How do investment scams work?
In a world where online investing is more accessible than ever, it’s also more dangerous. In 2024, Australians lost more than $1.3 billion to investment scams. In the United States, losses exceeded $4.6 billion, making investment fraud one of the most profitable forms of cybercrime globally.
But how do these scams actually work? Why do so many smart people fall for them? And how can you tell the difference between a real opportunity and a high-stakes con?
In this blog, we break down the inner workings of investment scams, the psychological tricks, the tech, the warning signs, and what to do if you or someone you love gets caught up in one..
What Is an Investment Scam?
An investment scam is a type of fraud where criminals trick people into giving money under the false promise of profitable returns. The scammer may claim you’re buying shares, cryptocurrency, commodities, or investing in real estate, AI technology, or startup ventures.
In most cases:
- The platform or company doesn’t exist.
- The returns are completely fabricated.
- The money disappears after deposits are made.
Scammers use complex language, fabricated credentials, and slick marketing to make the offer sound credible. Many of these schemes are well-organised criminal networks, not just lone scammers.
How Investment Scams Actually Work (Step by Step)
Here’s a breakdown of how most investment scams operate:
- The Hook
You get a message on social media, a cold call, or see an online ad promising high returns. Sometimes it starts through romance, job offers, or YouTube investment “gurus.” - Building Trust
Scammers build a fake identity, often posing as licensed financial advisers or crypto traders. They may show you fake testimonials, media coverage, and even government registration numbers. - Your First Deposit
You’re asked to deposit a small amount ($200–$1,000) and will soon see your “account balance” grow on a fake website or app. - Reinvestment & Bigger Deposits
Once you see “profit,” they’ll urge you to invest more — often tens of thousands of dollars. - The Exit
When you try to withdraw, they’ll block your account or demand more money (e.g. taxes or clearance fees). The website then disappears, and the scammer vanishes.
This cycle can last days or months, and the longer it goes, the more victims are emotionally invested and likely to keep sending money.
Common Types of Investment Scams in 2025
These are the most widespread scams in Australia and the US this year:
- Crypto Trading Scams
Fake platforms that simulate Bitcoin or altcoin trading, usually asking victims to fund an online “wallet” that they can never withdraw from. - Forex and Commodity Scams
Victims are lured into highly volatile markets with promises of AI trading bots or expert-managed funds that don’t actually exist. - AI Startup or Tech Investment Scams
Scammers pose as founders of tech startups building AI tools, clean energy, or space tech. Victims think they’re buying pre-IPO shares. - Pig Butchering Scams
A hybrid of romance and investment scam, the scammer builds an emotional connection before introducing a fake investment. - Boiler Room Scams
Victims are called by aggressive “brokers” who claim to work for international financial institutions. These groups often operate in Southeast Asia, targeting Australians and Americans.
Case Study: $250,000 Lost to a Fake Crypto Broker
In 2024, a retiree from Brisbane lost over $250,000 after being contacted on LinkedIn by someone claiming to be a certified investment advisor. The scammer introduced her to a “private crypto fund” with a fake ASIC license and directed her to a polished website that showed her investment growing.
Each time she tried to withdraw her money, she was told she needed to pay clearance fees or convert her assets through specific wallets. Eventually, all communication cease,d and the website was taken offline.
CypherGuard traced wallet addresses to a wider fraud network based in Southeast Asia and assisted with law enforcement escalation.
$110,000 Stolen Through an Instagram Trader Scam
A 29-year-old from California fell for a scam after engaging with a crypto influencer on Instagram who promised “10x returns in 30 days.” After sending money in multiple transactions using Bitcoin and Ethereum, the scammer disappeared.
CypherGuard traced the wallet via blockchain analytics and helped file reports with the FBI IC3 and relevant exchanges. Resolving was limited due to delayed action.
Red Flags: How to Spot an Investment Scam
Watch out for these common warning signs:
- Guaranteed returns
- High-pressure tactics (“act fast!”)
- Unregistered platforms or fake licenses
- Payments requested via crypto or gift cards
- Poorly written websites or apps
- Fake profits with no withdrawal option
If it sounds too good to be true, it probably is.
Emerging Scams in AI & Influencer Marketing
Investment scammers are now leveraging AI tools and social media influencers to deceive even tech-savvy investors.
AI-Powered Scam Platforms:
- Fake advisors using deepfake videos or voice synthesis
- Bots posing as customer support reps
- Auto-generated dashboards showing fake profits
Influencer-Led Scams:
- Paid promos for shady “pre-sale” tokens
- TikTok & Instagram shoutouts that disappear after the rug pull
- No mention of #ad or #sponsored violates platform guidelines
Even if the influencer is unaware, you can still lose everything.
How CypherGuard Can Help You
If you’ve lost money to an investment scam, time is critical. CypherGuard provides:
- Cyber intelligence tools to identify fake platforms and contact points
- Blockchain forensics to trace stolen funds
- Digital fraud analysis to uncover scam networks
- Support for law enforcement reports and disputes
We act quickly while scammers are still active, increasing your chance of tracing funds or securing evidence.
FAQ
Can I recover my money after an investment scam?
It’s possible if you act quickly and work with digital fraud investigators like CypherGuard.
How can I verify if an investment is real?
Check licensing with ASIC (AU) or SEC (US), verify company details, and search for independent reviews.
What if I already sent money?
Stop communication immediately and contact CypherGuard for next steps.