Investment scams are often associated with people who have limited financial knowledge or investment experience. We tend to assume that individuals with university degrees, professional qualifications or years of investment experience are better equipped to recognise fraudulent opportunities. However, this assumption overlooks an important reality: even financially knowledgeable and cautious individuals can become victims of investment scams.

A case brought by the US Securities and Exchange Commission (SEC) in September 2024 illustrates how sophisticated these schemes have become. In its case involving a platform called CoinW6, the SEC alleged that individuals posing as young, wealthy professionals approached potential investors through LinkedIn and Instagram before moving their conversations to WhatsApp. Rather than immediately promoting an investment, they gradually developed personal and romantic relationships with their targets to establish trust.

Once trust had been established, the individuals introduced a cryptocurrency trading platform that supposedly offered attractive returns. Investors were shown account balances and profits that appeared genuine but were allegedly fictitious. When investors attempted to withdraw their money, they were asked to make additional payments for taxes or fees. The SEC alleged that investors' funds had been misappropriated.

This case illustrates an important feature of modern investment scams: fraudsters do not simply persuade people to invest their money. They first build relationships, establish credibility and influence how individuals perceive the investment opportunity.

My study, Why financial knowledge is not enough: Behavioral manipulation and investment scam vulnerability in the digital age, published in the Journal of Techno-Social (Volume 18, Issue 1, 2026), examined 42 publicly available regulatory reports, enforcement case summaries and investor protection documents published between 2019 and 2024.

These documents were obtained from international authorities and organisations, including the SEC, the UK's Financial Conduct Authority, the Australian Securities and Investments Commission, the Federal Bureau of Investigation, the Canadian Securities Administrators, Interpol and the Better Business Bureau.

Using qualitative document analysis, the study identified two interconnected dimensions of investment scam vulnerability: weaknesses in investment-related knowledge and the behavioural manipulation employed by scammers. 

The first concerns individuals' ability to assess investment opportunities. Some recurring weaknesses included difficulty recognising unrealistic returns, inadequate verification of investment credentials, overlooking common warning signs and being influenced by professional-looking websites or complicated financial terminology.

The second concerns the psychological strategies used by scammers. These include emotional pressure, fabricated identities, fake testimonials, impersonation of professionals, personalised communication and simulated investment gains.

Importantly, the findings suggest that these two dimensions often interact. A person may understand that investments carry risks and that unusually high returns should be questioned. However, when confronted with convincing messages, apparent investment profits or reassurance from someone they have come to trust, their ability to apply that knowledge may be weakened.

This helps explain why financial literacy alone cannot be treated as a complete defence against investment scams.

Another SEC enforcement case in December 2024 demonstrates how scammers exploit the credibility associated with financial professionals.

The SEC charged three individuals over an alleged online investment fraud scheme involving the impersonation of nearly two dozen genuine securities brokers and investment adviser representatives at established US financial firms. The defendants allegedly created fraudulent websites, used fabricated client testimonials and promised monthly investment returns of up to 25%.

Investors were directed to fake online investment platforms displaying fictitious portfolio growth. According to the SEC, at least 28 investors were defrauded of more than US$2.9 million (RM11.84 million). When investors attempted to withdraw their funds, they were allegedly told to pay additional fees before the money could be released.

The significance of this case extends beyond the financial losses. It demonstrates how scammers can imitate the appearance of professional financial services to create confidence and reduce suspicion.

For ordinary investors, a professional website, convincing investment documents or someone claiming to represent a recognised financial institution may create a false sense of security. However, these appearances do not establish that an investment opportunity or its representative is legitimate.

Technology has also provided scammers with new ways to make fraudulent investment opportunities appear sophisticated.

In June 2022, the SEC filed a complaint against EmpiresX and several individuals over an alleged investment scheme that raised at least US$40 million from thousands of investors. Investors were attracted by claims of daily returns of 1%, supposedly generated through an automated trading bot or manual trading.

According to the SEC's complaint, the purported trading bot was fictitious, and the defendants misappropriated substantial amounts of investors' money for personal purposes. The scheme also involved claims intended to reassure investors about the safety and legitimacy of their investments. When the scheme began to collapse, investors were unable to withdraw their funds.

This case highlights an important warning: technology-related claims should never replace proper investment verification. Whether an opportunity promotes artificial intelligence, automated trading, cryptocurrency or sophisticated investment algorithms, investors should question how returns are generated, whether the business is properly authorised and whether independent evidence supports its claims.

A technologically advanced presentation does not necessarily indicate a genuine investment.

One of the central insights from behavioural finance is that financial decisions are not always made through careful and rational evaluation. Emotions, cognitive shortcuts and social influences can affect how individuals interpret information and respond to opportunities.

Scammers exploit these tendencies through several techniques.

The fear of missing out, commonly known as Fomo, can encourage individuals to act quickly when told that an opportunity is available for a limited time. Social influence can also be powerful when potential investors see fabricated testimonials or believe that friends and acquaintances have already invested successfully.

Overconfidence presents another risk. Individuals who believe they are financially knowledgeable may become overly reliant on their own judgement and less inclined to verify information independently. Similarly, after making an initial investment, some victims may continue transferring money because they believe another payment will allow them to recover their previous losses.

These responses are not necessarily signs of poor intelligence. They reflect ordinary human tendencies that can be deliberately exploited through persistent and personalised communication.

Preventing investment scams requires more than understanding interest rates, investment returns or portfolio risks. Investors must also develop behavioural awareness and stronger digital verification habits.

First, independently verify the investment company, platform and individuals promoting the opportunity through the relevant official regulatory authorities. Do not rely solely on links, registration documents or credentials provided by the person approaching you.

Second, question promises of unusually high or guaranteed returns, particularly when presented as low-risk opportunities. Investors should understand that genuine investments involve risks and that attractive returns require proper scrutiny.

Third, avoid making financial decisions under pressure. Urgent messages, exclusive offers and claims that an opportunity will disappear should be treated with caution. Taking time to verify information can prevent impulsive decisions. 

Fourth, be particularly careful when asked to make additional payments to release investment profits or withdraw funds. A displayed account balance or screenshot does not necessarily represent real, accessible money. 

Finally, seek independent advice and discuss unfamiliar investment opportunities with trusted individuals who have no connection to the person promoting them. 

Financial literacy remains essential, but the way we approach investor education needs to evolve. Teaching people how to manage money and understand investment products is important; however, they must also learn how scammers manipulate trust, emotions and decision-making. 

Financial educators should incorporate real-world scam scenarios and behavioural awareness into investment education. Regulators should communicate not only the financial warning signs but also the psychological tactics used to influence victims.

Financial institutions should strengthen public awareness and safeguards against impersonation and suspicious transactions. Ultimately, investment scams succeed not only because people misunderstand financial products, but also because scammers understand human behaviour. Being financially knowledgeable does not make anyone completely immune to manipulation. 

In today's digital investment environment, protecting our money requires more than knowing how to invest. It requires the ability to recognise when our emotions, trust and judgement are being used against us.

Amirul Ammar Anuar is programme leader for the diploma in financial technology at Methodist College Kuala Lumpur.