Today, information is abundant within everyone’s reach: but getting informed, searching, and investigating is tiring. Thus many become prey to sellers of miraculous solutions, who use techniques and pounding communication.

The stagnation of traditional market and the explosion of new tools have generated a new wave of more or less fraudulent investment schemes.

The best-known investment fraud schemes are:

1. Boiler room. 

The Boiler room scam is a fraud that begins with an unsolicited contact (so-called “cold calling” via telephone, e-mail, chat, social media), often aggressive, offering secure and above all high-yield financial services presented.

The system is structured to generate the pressure to buy quickly, not miss the opportunity, boasting authorizations or solidity, often with very professional websites.

The user must make a limited initial investment that immediately becomes profitable (even if virtually), with subsequent pressure to increase the investment. When the sum is requested, the scam manifests itself. (See SEC website)

2. Ponzi Scheme. 

The Ponzi scheme is a fraud that has developed over time in increasingly complex variants while maintaining the same basis and continuing to exploit people’s greed.

The typical features of the offer are the promise of high short-term earnings obtained from financial tricks or from investments of “high finance” documented in an unclear way, aimed mainly at a public not competent in financial matters and linked to a single promoter or company.

The basic scheme consists of several stages:

– Promise an investment with returns above-market rates in a short time.

– Return part of the sum in a short time, deceiving the user of the goodness of the system.

– Satisfied users spread the word by attracting other customers, paying for returns with money from new customers.

– When the repayments exceed the payments, the system collapses.

3. Pyramidal systems. 

As in the Ponzi scheme, the money raised from new victims of pyramid schemes is paid to previous victims to provide a veneer of legitimacy. The difference is that the victims themselves recruit additional victims through the payment of recruitment fees, generating a victim/executioner to recover what he lost.

4. Upfront commission schemes. 

A prepayment scheme occurs when the victim pays someone money in anticipation of receiving something of greater value – such as a loan, contract, investment, or gift or donation from an allegedly deceased millionaire relative – and then receives little or no nothing in return.

5. Money Mule. 

The money mule is a system where, through attractive job offers, criminals recruit people to be exploited as financial agents to launder money through their bank accounts, receiving a commission.

All fraud systems use the mental and cognitive weaknesses of the scammed, which often ignore the culture and education of the scammed person.

Warren Buffett ruled that “nothing sedates rationality like large doses of easy money,” and the expectation of earnings is the first determinant that crumbles cognitive defenses.

The weaknesses exploited by the scammer are:

• trust in the scammer: we tend to trust blindly to those who promise us what we want, to storytellers, to skilled communicators;

• the herd effect (so everyone does). When we don’t know what to choose, we trust the judgment of the crowd: if so many have entrusted their savings to that financial magician, why not do it too ?! And then on the internet, there are many positive reviews! Furthermore, in our subconscious, there is also a voice that whispers to us that, if everything goes wrong, we will not have made a mistake alone, and we will be able to share the weight of the bad decision with many companions in misfortune!

• the fear of missing a unique opportunity (fear of regret, regret avoidance, or fear of missing out – FOMO): we always hear that certain trains only pass once and we do not want to look back in the future and regret not having seized the opportunities they are offering us;

• the attraction for easy or risk-free earnings (greed): the desire for wealth can lead to rash decisions even very prudent people and with little savings;

• impulsiveness: sometimes you give in to impulse and instinct, but in the case of scams, it is enough that this happens only once to lose your life savings;

• the fascination of gambling: even if we are not regulars at the table or poker addicts, we feel the thrill of the possibility of risking everything to change our lives by winning a sum that we will never be able to earn in such a short time;

• excessive self-confidence (overconfidence). Even if we understand that the proposed deal could be risky, we believe we can count on our knowledge or our cunning, and we are convinced that we will be able to get out of it at the right time!

• once the investor has fallen into his net, the scammer also leverages the fraudster’s propensity to deny even the obvious: the shame of having ‘fallen in with all his shoes’ is so great that one prefers to continue hoping and you give up on reporting!

Social networks create the ideal conditions to skip every ritual, creep into every hole, exploit every weakness, and propose any miraculous tool. It emphasizes that this negative aspect is abundantly overcome by the possibilities that communication systems allow, constituting an instrument of freedom, information, and completion of the individual.

In fact, in the ocean of the infosphere, everything comes from any place, in any language, and is offered with any tool: from profiles, pages, videos, advertisements, groups, advertisements, and promotions, generating immense possibilities for various scammers. To inoculate their messages, to cast their nets, in a sea where protections cannot and must not be placed.

Invoking authority and further protection tools becomes a mantra to solve a problem by re-proposing obsolete and outdated schemes: the current tools may have run out of time, and it is time to relegate them to the shelves of history since they constitute trappings rather than walls of protection.

In this context, the only possible defense of the saver/investor consists of his training, the dissemination of financial culture, and the ability to find and evaluate information instead of deceiving himself with ineffective and inefficient supposed state protection.