Pyramids and Fake Startups: How to Avoid Becoming a Victim

Investment scams exploit the desire for rapid returns and limited financial expertise. Fraudsters use deceptive tactics to lure unsuspecting investors. Here, we outline the principal forms of investment fraud and practical protection strategies.

What is investment fraud?

Investment fraud refers to any scheme designed to obtain money from investors through deception, false information, or misrepresentation. Fraudsters promise high returns but either fail to return funds or use new investors’ money to pay previous ones.

Main types of investment fraud

1. Pyramid schemes (Ponzi schemes)

Pyramid schemes are a classic form of fraud, popularised by Charles Ponzi in the early 20th century. The mechanism is straightforward:

• Fraudsters promise high returns (often 20–50% monthly)
• Initial investors receive payments
• Funds for payouts come from new investors
• When new investments stop, the scheme collapses

Modern pyramid schemes often masquerade as legitimate investment projects, MLM businesses, or cryptocurrency platforms.

2. Fake startups and ICOs

With technological advances, fraudsters create fake startups and ICOs (Initial Coin Offerings), including:

• Fabricated whitepapers with technical jargon
• Nonexistent development teams
• False partnerships with reputable firms
• Fake product demos
• Invented reviews and endorsements

3. Fraudulent investment funds

Fraudsters establish fake investment funds that:

• Provide counterfeit licences and certificates
• Show fabricated trading results
• Use aggressive marketing tactics
• Demand large minimum investments
• Implement complex withdrawal processes

4. Real estate scams

In real estate, fraudsters may:

• Sell properties that do not exist
• Offer investments in fictitious projects
• Use forged ownership documents
• Create fake shared ownership schemes

How to recognise investment fraud?

1. Unrealistic promises

If an investment promises returns far above market rates (e.g., 100% per year), this is a major warning sign. Remember: higher promised returns mean higher risk.

2. Pressure for quick decisions

Fraudsters often create urgency, claiming you may miss a “unique opportunity”. Genuine investments do not require immediate decisions.

3. Lack of transparency

Warning signs include:

• Refusal to provide detailed information
• Unclear business models
• Missing contact details
• Reluctance to answer questions

4. Aggressive marketing

Fraudsters often use:

• Spam emails and unsolicited calls
• Social media for mass outreach
• Fake reviews and endorsements
• Manipulative sales tactics

5. Absence of regulation

Check if the investment company has:

• Licence from a regulatory authority
• Registration in official records
• Audit reports
• Liability insurance

How to protect yourself from investment fraud

1. Conduct thorough due diligence

Before investing:

1. Verify company registration in official records
2. Review financial statements and audit reports
3. Check licences and certificates
4. Read reviews on independent platforms
5. Consult a financial adviser

2. Diversify your investments

Do not invest all your money in one project. Spread funds across different assets and companies to reduce risk.

3. Invest only what you can afford to lose

Never invest money needed for essential expenses. All investments carry risk.

4. Be cautious with “exclusive” offers

If you are offered an “exclusive opportunity” available only to a select few, this may indicate fraud. Legitimate investments are generally open to all.

What to do if you become a victim?

Immediate actions

If you realise you have been targeted by investment fraud:

1. Cease all further investments
2. Save all documents and communications
3. Take screenshots of websites and advertisements
4. Contact law enforcement authorities
5. Contact Global Law Group

Documentation

Gather all information about the fraud:

• Contracts and agreements
• Payment records
• Correspondence with fraudsters
• Advertising materials
• Website screenshots

Is it possible to recover funds?

Recovering funds after investment fraud is possible with a professional approach. Our legal team specialises in:

1. Legal analysis of the scheme

We analyse the structure of the fraudulent scheme and determine:

• Legal grounds for recovery
• Liability of involved parties
• Options for recovery through court
• International protection mechanisms

2. Working with law enforcement

We cooperate with police and prosecutors for:

• Initiating criminal proceedings
• Seizing fraudsters’ assets
• Returning funds through confiscation

3. Civil lawsuits

If necessary, we file civil lawsuits for:

• Invalidating transactions
• Recovering losses
• Compensation for non-material damages

Prevention is the best protection

Remember these principles for safe investing:

• If an offer sounds too good, it is likely fraudulent
• Never invest under pressure
• Always verify information from independent sources
• Consult professionals
• Trust, but verify

Conclusion

Investment fraud is a serious threat to anyone seeking to grow their savings. Understanding fraud methods and following safety measures will help protect your assets. If you become a victim, Global Law Group is ready to assist.