Investment fraud: 6 tips to help you spot the signs

Investment fraud is one of the types of fraud that causes the biggest financial losses for Canadians.¹

As a general rule, if you come across an investment or business opportunity that offers a huge payoff with zero risks, be wary. When things seem too good to be true, they usually are. Here are some tips to help you spot investment fraud.

1. Be on the lookout for scams

Investment scams give you the impression that you could make a lot of money by investing in a specific product or service. But in fact, that product or service may be illegal, extremely risky or not even exist. Scammers often use manipulative techniques to get you to invest—and they can sometimes be very convincing.

Know the red flags to watch out for:

• The offer is unsolicited (received via direct message, phone call, text message, email, etc.) or appears in a social media ad (for example, featuring a well-known personality).
• It’s presented as a “once-in-a-lifetime” opportunity.
• You’re being pressured to decide fast—or even immediately.
• You’re asked to pay fees or disclose personal or financial information in advance.
• You’re asked to install remote access software on your computer.

If you notice any of these warning signs, you may be dealing with investment fraud. Take the time you need to make a well-informed decision.

2. Make sure that the person or company offering the investments is licensed

Professionals must be registered with regulatory authorities in order to provide financial services or sell investment products. By taking the time to check who you’re dealing with, you can avoid serious problems down the road. In Quebec, you can check the AMF’s Register of firms and individuals authorized to practice to verify the legitimacy of the person who contacted you. In Ontario, professionals must be registered with the Ontario Securities Commission (OSC).

Are you being asked to invest in cryptoassets? Check whether the cryptoasset trading platform is registered with the AMF (in Quebec) or the OSC (in Ontario). Investing is never risk-free, but if the platform is registered, you’ll at least know that it’s subject to some oversight.

3. Beware of investments with no risks and high returns

Does an investment promise sky-high returns? Don’t believe it. Financial products come with varying levels of risk and return. Some investments aim for higher growth. Others, like investments with deposit protection and certain bonds, prioritize stability and security, and typically generate lower returns. But it’s highly unlikely that an investment can deliver high returns without any risk.

To get an idea of what a reasonable long-term return might be, check out these Projection Assumption Guidelines. Estimated annual returns for 2026 range from 2.4% to 8%, depending on the type of investment. For example, if you’re promised a 5% return per month, that’s equal to an annualized return of 79.5% when you factor in monthly compounding. Offers like these are major red flags. These kinds of returns are extremely unlikely, and most investments don’t make that much. When in doubt, talk to your Desjardins advisor. They can weigh in with their opinion and answer any questions you may have.

4. Stay cautious, even if the offer comes from someone you know

A lot of investment fraud strategies rely on word of mouth. That’s how pyramid schemes and Ponzi schemes work. They only generate money by luring in new victims. Once they can’t find anyone new to give them money, or if a large number of investors try to get their money out at the same time, the whole thing falls apart. If someone you know tells you that they discovered an incredible investment opportunity, there’s a chance that they’ve fallen for a scheme and don’t even know it! And if they contact you over social media, call them to make sure that their account hasn’t been hacked.

5. Ask for details in writing

Legitimate financial products should come with a complete, detailed product sheet that includes:

• Asset allocation
• Risk level
• Historical returns
• Description of fees

Make sure to check that these documents are legitimate.

If this is a business opportunity or a franchise, they should submit a business plan that includes:

• The business profile and model, and its leadership team
• A market study
• Realistic financial forecasts

Be skeptical if the opportunity is described as “too complicated to explain,” has a strategy that needs to be kept secret or the financial details can’t be revealed yet. It’s probably a way to distract you from the fact that there isn’t any detailed information.

6. Make sure you can track your transactions

Scammers often ask for cash, cryptocurrency or a cheque made out to an individual, since those methods are harder to track. Doing business with a recognized institution that’s registered with regulatory authorities lowers the risk of fraud and makes it easier to track transactions. Be especially careful with overseas investment opportunities. If something goes wrong, tracking down your money can be difficult or even impossible.