How Can I Avoid Being the Victim of Investment Fraud?

In the case of fraud, many times the fraud can be avoided if proper due diligence is performed. According to one recent report, as much as 70% of fraud can be discovered if the investor took the time to do the proper research before investing. But even savvy investors can be duped into believing that their money is not only safe but that an investment will provide substantial returns.

To be clear, however, investors generally are not required to perform their own due diligence. They have the right to rely on the investment professionals to whom they entrust their money and investment professionals are required to disclose all material information and not misrepresent any material information, regardless of whether investors have performed their own due diligence.

To avoid investment loss, here are top 5 things to look out for before investing:

Being Pressured to Invest NOW

Investors should be cautious any time they are being rushed into making a decision right away. Is the offer only good for a limited time, or are you being led to believe that you are part of a special group being informed of the offer? Take the time to do your research; most legitimate offers will be there tomorrow.

If It’s Too Good To Be True, It Probably Is

If the broker is offering returns on your investment at substantially higher than average market rates – look out. Many smart investors have become victims of investment fraud because of the dollar signs. This is typical of a Ponzi scheme – the Ponzi schemer will promise a high rate of return and then use new investors’ money to pay that purported investment return to you, which can serve to entice you to invest even more.

Doing Favors

If the broker is offering to do you a favor of some sort in return for your investment, this could be a ploy to distract you from the matter at hand and is a common trick in investment fraud.


Although the broker might appear successful and well qualified, appearances can be deceiving. Make sure your broker is legitimate. The Commodities Futures Trading Commission has a basic search feature here, as does FINRA here.

The Broker’s Own Endorsement or 3rd Party Endorsements

Finally, if the broker claims that he personally invested in the product or states that others you may know already have invested, rather than focusing on the investment itself, this is another sign that the investment may be flawed.

If you have done your due diligence and still have questions about the validity or legality of a potential investment, is important that you seek out qualified legal counsel before you invest your hard-earned money. The fraud attorneys at Dimond, Kaplan & Rothstein, P.A. have extensive experience dealing with investments of all types, and we have offices in Los Angeles, New York and Miami. Contact us to set up a consultation today.

Do you think you have been a victim of investment fraud?

The attorneys at Dimond Kaplan & Rothstein, P.A. have recovered more than $100 million from banks and brokerage firms for their wrongful actions.

If you think you have been a victim of investment fraud you may have certain legal rights that require your immediate attention. Contact us today to schedule a free consultation.

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