Investing is a powerful tool for building wealth and securing financial stability. However, it is imperative to remain ever so vigilant against potential scams. Globally, with no exception to Nigeria, fraudulent investment schemes are becoming increasingly sophisticated. To avoid falling into the hands of these scam artists, it is important to recognise the trends and warning signs. Let us explore these red flags to watch out for when looking to make an investment and some strategies to avoid falling victim.
- Unrealistic high returns with minimal risk
If you have been promised abnormally high returns with little or no risk, pack your imaginary bags and run away. It is likely a scam. Do you recall the infamous MMM Ponzi scheme which lured many Nigerians with promises of 30% monthly returns, leading to substantial financial losses when it collapsed? Yes?
Always remember that legitimate investments come with inherent risks, and returns are typically proportional to those risks. Be sceptical of any opportunity that guarantees high returns without corresponding risk.
- Lack of transparency
If there is vague or non-existent information about the investment company’s operations, management team, or financial statements, it is most likely a scam and it should raise your suspicion.
It is best to conduct thorough research about the company and ensure that they provide clear details about the business credentials, model, and financial health. If they refuse to provide any legitimate information or information that is not understandable, it’s wise to walk away.
- Pressure to invest quickly
Usually, scammers use a high-pressure sales tactic to urge one to make immediate investment decisions. They will often pressure one to act quickly on an investment, discouraging them from taking time to research.
One thing to note is that legitimate investments will probably be available even after you have had time to consider them. Don’t ever succumb to the pressure; take the necessary time to evaluate the opportunity thoroughly.
- Unregistered investment platforms
Platforms or individuals who are not registered with relevant financial regulatory bodies might be fraudulent. Engaging with unregistered and unregulated organisations can expose one to significant investment risks.
Before investing, verify the registration status of the platform or individual with the Securities and Exchange Commission (SEC) Nigeria or other relevant regulatory bodies. It is better to be safe than sorry.
- Unsolicited offers
Receiving unexpected investment offers, especially through unsolicited communication is a serious red flag. Scammers often use unsolicited emails or messages to lure potential victims into fraudulent schemes.
Be cautious of unsolicited investment offers. Always conduct independent research before considering such opportunities.
- Difficulty in withdrawing funds
When you face challenges or delays attempting to withdraw your investment or profit, it might be a sign of fraudulent activity.
Before investing, understand the withdrawal process. If a platform makes it difficult to access your funds, reconsider your involvement.
- Emphasis on recruitment
Be cautious of opportunities or investment schemes that prioritise recruiting new members over the actual sale of products or services. Schemes that mainly rely on new investments rather than external revenue sources or rewards you more for bringing in new investors than for the quality of the product or service offered are likely Ponzi schemes.
Conclusion
According to research, fraudulent investment schemes have defrauded individuals of over ₦500 billion in the past decade in Nigeria. To protect yourself, remain vigilant, conduct thorough research, and be sceptical of opportunities that seem too good to be true. You can make informed decisions and safeguard your financial future by recognising these red flags and employing the suggested avoidance strategies.
