The most common investment scams and how to spot them

Make yourself aware of Ponzi schemes, forex trading fraud, phishing, crypto and real estate cons

Avoid sharing personal or financial details with unverified entities and perform thorough due diligence before investing. Getty Images

Investment scams and financial fraud have been increasing globally at an alarming rate. They are perpetrated in various forms and often end up with unsuspecting victims being robbed of their lifelong savings.

Most scams promise investment returns that sound too good to be true, guaranteed profits, ways to beat the stock market and little to no risk. They tend to exploit the desire for quick returns and are often sold through word of mouth and cold calling.

Financial experts always advise individuals that good investments tend to be boring and only benefit from the power of compounding over the long term.

“It’s extremely important to undertake thorough research before trusting anyone who offers any sort of investment opportunity. If they are offering a high return for little risk, it's probably too good to be true,” says Alison Soltani, founder of Leap Savvy Savers.

“I would run it by the Simply FI Facebook group (highly trusted source) and get their feedback first. It’s always best to stick to tried and tested long-term investment strategies – investing should be boring and your returns compound over time.”

Rupert Connor, partner at Abacus Financial Consultants, agrees and urges investors to conduct thorough due diligence, verify the legitimacy of investment opportunities and be wary of promises of high returns with low risk.

Investment scams claim you will make a lot of money quickly with little to no risk – usually by investing in the financial markets, cryptocurrency, real estate or precious metals and coins.

These fraudsters get your attention with social media posts or online ads that often encourage you to attend free events or watch introductory videos to learn the secret to getting rich.

They back up money-making guarantees with success stories of people enjoying lavish lifestyles.

The unprecedented rise in investment fraud is due to a combination of traditional and modern tactics, according to the 2023 State of Investment Fraud report published by Carlson Law, which analysed data from the FBI and Federal Trade Commission.

Fraudsters are also exploiting advances in technology. Many of these news scams use artificial intelligence, such as voice cloning and deep fake videos.

“Investment scams in Dubai have surged in recent years, with fraudsters increasingly targeting investors by promoting seemingly lucrative opportunities in sectors like real estate, energy and cryptocurrencies. These scams often exploit trust, leading individuals to invest significant sums without proper due diligence,” says Vijay Valecha, chief investment officer of Dubai-based Century Financial.

We spoke to financial experts about the most common forms of investment scams recorded in the UAE.

Ponzi schemes

Fraudsters may create a fake investment scheme using a reputable company’s name or logo to deceive residents into investing, promising high rewards and low risk, Ms Soltani warns.

“The fraudster uses the money of new investors to pay the returns of early investors, but always focuses on tricking more people into investing,” she says.

“They may create false customer reviews and a professional website to trick potential investors. If something seems too good to be true, it's worth researching it fully.”

Mr Valecha says that Ponzi schemes are often launched with extravagant events and celebrity endorsements to appear credible.

He cites a recent case where Dubai-based BlueChip Group promised a guaranteed monthly return of 3 per cent (36 per cent annually) to investors, but vanished in March with an estimated Dh250 million ($68.1 million), leaving nearly 800 victims.

This scheme was run by Ravindra Nath Soni, who previously operated Acme Management Consultancy, which similarly disappeared four years prior, Mr Valecha adds.

Carol Glynn, founder of Conscious Financial Coaching, says this type of scam is one of the oldest worldwide.

Often, early investors get paid out as promised but once the number of investors reduces and the scam becomes unsustainable, the organisers disappear with the remaining funds, she warns.

Avoid investments that promise guaranteed or exceptionally high returns, experts warn. Silvia Razgova / The National

Phishing scams

Ben Bolger, a financial planner in Abu Dhabi, says phishing scams in the UAE often involve scammers pretending to be from local banks or government agencies, like the Ministry of Interior.

They might ask for sensitive information such as your Emirates ID number, credit card details, banking passwords, or one-time passwords to “fix” account issues, he says.

These messages create a sense of urgency, pressuring people to act quickly without verifying if the request is genuine, he warns​.

Lottery and prize scams

Lottery and prize scams in the UAE often involve scammers claiming you've won a huge prize or lottery from a well-known brand or organisation, according to Mr Bolger.

They’ll ask you to pay processing fees or taxes upfront to claim the prize and may even request your bank account details, Emirates ID, or passport number to “process” the win, he warns.

These requests are designed to steal your money or personal information, as the prize doesn’t exist, he adds.

Trading scams

Another prevalent scam in the UAE is forex trading fraud, where individuals or companies promise substantial profits from foreign exchange trading, but often use unregulated platforms or fake trading accounts to deceive investors, Mr Connor says.

Ms Soltani says: “Fraudsters will create fake trading groups and if they get your phone number, add you on WhatsApp or some other social media platform.

“They will imitate a large, reputable firm and talk of an exciting new investment or trading opportunity, which is usually low-risk with high rewards promised.”

Ms Glynn says that some platforms guarantee exorbitant monthly returns on forex trading with no risk to the principal amount.

Fraudsters promise investment opportunities or fund transfers but require victims to pay upfront fees or taxes, only to disappear once the money is paid

Carol Glynn,
founder, Conscious Finance Coaching

“While legitimate forex trading can be profitable, no credible platform can guarantee such returns without risk,” she warns.

“If you are being promised no-risk investing, it is a major red flag and an indicator that it's a scam. Victims often lose their initial investments after being convinced of false security and high returns.”

Cryptocurrency scams

Cryptocurrency scams have become more common in recent years where fraudsters promote fake crypto trading platforms and opportunities through social media and email, according to Ms Glynn.

They sometimes use influencers or fake endorsements to build credibility, promising unrealistic profits.

Initial returns may be offered to lure victims into investing more, after which communication ceases and the investors’ money is lost without any chance of getting it back, she warns.

Mr Valecha says cryptocurrency fraudsters usually use rug pull, initial coin offering (ICO), or airdrop techniques to carry out scams.

“Rug pull scams occur when developers attract investors to a crypto project, then abandon it or pull the rug before completion, leaving investors with worthless currency,” he explains.

“ICO scams involve creating fraudulent cryptocurrencies and collecting funds from investors with false promises of value growth, while never delivering on their commitments. Although these scams are less common now, similar scams have emerged under names like initial exchange offerings and initial DEX (decentralised exchange) offerings.

“Additionally, airdrop scams involve fake giveaways where fraudsters promise free tokens in exchange for cryptocurrency or personal information, ultimately disappearing once they receive the funds or data. Notable cryptocurrency scams include Habibi Coin, OneCoin and GainBitcoin.”

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Real estate scams

Fraudsters often promise high returns on fictitious real estate investments, requiring large upfront payments for exclusive properties, Mr Valecha says.

They may use fake documents to create the illusion of ongoing or completed projects. In property fraud, fraudsters may falsely claim ownership of properties, leading investors to pay for non-existent or non-transferable ownership rights, he says.

Such schemes often involve “off-plan” investments, where promised projects never materialise, he adds.

Online shopping scams

Mr Bolger cites how online shopping scams are widespread in the UAE, with fraudsters creating fake websites or social media ads that offer heavily discounted items.

“They’ll often ask for prepayment through debit or credit cards or untraceable platforms like cryptocurrency,” he says.

“Some scams even ask for personal details like your Emirates ID or passport number under the pretence of delivery verification, but after payment, the goods never arrive.”​

Advance fee scams

These scams are when fraudsters impersonate financial authorities such as the Dubai Financial Services Authority, according to Ms Glynn.

Fraudsters promise investment opportunities or fund transfers but require victims to pay upfront fees or taxes, only to disappear once the money is paid, she says.

How to prevent falling prey to scams

Avoid investments that promise guaranteed or exceptionally high returns, verify the legitimacy of platforms through regulatory authorities like the DFSA, avoid sharing personal or financial details with unverified entities and perform thorough due diligence before investing, Ms Glynn says.