The crowd’s been getting scammed.

Problems started when the SEC expanded the definition of “Accredited Investor”. allowing everyday people to participate in risky “direct-to-consumer” investments. The world of investment crowdfunding was born (then, highly advertised).

Market volatility and rising interest rates have exposed several of the popular grifts lately:

“YieldStreet is facing litigation filed in 2020 by investors who lost more than $100 million”
“Bankrupt crypto lender Celsius Network used new customer funds to pay for other customers’ withdrawals, the definition of a Ponzi scheme”
“(The Income Store) promise of easy money was actually a $75M Ponzi scheme, feds say”

These weren’t small, fly-by-night companies either.

The Income Store was on the Inc. 5000 list 6 times.

Celsius held $20 Billion in crypto assets.

Yieldstreet counts $3.8 Billion in investments.

These companies had custody of billions in investor dollars by promising huge returns with little mention of risk. In the end, the risk was all that mattered.

Will Rogers once said “I’m more concerned with the return of my money than the return on my money” and I think there’s a lot of wisdom in that for potential investors.

I’ve got my eye on a few more shady-sounding crowdfunding operations out there and would recommend extreme due diligence before touching them. After all, no investor ever regretted taking a closer look under the hood.

Here are some common questions to ask so you don’t get scammed:

What are the costs?

It’s important to understand commissions on the front, fees over time, and fees on the exit.

How do I get my money back?

Possibly the most important question. Many of these shop-from-home investments make it easy to buy. What does withdrawing look like in terms of time and expense?

Why Am I Being Pitched This Investment?

Not everything that’s sold benefits the buyer. It’s important to understand the incentives behind each offering. Always beware of the unsolicited offer.

What are other people saying about this opportunity?

If you see or hear an ad for an investment opportunity, don’t take it at face value. Look for information about it from independent credible sources such as the Better Business Bureau and Consumerfinance.gov

Is this Too Good to Be True?

High yields are a hallmark of risky investments, as they were in the case of Yield Street and Celsius.

Investment opportunities are everywhere- ask yourself why private equity or public company investors have passed on this one before it was offered to the public.

Often times these deals are like last week’s fish being used in this week’s stew.

What risks are involved?

There’s no such thing as “Risk-Free”: Do your research, and understand what risks are involved. Are your deposits safe with the custodian? How do interest rate changes impact your yield and principal? Is the company financially stable and able to repay investments? You should understand exactly how the profits are earned before committing a dollar.

Often times the companies will ignore or sugarcoat the risks like:

If you’d like to read more investor protection tips, or if you’re a victim of fraud, head to: What You Can Do to Avoid Investment Fraud | Investor.gov