Risk or scam? How to tell a risky investment from a fraud

Crypto prices can halve in a few weeks. That's risk. A platform that won't let you withdraw your money is something else: fraud. Telling the two apart is one of the most useful skills an investor can have.

Six questions to ask

1. Is the return promised or guaranteed?

Real investments don't guarantee returns, especially high ones. Bitcoin, shares and property can all fall. Anyone promising "guaranteed 2% a day" is either lying or taking on hidden risks they aren't telling you about.

2. Can you see where the money comes from?

A legitimate return has a clear source: the price of an asset rising, interest from a regulated lender, or business profits you can check. If the explanation is vague ("a secret trading bot", "arbitrage"), treat it as a red flag.

3. Who holds your money, and are they regulated?

Look up the company on your financial regulator's register. Check the exact web address too, because scammers copy the names of real firms. If you can't find it, or it's registered only in a far-off place with no clear oversight, walk away.

4. Can you get your money out?

Legitimate platforms let you withdraw without paying surprise "taxes" or "unlock fees" first. Being asked to pay to access your own money is one of the clearest signs of fraud.

5. Are you being rushed or flattered?

"Only 3 spots left", "price goes up tomorrow", "I'm only telling you because I trust you." Pressure and secrecy are tools to stop you from thinking or asking anyone.

6. How did you hear about it?

Unsolicited messages, new online friends, social media ads and celebrity endorsements are where most crypto fraud starts. Good investments rarely come looking for you.

A quick comparison

• Risky but legitimate: the price can go down, the risks are disclosed, you can withdraw whenever you choose, the provider is regulated, and nobody promises a return.
• Likely a scam: returns are guaranteed or unusually steady, you're under pressure to act fast, withdrawals need fees, the platform isn't registered anywhere, and you were contacted out of the blue.

Even a legitimate asset can be a bad investment for you if you can't afford to lose the money. Read Risk vs. reward in crypto next, or test a specific offer with the scam checker.