programe with no verifiable forex trading, ultimately leading to losses estimated at $83m worldwide.
The red flags:
- Guaranteed high returns
Legitimate investments don’t promise 300% with zero risk.
- No proof of real trading
If you can’t verify where your money’s going, walk away.
- Pressure to recruit others
This is a classic scam tactic often disguised as ‘network building’.
Germany: Wirecard – €20bn Accounting Fraud
Wirecard grew rapidly to a €24bn valuation and earned a spot in the prestigious DAX 30, attracting major institutional and retail investors. But behind the façade, the company was a house of cards built on fabricated revenues through fictitious clients and dubious third-party partners, particularly in Asia and the Middle East.
In June 2020, the deception unravelled when EY auditors refused to sign off on Wirecard’s 2019 accounts after failing to verify the €1.9bn supposedly held in Philippines banks. The share price plummeted by 66%, and soon after, Wirecard admitted the funds never existed.
The red flags:
- Opaque financials and fake clients
Be cautious of hard-to-verify sources.
- Regulator and auditor warning signs
Legal threats against critics are big red flags.
- High-profile status ≠ trustworthiness
- Status doesn’t guarantee legitimacy
