Smart Tips to Protect Your Money from Investment Frauds

In today’s fast-paced financial world, opportunities for wealth creation are everywhere — but so are scams. Fraudsters use polished websites, convincing stories, and fake credentials to lure people into schemes that can wipe out savings in an instant.

The more you understand how legitimate investments work — and how scams operate — the safer your money will be.

What is Investment Fraud?

Investment fraud occurs when someone deceives investors or manipulates financial markets for unlawful gain. In other words, it’s when a person or entity promises safe or high returns but hides the real risks, lies about the investment, or simply steals the money. 

Fraudsters disguise themselves to invest in a product, service, or scheme with false promises, hidden risks, or outright lies.

Common examples include:

1. Ponzi Schemes 

A Ponzi scheme is a fraudulent investment operation where the organizer/Fraudsters pays returns to existing investors using money collected from new investors, rather than from actual profits. The scheme creates a false impression of a profitable and legitimate business, luring more people to invest.

2. Pump-and-Dump 

A pump and dump is a securities fraud scheme that involves artificially inflating the price of an investment and then selling it for a profit. The fraudsters buy a significant amount of a low-priced asset, such as a penny stock or a new cryptocurrency, and then use misleading information to generate hype and interest. 

This “pumping” phase drives the price up as new investors, often influenced by a fear of missing out (FOMO), begin to buy in. Once the price is at an inflated high, the fraudsters “dump” their holdings, selling them all at once. 

This sudden sell-off causes the price to crash, leaving the new investors with substantial losses, while the fraudsters have already cashed out with their profits. The scheme is illegal and is a form of market manipulation.

3. Advance Fee Scams 

An advance-fee scheme is a type of fraud where a victim is tricked into paying an upfront fee in anticipation of receiving something of much greater value, which they never actually receive. The core of the scam is that the promised benefit is always contingent on a small, initial payment.

4. Fake Financial Advisors  

A “fake financial advisor” in the context of fraud is an individual who pretends to be a legitimate and licensed professional to deceive people and steal their money. These fraudsters use various deceptive tactics to gain trust and convince victims to invest in non-existent or fraudulent schemes.

5. Grey Market Selling or Unregistered Securities Fraud  

The grey market involves the unofficial trading of securities outside of regulated exchanges, such as trading shares of a company before its IPO. This market has no legal protections, making it an ideal environment for fraud. 

Fraudsters can easily manipulate prices, inflate the “grey market premium,” and use fake middlemen to steal funds. The absence of official records and transparency makes it difficult for investors to verify the legitimacy of these transactions, leaving them vulnerable to significant financial losses.

Red Flags You Should Never Ignore

• Guaranteed high returns with little or no risk.
• Pressure to invest immediately (“last chance” or “offer closing today”).
• Complicated strategies you’re not allowed to fully understand.
• Requests for payments to personal bank accounts or in cash.

10-Step Checklist Before You Invest

1. Verify Registration – Ensure the entity is registered with SEBI, RBI, IRDAI, or relevant authority.

2. Check Background – Look for reviews, complaints, and regulatory actions.

3. Understand the Product – Avoid investments you can’t clearly explain.

4. Assess Return Claims – Be suspicious of unrealistic promises.

5. Verify Past Performance – Ask for audited reports.

6. Confirm Payment Channels – Always pay via official bank accounts.

7. Read Documents – Review offers letters, terms, and disclosures.

8. Avoid Urgency Traps – Take time to decide.

9. Keep Records – Save all receipts and correspondence.

10. Trust Your Instincts – If it feels off, walk away.

How Regulators Can Help You

In India, SEBI, NSE, BSE, and other regulators actively issue alerts about fraudulent entities. They maintain lists of registered intermediaries, publish press releases to cautionary investors, and take enforcement actions. Always check these sources below before committing money.

Secure Investing with Share.Market

Protecting your wealth requires both smart choices and safe practices:

• Share.Market will never ask you to transfer money outside our app
• We will never request your OTPs, UPI PINs, or login credentials
• Be cautious of “guaranteed return” schemes—they are usually fraud traps
• Always cross-check offers with official Share.Market sources.

If You Suspect Fraud

• Stop all further transactions immediately.
• Gather documents, messages, and payment proofs.
• Report to SEBI’s SCORES platform or the local police’s cybercrime division.

Final Thought – An informed investor is a protected investor. Scams thrive in secrecy, confusion, and misplaced trust — but with research, verification, and caution, you can safeguard your financial future.

Remember: If it’s too good to be true, it probably is.

Disclaimer and Disclosure 

Investments in the securities market are subject to market risks, read all the related documents carefully before investing. Registration granted by SEBI, enlistment as Research Analyst with Exchange and certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors. Kindly refer to  https://share.market/ for more details.Investments in WealthBaskets are subject to the Terms of Service. All investors are advised to conduct their own independent research into investment strategies before making an investment decision. Mutual Fund investments are subject to market risks, read all scheme related documents carefully. PPWB acts as a distributor of mutual funds and it is not an exchange traded product. PPWB acts as a distributor of mutual funds and WealthBaskets and it is not an exchange traded product. Disputes with respect to the distribution activity of Mutual Funds and WealthBaskets will not have access to Exchange investor redressal or Arbitration mechanism. The securities are quoted as an example and not as a recommendation. This is for informational purposes and should not be considered as recommendations.

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