The Ultimate Guide to Online Investment Scams

Most people avoid investment scams at all cost, but not me.

I spent this past summer actively seeking them out for your benefit!

I clicked on every advert, signed up to every mailing list and waded through my spam folder. All in the hunt for great examples of investment scams.

To put this research to good use, I have created this huge reference guide to help anyone avoid online investment scams.

What’s in this guide?

I debunk 10 common online investment scams

They range from criminally insane to the ruthlessly effective. I’ll poke fun at some and marvel at the evil genius of others. I’ve picked 10 unique scams to paint a diverse picture of the latest scam techniques.

After pulling a scam apart, I’ll suggest any legitimate alternatives that I’ve found during the course of my research.

I share my own 30-point comprehensive scam checklist for spotting scams like a private investigator

If you stick to my methodology, you’ll be able to tell apart a legitimate offering from a dangerous doppelganger.

I list 6 incorruptible knowledge resources which I trust.

When falsehoods and fake news abounds, you need to have a clear set of authoritative sources to hand. I’ll point you to the websites that give me reliable information which I use to bust online criminals.

Health warnings before we begin

I have avoided linking directly to any of the featured scams. It goes without saying that I advise everyone to stay away from such providers.

My alternative suggestions are intended as a healthy way to redirect any enthusiasm you may have for the underlying investment in each scam. I found these links myself. Nobody has paid to be included.

This article is not independent financial advice. Read my important disclaimer. You should perform further research before considering any investment.

10 real online scams – picked apart and rated

1

Davenport LaRoche

davenportlaroche.com

Deception Rating



'Very slick'


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Fake opportunity: 

Invest in shipping containers to receive an annual return of 12% - 25%.

How does it work:

Davenport promise to use your funds to buy shipping containers and lease them on to customers.

Why victims could fall for it:

The company has a polished website and a physical office in Hong Kong; a well regulated financial centre. 

Investigation results:

Davenport appears to be the latest incarnation of the shipping container scam. An identical opportunity was previously promoted by sister swindle firm 'Pacific Tycoon', which went dormant as Davenport appeared.

The fraudsters appear to operate from Vietnam. Scammed investors (of whom there are many) have uncovered that Davenport's official Hong Kong office address actually sits empty.

From further research into the industry, I can conclude that the underlying opportunity is bogus. There is no global container "shortage" per Davenport. In fact, there is an oversupply, which is leading to downward pressure on container rates.

Is there a legitimate alternative?

I couldn't find any legitimate shipping container investment opportunities online. Although I imagine few investors would see this as a desirable investment given the supply glut in the market.

2

Forex Bit Options

forexbitoptions.com

Deception Rating



'A thin layer of polish atop farce'


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Fake opportunity:

Use their site to trade binary options (a financial instrument).

How does it work:

Forex Bit Options allows you to create an account, where you'd place trades to bet on the short term direction of a currency, cryptocurrency or similiar.

Why victims could fall for it:

The company has a polished website and a physical office in Hong Kong; a well regulated financial centre. Scam alert websites

Investigation results:

The website stands up from a quick review. It's only on further inspection that things look off.

The site boast '370k accounts'. Yet the domain has a Domain Authority score of 1/100. This implies that virtually no other website deems this website worth linking to. When I Google the website address, I noticed that virtually nobody has ever mentioned them. The article you are reading now is probably the most coverage the site has ever received. 

Not much language on the site sets off alarm bells - but the lack of information itself is suspicious. For a financial firm, it's odd that the 'about us' page gives virtually no information about the company.

I also spotted some typos, such as 'currencys' instead of 'currencies', which would have been spotted by a full-time website and IT team on a professional platform.

The name of the CEO 'Amina Rustamini' didn't yield any relevant results on Google. I performed a reverse image search on the CEO photo, and found that the same image was used on suspiciously similar websites 'bitclubnetworkinvest.com and bitcoinsanalytica.com.

Not a problem in itself - until I saw that the CEO name was different on each site. See image left.

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One of the other website clones offered a much more racey investment opportunity - 200% profit in 3 days on a $30,000 investment. Also see left. Not so subtle.

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The final nail in the coffin is the 'Recent Payments' page, which apparantly shows a live stream of transactions (several per second fly up the page). I interrogated the code behind this data feed, and discovered that it is actually a third party widget which shows a live stream of every bitcoin transaction made globally. 

Is there a legitimate alternative?

Yes, many websites offer binary option trading, contracts for difference and spread betting. However, as I explain in my guide to spread betting, this is not a profitable opportunity. I recommend sticking to buying shares or investing in property instead.

3

UK Capital Group

ukcapitalgroup.co.uk

Deception Rating



'Pretty, but little substance'


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Fake opportunity: Make low risk, high return investments in opportunities marketed by this firm. 

How does it work: You provide your contact information, and UK Capital Group will send you brochures and call your mobile to offer you various investment options. 

Why victims could fall for it: UK Capital Group buys prominent ads on Google, and has a clean and professional homepage. The asethetic has an understated feel, and has the same 'feel' as legitimate investment promoters.

The firm refers to FSCS protection and 100% capital protection. This is written to target retirees looking for a place to invest their pension funds profitably but with low risk.

Investigation results: The first red flags are the promises made on the landing page. 'All investments are 100% capital protected', 'High return, low risk', '100% capital protection and preservation 24×7 with all fully regulated and listed investment funds.' One of its ads even promises '5% return per month'.

These claims are misleading, because no investment opportunity offers both high returns and FSCS protection. Only bank accounts are covered with £85,000 of FSCS protection.

The FSCS does provide some limited protection for investments, such as compensation after receiving negligent advice. However their rules state this only covers you if your adviser was an authorised firm, and that's the next problem. 

The footer (see below) states 'We a [sic] fully authorized and FCA regulated firm'. The missing word doesn't fill me with confidence, and neither does the lack of a Company name, Company registration number or an FCA registration number.

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A search for the company on the FCA register of authorised firms doesn't yield any company with a matching trading name or postcode. Therefore, I have concluded that the firm is not authorised to promote investment products and is merely a sham.

This raises concerns about the quality of the opportunities it will begin promoting to anyone unfortunate enough to sign up.

A Google for 'UK Capital Group' yields nothing. The site has a Domain Authority of 1/100 and consists of a single page. The various page names in the menu merely redirect to different points on the homepage. It is little more than a funnel to collect visitor details. 

Is there a legitimate alternative?

Unfortunately there is no such thing as a high return, capital protected investment. However, for other high return investments in equities and bonds, passive or actively managed funds are probably the closest alternative. You can lower the risk of a diversified investment portfolio by weighting your money towards bond funds.

4

Wizard Pro Trading Signals

wizardpro.net

Deception Rating



'Clever and cruel'


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Fake opportunity: Earn $1,000 in a week by placing high return trades guided by an algorithm.

How does it work: Sign-up is free. Once a member, you receive a tool which generates buy or sell instructions to use on a specific third party trading platform. In theory, placing trades using your own money on that platform will generate high profits.

Why victims could fall for it: To many, this sales pitch might sound like 'too good to be true' nonsense. However to those with just the right amount of knowledge about investing, it might sound pretty appealing.

The science behind Profit Wizard Pro is actually real. For the last two decades, hedge funds and fund managers have been hiring some of the brightest minds from prestiguous universities to help them build trading algorithms. The engineers in this field are known as quantitative analysts, or 'quants'. 

Computer-driven trading strategies are actually widespread. They were blamed for the unusual trading activity which lead to a US stock market falling by 9% for no reason on 6 May 2010. If they are widely used by hedge funds, we can conclude that some algorithms out there do actually work. 

Investigation results: Where do I begin. First of all - this aggressive sales technique stinks of scam. Pushy sales and careful investing simply doesn't mix. If a chartered financial advisor began promising huge profits to his clients, he'd be out of business within a year. 

Profit Wizard Pro is a clever ruse, because the author/creator doesn't ask users for payment.

It therefore feels like a free solution. Once they've entered their details, members are told that the algorithm is only compatible with a specific binary options trading website. The provider is unregulated. One of many. This means that you cannot even be sure they will play fair or honour a withdrawal request.

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But let's not concern ourselves with administration - 99% of investors will lose their deposits before that point. The 'algorithm' gives users a false sense of security and encourages them to place much larger trades than they would dream of. 

The marketing video shows the author winning $500 on his initial $250 trade. This implies that the bet was equivilent to placing his entire deposit on red or black at the roulette table.

When you make a series of such large bets, you will be wiped out the instant that you encounter a single loss. This is known as the gamblers ruin, which I explain further in my spread betting article.  

But won't the algorithm protect users from incurring losses? It's unlikely. We can never be sure, as the author reveals zilch about the trading strategy of the software itself. We can however safely assume that if it did work - if he had created a money-making machine - he would never share it

Spotting a criminal binary options operation has now become much easier. In March 2019, the regulator has banned the selling, marketing or distribution of binary options to the general public.  

Is there a legitimate alternative?

Binary options are effectively a form of gambling. For a (slightly) fairer set of odds, you might as well drop the pretense and head straight to a bookmaker! 

If it's trading profits you're after, then I'm afraid to report that active trading is unlikely to leave you richer.

If you believe that you can determine when is a good time to invest and bear all the investing costs of trading frequently and still come out on top - you might be better spending your time giving courses on confidence!

5

Deception Rating



'Fooled for a short while'


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Fake opportunity: Invest in forestry land, receive a return on the timber grown on the property. 

How does it work: You provide your contact information, and UK Capital Group will send you brochures and call your mobile to offer you various investment options. 

Why victims could fall for it: Arden held a Trust Pilot rating of 5/5, and still holds a score of 4/5 with 33 reviews. Because forestry assets do not produce an immediate cash return, investors wrote positive reviews about the quality of customer service rather than the returns. 

Their website (now closed, but still accessible here) is large, and contains plenty of information about forestry investment. 

Arden did physically purchase some small plots of forestry land. This meant that they had a physical operation which could be verified.

I understand that investors were invited to tours around plots of forestry land to introduce them to the company. This is a far cry from a boiler room telephone scam. Investors could smell and touch the physical asset they were about to purchase. 

Investigation results: This scam was caught by an investor who asked to visit their plot of land. After arriving back home, the they looked up the land title deeds on the Land Registry website and found that the plot was registered to someone else. 

Arden took in approximately €5.29 million from UK and Irish investors before their bank account was frozen by Irish police in 2016. This resulted in a liquidator being appointed, who promptly discovered €3.6m of suspicious withdrawals.

The directors plead guilty to charges of fraud and were eventually jailed for five years in July 2019.

Is there a legitimate alternative?

During my research I have discovered that investors in forestry have actually enjoyed high returns over the last decade. This UK government resource shows that investor returns have consistently exceeded 10%.

However, Arden Management is a cautionary tale for investors. This case shows how difficult it can be for investors to verify that the providers of forestry investment opportunities are genuinely managing the land in the way they describe.

A reputable forestry company that I have found is Tilhill Forestry. The BBC reports that Tilhill was founded in 1948 and was for a while the largest forestry company in the UK. It has had multiple corporate owners and is currently owned by BSW Timber Ltd - which reports revenues of £304m (see below). In the search for legitimacy, size and history matters. It doesn't directly offer investments, but offers a service to find land purchase opportunities, so it is probably only suitable for larger investors.

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6

Wssaviour

Wssaviour.com

Deception Rating



'Ludicrous'


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Fake opportunity: Invest in an extremely high yield investment strategy, offering daily or monthly payouts ranging from 1% per day to 1000% after 40 days. 

How does it work: You deposit funds online. Wssaviour accepts only cryptocurrencies as a form of payment. You select an investment plan, such as the 'Professional Daily' plan which claims to return 1.3% per day for 100 days. The funds are allegedly placed into an investment fund where traders generate profits.

Why victims could fall for it: WSSaviour has a generous referral program which offers up to 15% of all deposits to those who direct people to make deposits.

This 'affiliate scheme' creates an industry of complicit individuals who flood the web with 'reviews' and 'monitoring websites' which give a positive view on the investment. The volume of content drowns out critism and produces a bubble of positive feedback which can convince investors. 

The promised returns are high, and over a short period. Highly adventurous investors with an inclination to gamble may be tempted to 'give it a punt' regardless of their doubts. 

Their mentality is 'as long as I withdraw in a few days before the scheme collapses then I'll still make a worthwhile profit.'

Investigation results: This opportunity is called a 'HYIP' or 'High Yield Investment Program'. HYIP is just a ponzi scheme by a different name.

A ponzi scheme is an investment fund which produces little or no underlying investment returns. High returns are promised, and are sometimes delivered, but only by using cash from new investors to pay older ones.

All the while, the owners enrich themselves by siphoning off cash. A Ponzi scheme can maintain the appearance of a legitimate investment fund up until the point where inflows are insufficient to be able to keep up with withdrawal requests. 

HYIPs can sometimes appear and collapse within a matter of weeks. I have chosen to cover Wssaviour because it has remained alive for more than a year. The website however states that they have been in operation since 2014. By creating a timeline of when the company has been mentioned online over time, I have concluded that it actually began in June 2018. 

HYIPs usually make a token attempt to convince users that they have access to an exciting and lucrative investment opportunity. Wssaviour merely says that 'The experience and skills of our traders and financial experts is the key to the success of the investment fund'.

The use of cryptocurrency deposits increases the ease with which Wssaviour can launder the money with a degree of anonymity. 

The homepage proudly displays the UK company number of WSSH Ltd - the company which is apparantly behind the operation, and links to its company certificate (see below). WSSH Ltd does indeed exist, and it was incorporated in 2014. 

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Wssaviour claims to manage $451m of assets. I investigated the further and found that the company only reports assets of £1,418 (see above). That's not quite the capital needed to sustain a multi-million dollar investment business. It goes without saying that WSSH Ltd is not authorised by the FCA to carry out investment activities.

I investigated the ownership of the domain. The owner is listed as Eva Kozma. Eva is also a director of WSSH Ltd. This demonstrates that the company and website are indeed connected. Curiously, both sources give a residential address in Birmingham.

It's impossible to determine whether Eva Kozma is a real, fictional or the victim of identity theft. I would be surprised if someone running such a shady scheme would allow their real name and address to be tied to the project!

Is there a legitimate alternative?

HYIPs offer unrealistic levels of return over a short period. There are no real investments that can reliably deliver anything close to the profits promised by Wssaviour. 

7

Pillar Property Group

pillar-property-group.com

Deception Rating



'Difficult to spot'


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Fake opportunity: Invest with Pillar Property Group, who will then invest in property developments across the UK, overseen by its team of construction professionals including consultants, architects and surveyors. 

How does it work: After making contact with them, Pillar Property Group would ask customers to make investments of £5,000 or more in 'asset backed' investments, which promised average returns of 32%.

Why victims could fall for it: Pillar Property Group Ltd is a real trading business. It is part of a group of companies with a strong reputation in the property development industry. 

The profits promised are within the ordinary range of returns for real property development opportunities, therefore the pitch appears credible on the surface.

Investigation results: I can reveal that the website shown above has no real connection to Pillar Property Group Ltd.

This is what makes the scam very effective. The fraudsters have stolen the identity of a reputable business. When potential investors research the company itself, they learn about an ordinary business and see nothing to raise suspicions.

The real Pillar Property Group Ltd is a wholly owned subsidiary of British Land Company PLC - a FTSE 100 company, and has assets worth hundreds of £ms.

However a close look at the website (now offline, but can be seen here) reveals inconsistencies. The footer reiterates that the website is run by 'Pillar Property Group Ltd' but it then quotes the registered company number '07459482'. This doesn't even correspond to Pillar Property Group Ltd.

The FCA is aware of this company, and has produced a warning (see below) advising investors that they should not buy financial services from them.

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However it appears that they managed to remain under the radar for long enough. At the date of writing this article (3 October 2019), a search for 'Pillar Property Group scam' yields no results on Google.

Is there a legitimate alternative?

There are no shortage of ways to invest in property, which we outline in our guide. Property development is more risky than buying to let, because a development project may fall into difficulty. Planning permission can be difficult to obtain, budgets can be blown and the original financing may be insufficient to carry the project through to completion. 

If you are not familiar with all the ways in which property development can fail, I recommend that you find a lower risk alternative rather than be persuaded by the apparantly high returns available on property development investments.

8

Tarquin Jones & Park First

tarquinjones.com, parkfirst.com

Deception Rating



'An old fashioned rip-off'


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Fake opportunity: Invest in airport car parking spaces at Glasgow airport for £25,000 a space. 

How does it work: Tarquin Jones refer investors to Park First (A car park operator). Park First sells car park spaces for £25,000 and guarantees a return of 11% for the first few years.

Why victims could fall for it: Park First is a real airport car parking company. Its empire includes spaces at Luton, Gatwick and Glasgow. 

The business case for airport parking appears sound. The volume of flights out of british airports increases year-on-year, which in turn increases demand for parking spaces. 

We all appreciate how expensive car parking is at airports. This provides a justification a high valuation for a single space.

Investigation results: Tarquin Jones has been promoting Park First airport parking investments for one year. 

It features a Trust Pilot score of 5/5 on its homepage. This is misleading for two reasons. 

First, Tarquin has a Trust Pilot score of 4.5/5. If it used an official widget to display its rating, this would be shown correctly. 

Second, I have performed an audit of the Trust Pilot reviews and have many indicators which suggest the reviews are fake.

Consider this guidance from: Richman SEO Training after he performed detailed research into fake reviews. 

"Most of the businesses selling reviews make little effort to cover their tracks. They often post under a name uncommon in the UK, write short reviews comprised mostly of complimentary adjectives and are likely to have published only one review under the same user account. Fake reviews also tend to be posted in batches, with a disproportionate number of 5-star reviews posted on the same day."

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1) 27/31 of the reviews were left by users without traditional British names. This is unusual for a company based in the UK, which promotes UK investments. 

2) The reviews tend to be short and generic. They give little mention of any specific investments or returns on investment.

3) 21 of 31 reviewers have posted just a single review.

4) The reviews are grouped in batches. 16 of 31 were posted on the same day as another review. One day attracted 7 reviews! The chance of such a clustered occuring randomly is vanishingly small. 

Moving on, Tarquin Jones still prominently promotes the Park First investment despite very troubling developments at the company. This is irresponsible and reflects poorly on the operation. The fake reviews begin to make sense in the context of the poor quality investments Tarquin Jones offers. 

In December 2017, the FCA slapped Park First for being unauthorised to offer collective investments. The FCA recommended that investors try to exit their investments or reach a deal with the firm. 

In July 2019, several companies in the Park First group entered into administration. Investors attempting to exit are still awaiting repayment. This demonstrates that a 'guaranteed return' or 'exit opportunity' is only as good as the financial stability of the firm.

Is there a legitimate alternative?

Airport car park investments are few and far between, due to the finite number of airports in the UK. The business model of a typical car park operator does rely upon outside investment from small private investors.

After the Park First debacle, it's unlikely that a similar scheme will gain traction anytime soon.

9

OneCoin

onecoin.eu

Deception Rating



'A modern spin on an old-school pyramid scheme'


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Fake opportunity: Invest in new 'centralised' cryptocurrency OneCoin and be part of the next Cryptocurrency boom. Join the OneLife network and earn further money by recommending OneCoin to others.

How does it work: OneCoin purports to operate much like Bitcoin but with a twist. Where most cryptocurrencies are 'decentralised', i.e. transactions are processed securely across many individual's computers, OneCoin is 'centralised'.

This means that OneCoin is controlled by a single organisation. This puts them in a position to be able carry out anti-money laundering checks, which is in isolation a benefit from a regulatory standpoint.

Why victims could fall for it: Since 2017, new cryptocurrencies have been emerging on a weekly basis. It has become the new gold rush, with initial investors backing some projects seeing 1000% returns, while others crash and burn.

In this environment, investors are applying less scrutiny to crypto investments than they would apply to their low-tech counterparts.

Investigation results: OneCoin became a worldwide sensation, but it remained coy about actually 'showing' its blockchain technology to outsiders. Speculation grew that the company was a complete sham, and was merely pretending to operate a sophisicated internal system.

Its worldwide reach has caused damage on an epic scale. The US Department of Justice has estimated that OneCoin took in an estimated €3.4 billion from investors worldwide between 2014 and 2016.

In March 2019, the founder of the OneCoin company was arrested at a US airport and charged with conspiracy to commit wire fraud. Alongside the charges, the Attourneys Office shed the following light on the operations:

"The purported value of a OneCoin has steadily grown from €0.50 to approximately €29.95 per coin, as of January 2019. In fact, the value of OneCoin is determined internally and not based on market supply and demand; and OneCoins are not mined using computer resources."

Is there a legitimate alternative?

Refer to my investors guide to Bitcoin which explains more about how mainstream cryptocurrencies work. I conclude that putting money into cryptocurrencies should be seen as a highly speculative bet rather than a long term investment.

10

Diamond Global Trading & Investments

diamond-investments.net

Deception Rating



'Even experienced investors were swindledl'


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Fake opportunity: Earn up to 9% per year from investing in 'Mini-bonds' which are raising funds for a wind power project.

How does it work: Investors make a payment and are issued with private bonds from the borrower company - Diamond Global Trading & Investments Ltd. Diamond uses the funds to construct the wind turbines. Investors eventually receive repayments of capital and interest in accordance with the bond agreement. 

Why victims could fall for it: Mini bonds have become fashionable in the last ten years. When corporate giant Tesco issued a 5.2% bond back in 2011 it raised the profile of this type of investment (See left).

Mini-bonds are a new name used for a very old financial instrument - the humble corporate bond. In other words, a direct loan from you to a company. Investments such as these are easy for a potential investor to understand and can be confused with fixed term savings accounts which are sometimes known as 'savings bonds'. 

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Investigation results: Mini-bonds carry a high degree of risk because you are relying upon a single company to remain solvent and repay your bond. Tesco is the exception - most mini-bonds are issued by medium sized business which are often engaged in high risk projects.

Diamond are alleged to have breached investors trust by not following through with their wind power project. 

Investor Tony Clarke, who had a sound investment background, saw through the scam. When the first interest payments were repeatedly delayed, he looked into the status of the construction project himself. He discovered that one year into the project, planning permission had not been granted.

Furthermore, he alleges that the Directors of Diamond understood the hopeless liklihood of such permission ever being secured, due to numerous issues with the land. 

It is difficult to independently assess the current financial position of Diamond Global Trading and Investments Ltd, or its sister companies, because they have failed to file accounts at Companies House since the scheme began in 2016.

Tony has clubbed together with 104 other Diamond investors to take legal action against Diamond Global Trading and Investments Ltd and its Directors. They claim losses of £3.2m in initial deposits. He hopes that they can recoup some or all of their investments. 

The company's administrators Grant Thorton have already racked up £300k in fees in the course of one year. These will take priority over investor claims. The investors must be hoping for a prompt wind-up in the near future, to ensure that they will still  receive a meaningful share of the proceeds.  

Is there a legitimate alternative?

The mainstream alternative to mini-bonds, would be to invest in a corporate bond fund. All funds apply the science of diversification by spreading monies across 20+ bonds. This reduces the exposure to any single company defaulting on their obligations.

The FCA has since tried to steer retail investors away from mini-bonds. It has brought out the big guns to do so - it  has restricted access to this type of investment to 'sophisticated investors' only.

A comprehensive checklist for spotting investment scams

Are the website owners who they claim to be?

This could should be either a private limited or public limited company name. For example 'Stakeholder Investments Ltd' or 'Absolute Returns PLC'.

Is the investment company financially sound and well managed?

Search by company name on the Companies House website and look at all the company filings for the last few years. 

The accounts of the company will give a snapshot of the balance sheet at a recent date, giving details of its assets and liabilities. The confirmation statement will give insight into the ownership structure of the company (together with the accounts). 

The 'People' tab will display all current and past directors of the company. Take note of these names.

Also take note of the registered address and incorporation date shown on the 'Overview' tab.

Is the firm authorised to provide or introduce investments?

Enter the legal company name into the online FCA register to see if the firm is authorised.

Don't stop clicking when you see the word 'authorised' against a company name. The FCA gives permission on an activity by activity basis. An 'authorised' firm may have one permission or ten.

Click onto the company name and expand the 'permissions' section. As an example, the following company has permission to hold client money and manage investment funds. 

If a firm does not have permission to hold client money, it may only faciliate a payment from you to another party. It would not be permitted to hold funds on your behalf in a client bank account.

Does the company act professionally and operate with a full staff?

Its humanly possible for a rare typo to slip through the cracks of a company once in a blue moon. However, finding multiple errors or errors on very prominent parts of a homepage is a big hint that you are dealing with a team of one.

Is the company as large and successful as it claims?

Run the domain name through Moz.com's Domain Authority (DA) scoring system. DA is a measure of the quantity and quality of the links pointing towards a website.

DA is scored in a range between 1 and 100, with 100 representing a behemoth like Google. A score of one suggests that the web is barely aware of its existence. An typical score for a commercial website would be 20 - 40.

DA isn't a solid method of deciding whether a site is legitimate. Web activity can be bought, and notorious websites receive links too.

The best way to use DA is as a sense check against grand claims main on investment websites. If a website claims to be an industry leader, and yet it has a DA of 4/100, you can be sure that the claim is false. 

Does the company have a culture of compliance and ethics?

Does the website include plenty of risk warnings, or does it play down the risk?

There are many cautious pieces of wording found on genuine investment websites. Making customers aware of risks is the easiest way to protect a firm from customer complaints and legal risks, so proper firms do their best to inform their customers of the possible downside.

Examples could include:

"Past performance is not a guarantee of future performance"

"The investments are volatile and may lose value"

"You should consider seeking financial advice before investing"

"The investment is highly illiquid and therefore this is intended as a long term investment"

"This opportunity is only available to sophisticated investors"

Here's a real example from a well known UK stockbroker website:

Does the investment opportunity feel realistic?

If an investment is projected to return more than 6% per year, ensure that you understand 'why' the reward is so high. 

Earning more than 6% is equivilent to investing in the stock market. Investments in the stock market bring volatility and a real risk of loss. 

If an investment opportunity promises a 10% return without similar risks - you must be missing something.

An investment firm would gladly pay a lower return to investors if it could. The very fact that it needs to offer such a high return speaks volumes about the nature of the investment. 

A high return doesn't communicate what type of risks are present, but it gives a strong indication of the overall level of risk.

Does the situation feature any other scam indicators?

If 25% of your deposit is redirected to a sales agent instead of being invested in assets - what hope does your investment have?

This is a question that investors of collapsed investment firm London Capital & Finance (LCF) unfortunately have a clear answer to.

LCF paid agent Surge PLC 25% of all investment proceeds in return for directing investors towards its fund.

Avoid being caught in the same trap by searching on the investment firm website and on Google for 'affiliate schemes' or 'referral schemes' relating to the investment manager. Some schemes are kept private, but others are made public to encourage participation. 

If you learn that the investment manager is prepared to pay more than 1% for investor funds, stay away. This cost will ultimately be passed onto you, either through high management charges or deductions from your investment. 

Trustworthy Resources

The following websites are have proven themselves as reliable sources of information.

Moz Link Explorer

Alexa Site Info

Companies House

Money Advice Service

Financial Conduct Authority ScamSmart

HMRC Tax Avoidance Schemes

A financial advisor is like an insurance policy against scams

Use an FCA authorised independent financial adviser to guide you into the investment. They may advise against the investment for other reasons.

Even if you go ahead, you will have some protection under the Financial Services Compensation Service if the investment turns out to be a scam. This would be on the basis that you may be able to claim that the advice was negligent.

Only invest a small proportion of your wealth. The FCA recommends never investing more than 10% of your funds in a single investment. I further recommend you apply a more conservative 5% rule if the investment represents a single asset.


This article is part of the Advanced Investing Course provided by Financial Expert


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