How to identify and avoid investment scams: tips from corporate investment expert Julia Pogasiy – European Agency for Financial Intelligence and Anti-Corruption

In the modern world, where investments have become so accessible and diverse, it can be difficult to distinguish between legitimate and fraudulent opportunities. Unfortunately, this results in many people losing a lot of their money to scammers who promise high returns but don’t deliver on their commitments. Therefore, it is very important to know how to recognize and avoid scams in the investment world. In this paper, we will use the experience of Julia Pogasiy, a corporate investing expert with more than five years of experience in this field. Julia shares her insights on how to identify and avoid investment scams and will offer tips and strategies to protect against fraud.

Who is Julia Pogasiy?

Julia Pogasiy is a corporate investment expert with a wide range of experience. She has an impressive track record of successful investments especially in the early stage of company development. Her contributions to the industry are noted by many experts and her experience is in demand by investors and entrepreneurs alike.

Since 2019, Julia has played a key role in finding investors for many international cryptocurrency projects, thanks to her efforts the projects receive investors and funding. In 2019, while working and searching for investors, Yulia met Mikhail Alexandrov, who was impressed with her professionalism and experience. This led them to quickly become partners and friends, and they have been working together on investment projects ever since.

In 2020, Julia launched an investment project in Malaysia that focused on finding startups to invest in and mergers and acquisitions. She quickly identified several promising companies and helped them obtain financing to grow their businesses. Her successes in the financial industry have earned her recognition from industry associations. In 2020, she became a member of the Fintech Association of Malaysia¹ and the Fintech Association of Singapore² and was invited as a speaker at several of their events. In the same year, Julia launched a technology company in Malaysia that specializes in developing innovative technology solutions for businesses. In 2021 she invested in several startups with the intention of going public. The projects proved successful, and her experience in identifying investment opportunities and assessing risks was crucial. In 2022, Yulia obtained her Abu Dhabi financier’s license, which allows her to provide financial advice and services to clients in the region. She also opened an office in Abu Dhabi with partners to manage the family capital. Her expertise in finance and investments has made her highly sought after by her clients.

Common red flags you should look out for

When it comes to investing, there is always a risk of loss, but when evaluating an investment opportunity, there are some signs that are more suspicious than others. If you are considering investing your funds, it is important to pay attention to common “red flags” as they may indicate that the investment is not legitimate or could result in significant losses. Below are the top 5 signals to watch out for according to Julia Pogasiy.

Promises of high returns at low risk

One of the most serious warning signs to watch out for is promises of high returns at low risk. One should definitely think twice if the title of Bernard Shaw’s famous play “Too Good to Be True” can be applied to the project’s characterization. Any investment that promises high returns with little or no risk is most likely a scam. All investments involve some level of risk, and anyone who claims otherwise is likely trying to mislead you.

Claiming to invest quickly

Another warning sign to watch out for is leverage to get you to invest quickly. Scammers often use high-pressure tactics to get people to act recklessly and invest as soon as possible without doing any research. They may tell you that the opportunity is only available for a limited time or that you’ll miss out if you don’t act quickly. However, legitimate investment opportunities always allow enough time to research and make an informed decision.

Lack of Information or Transparency

Lack of information or transparency is another warning sign to look out for when considering investment opportunities. If an investment company doesn’t provide detailed information about its investments, how they work, or the risks involved, you should be wary. Legitimate investments should be transparent about the potential risks and benefits, as well as any fees or charges.

Unregistered or unlicensed investment companies

Unregistered or unlicensed investment companies are another warning sign you should be wary of. Before you invest, make sure the company is registered with the appropriate regulatory body. Unregistered or unlicensed businesses may not follow the same rules and regulations as legitimate companies, putting your investment at risk.

Suspicious credentials.

Finally, be wary of investment opportunities with suspicious or unverified credentials. Make sure the people or firms offering investments have a legitimate background and track record. Check their credentials and do your research to make sure they are who they say they are and have the experience and expertise they claim to have.

Due Diligence: How to Research a Potential Investment

Before you invest, it’s important to research everything as thoroughly as possible to make sure you’re making the right decision. It’s important to remember that performing due diligence is a prerequisite for taking sound investment actions. Below, we list the steps recommended by Julia Pogasiy that she believes you should take before investing. Following them will give you valuable information about potential investments, investment companies and advisors.

Check Securities and Exchange Commission filings

The Securities and Exchange Commission³ requires companies to file strictly specific information and reports with the agency. These documents can provide valuable information for investors. Some of the major SEC filings include the 10-K, 10-Q and 8-K reports. The 10-K report is a comprehensive summary of a company’s financial performance, including revenue, net income and expenses, as well as any potential risks the company faces. The 10-Q report is a quarterly version of the 10-K report that contains more up-to-date information. The 8-K report is filed when a major event, such as a merger or acquisition, occurs. By reviewing these documents, investors can gain insight into a company’s financial condition, potential risks and growth prospects.

Registration and licensing checks

It’s important to make sure that the investment firm or adviser you’re considering is registered and licensed with the appropriate regulatory agencies. The SEC and the Financial Services Industry Regulatory Authority⁴ maintain databases of registered investment companies and advisors.

Research the investment company or adviser in detail

Doing research on an investment company or advisor will help you gain insight into their track record, investment philosophy and client satisfaction. Some of the main items to look for when researching a company or advisor include their experience, investment strategies and historical investment returns. You may also want to look for information on any regulatory actions or complaints about that company or advisor.

Ask for references and check them out

One of the best ways to find a reliable investment company or advisor is to ask for recommendations. Once you have a list of potential advisors or firms, you can contact their references to ask about their experience with the advisor or firm. You can ask about their investment performance, responsiveness and overall satisfaction with the advisor or firm.

Seek unbiased opinions from trusted sources

In addition to doing your own research, it’s helpful to get unbiased opinions from reliable sources. Financial publications such as Barron’s, Forbes or The Wall Street Journal can provide insight into financial markets and specific investments. You can also get opinions from independent financial advisors who have no interest in the investments you are considering. Finding unbiased opinions can help you avoid confirmation bias and make informed investment decisions.

What to do if you suspect that you have become a victim of investment fraud

If you’ve invested in something and suspect that you’ve become a victim of investment fraud, Julia Pogasiy recommends that you follow a general algorithm to protect yourself and potentially recover your losses.

Gather information

The first step when you suspect investment fraud is to gather as much information as possible. You should gather all documents related to your investments, including statements, contracts and prospectuses. In addition, write down any communications you have had with the investment professional or company. This information will be critical in determining whether fraud has occurred, as well as in pursuing legal action, if necessary.

Contact an attorney

A lawyer will be able to review your documents and advise you on whether you have a chance of winning. He or she can also help you take the right legal action against the investment professional or firm that defrauded you.

Report Fraud

It’s important to report suspected investment fraud to the appropriate regulatory agencies. In the U.S., the Securities and Exchange Commission is responsible for regulating the securities industry and investigating fraud.

Protect your assets

You should immediately stop investing in suspicious investment instruments or companies. It also makes sense to analyze your other investments to make sure they are safe and sound.

Be prepared for a lengthy process

Recovering losses from investment fraud can be a long and difficult process. It’s important to be prepared for a long legal battle and to be patient throughout the process.

Types of investment fraud:

Julia Pogasiy also shared the most common types of investment fraud:

Ponzi Schemes.

A Ponzi scheme is an investment fraud that promises investors high returns with little or no risk. It is named after Charles Ponzi, who became famous for launching such a scheme in the early 20th century. Its essence is that the swindler attracts new investors, promising high profits, and pays off previous investors with money received from new investors. Eventually, the pyramid collapses when the new investors become insufficient to continue paying out and the former investors lose their money.

Pump & Dump

A “Pump & Dump” scheme is a type of investment fraud in which a group of people conspire to artificially inflate the value of stocks. The scammers buy a large number of securities, then spread false information to create hype and raise the price. After the increase, they sell their stock, causing the price to fall and other investors to suffer significant losses.

Insider Trading

Insider trading is buying or selling securities based on information that is not publicly available. This type of investment fraud is illegal and can carry severe penalties. Insiders include executives, directors and other employees who have access to confidential information about a company’s financial performance. These people use confidential information to make transactions that are not available to the general public, resulting in profits for them but losses for other investors.

High Yield Investment Programs (HYIPs)

HYIPs are investment scams that promise high returns with little or no risk. These scam programs usually operate on the Internet and attract investors with flashy websites and promises of high returns. HYIPs often claim to invest in high-risk, high-yield ventures such as forex trading, commodities, and cryptocurrencies. However, the promised returns are usually too good to be true and are often unattainable in the real world.

How to protect yourself from investment fraud

To conclude our conversation, Julia explained that anyone can become a victim of fraud, even an experienced investor, so it’s important to know the basic things that will keep 90% of such cases from happening.

Be wary of offers that seem too good to be true

One of the main ways investment scammers lure their victims is with offers that seem surprisingly good. For example, you may receive an email promising high returns with no risk. If the investment opportunity sounds too attractive to be true, it’s probably just a scam.

It is better to be skeptical of investment opportunities that promise high returns with little or no risk. Always research such an investment, the person or company offering it, before making any decisions.

Don’t invest based on emotion or FOMO

Investing based on emotion or FOMO (fear of missing out) is a common mistake many people make. Emotional investing can lead to poor investment decisions and ultimately major financial losses.

Before making any investment decision, it is crucial to evaluate your financial goals and risk tolerance. Avoid making investment decisions based on hype or social media trends.

Diversify your investments

Diversification is a key investment strategy that can help protect you from investment fraud. Diversification involves spreading your investments across different asset classes, such as stocks, bonds and real estate. By diversifying your investments, you reduce the risk of significant financial loss if one of your investments fails.

Avoid unregulated investment opportunities

Investing in unregulated investment opportunities can be extremely risky. Unregulated investments are investments that are not subject to government oversight or regulation. They are often high risk and can result in significant financial losses.

Before pursuing any investment opportunity, make sure it is registered with the appropriate regulatory authorities. Registered investment opportunities are subject to government oversight and regulation, which will help protect you from fraud.

Don’t be afraid to ask questions

When it comes to investing, it’s important to ask. If you’re unsure about an investment opportunity or the person or company offering it, don’t be afraid to ask questions. A reputable investment professional should be prepared to answer them and clarify your concerns.

If you encounter resistance or vague feedback, it can be a warning sign that the investment opportunity is fraudulent. After all, a successful person always has something to show for it.