Signs That You Are Getting Scammed by an “Investment” App

Identifying investment scams or better known as Ponzi schemes is not difficult. You have to watch out for some indicators that should raise red flags when you come across schemes that promise high returns on your investments.

There was a time when Ponzi schemes were local and physical in a given location. A scammer opened an office and got people from surrounding areas to invest until the captive market was exhausted and moved to another location.

Unfortunately with time and the evolution of technologies, they have become digital. They are now done online through websites and mobile apps.

Crooks have been promising easy money since before the Internet was mainstream. The digital age has increased their reach as they can target countless people.

Fraudsters are well aware of the investment boom and they are making big headway. Conducting extensive research, security firms have uncovered hundreds of malicious iOS and Android money-stealing apps. These apps spoof popular cryptocurrency trading, stock trading, and banking apps with logos.

You can learn more here.

Some M.O.s of scams in investments and financial services:

One security firm (Sophos) was alerted by someone who fell victim to one of these scams. They became friends through a dating site and the conversation turned to text. After establishing some trust, the scammer sent a link for a cryptocurrency trading app. The app mimicked a Hong Kong investment and trading company called Goldenway Group.

The scammer showed the victim how to buy cryptocurrencies and transfer them to their wallet. When the buyer wanted to withdraw the coin, the scammer made excuses and then blocked them. The victim lost everything he had bought.

Official app stores regularly review apps and remove apps they deem malicious and fraudulent. Scammers found ways around this by abusing a process meant to help small app developers test their products before submitting them to the app store. These services are provided by third-party companies that disclaim liability.

Scammers may link victims to a website that looks like an official app store, with buttons to download.

Victims using Android devices are asked to install an app, create an account and operate. The apps mimicked features like trade updates, wallets, and price tracking. Any transactions made by the victims were sent directly to the scammers.

Social networks provide us with many opportunities to connect with others and share content around the world with ease. Fraudsters use these same social benefits to promote fraudulent investment opportunities. Social networks give them access to personal information to target potential investors and even create the illusion of a shared common interest.

By using social media, scammers can contact many different people at relatively little cost: They can create fake accounts, email addresses, and link their posts to a website, videos, or photos that make the investment look legitimate.

The potential for anonymity on social media can also make it difficult to identify or track down fraudsters using this medium to promote a scheme.

If a scheme becomes popular on social media, people who think the investment is legitimate may encourage others in their network to invest. This can result in affinity fraud where friends, family and colleagues invest and then promote an inappropriate or fraudulent investment. If the investment fails or is fraudulent, money is lost and personal relationships are affected.

Quick Signs You Are Being Scammed

High returns, low risk

No investment can generate high returns with low risk. Guaranteed high returns are almost impossible. Stay away from companies that ask you to invest, offering a 1% or 5% return on your investment every day or offering a guarantee to double your money in a short period of time.

Any investment that promises annual returns of more than 12% could be fraudulent as a general rule. On average, most investment advisers expect stocks to offer an annualized return of 10-12% over the long term. There are almost no other ways in which average returns can be better than stocks over the long term.

Investments also need time to double. An investment that offers you 12% will take a little over six years to double your money, and one that offers you 10% will take a little over seven years. Use these benchmarks to evaluate investments from little-known companies.

Difficult to understand the business model to generate those profits

If you don’t understand a company’s business model, walk away. Fraudsters may use complicated ways of explaining how their business model works to confuse investors. Or when you ask about the way their returns they may redirect your attention to screenshots or examples of success stories, rather than discussing the actual business.

Many companies running the Ponzi scheme can talk about novel business ideas. If you don’t have a comparable business to understand the returns, avoid investing in such companies.

High commissions for introducing or referring new members to investment

Ponzi schemes typically find investors following a multi-level marketing model. They can offer commissions to an investor to bring others. It is MOST LIKELY a Ponzi scheme if it provides high returns with low risk and referral fees.

Many Ponzi schemes also feature company registration certificates and other government-issued documents. Do not use these documents as they may be false or not relevant to the business model.

Tips to Use Investment Apps Responsibly

1. Only put your money where you can afford to lose it: This may seem self-evident, but keep in mind that investments can move up and down in value. You may find yourself in a tough financial situation if you invest more than you can afford to lose.
2. Don’t feel compelled to invest: Apps that encourage you to invest more than you’re comfortable with may try to persuade you to do so. It’s most likely a fraud if an app is urging you to invest more than you want to. To compel you to make a decision, they usually use a timer or a countdown.
3. Recognize the investment: Before you invest, make sure you know what you’re getting into. What are the probable risks and rewards? Is it in line with your investment objectives? Don’t invest if you don’t understand the investment.
4. Fees to be cautious of: Investment apps frequently impose fees, so check the fine print before investing. Details are always the devil’s playground. Transaction fees are charged by some investment applications, while annual or monthly fees are charged by others. Before you invest, make sure you understand all of the expenses, especially any expenses incurred when it’s time for you to sell or pull cash out of the investment.
5. Don’t believe the hype: Investment app developers want you to believe that their app is the finest and that it will make you wealthy quickly. However, the reality is that most investment applications will not make you wealthy overnight. Don’t get caught up in the hoopla and be realistic about the prospective rewards.
6. Take a look at the feedback: Always check the reviews before downloading an investment app. This will provide you with an excellent notion of what other users think of the app. The majority of reviews for credible investment applications will be positive.
7. Be wary of promises: Investment apps that promise substantial returns or no risk are almost certainly scammers. Providers of investment apps get money when you invest, so they’re not likely to stop.

If you are ever in doubt or anything seems too complicated to grasp, steer clear until you’ve had more time to educate yourself and ask questions.