Investment scams

Be suspicious of anyone offering you easy money. Scammers are skilled at convincing you that the investment is real, the returns are high and the risks are low. There’s always a catch.

How investment scams work

There are three main types of investment scams:

• The investment offer is completely fake.

• The investment exists, but the money you give the scammer doesn’t go towards that investment.

• The scammer says they represent a well-known company – but they’re lying.

In any case, the money you ‘invest’ goes straight into the scammer’s bank account and not towards any real investment. It is extremely hard to recover your money if it goes to a scammer based overseas.

Anyone can be scammed and every scam is different. Scams are often very hard to spot and can feel legitimate in the moment. Scammers can use professional-looking websites and apps, and impersonate legitimate companies.

How scammers get you to invest

1. The set up

Scammers can come from anywhere. The most common approaches are:

• Unexpected contact – they may contact you by phone, social media, email or text message. They might pretend to be someone you know, such as your fund manager, financial adviser, bank, or even a friend. They’ll offer guaranteed or unrealistic high returns on an investment.

• Fake investment trading – they use real investment trading platforms to set up fake accounts. Then they offer to trade on your behalf. Once you deposit your money it’s gone for good.

• Fake investment comparison websites – scammers will get you to enter your personal information into their fake website, then contact you to sell their scam investment.

• Websites with fake ASIC endorsements – slick websites with fake investing information and performance figures. They may claim to be endorsed or approved by ASIC by showing the ASIC logo.

• Dating apps – using romance to form a relationship with you, then offering you an investment opportunity.

• Paid advertising – scammers often pay big money for advertisements, to appear high in online search results. They also advertise through social media. Advertising a scam is illegal.

• Fake news articles – scammers will promote fake articles on social media, impersonating other news outlets and linking to their scam websites.

2. The offer

A scammer may tell you they’re offering:

• guaranteed, quick and easy investment returns and sometimes tax-free benefits

• investments in shares, cryptocurrency, mortgage, real estate or virtual investments, all with ‘high returns’

• options trading or foreign currency trading

• commissions for building their client base and getting others to invest

• an opportunity with no risk or low risk, because you will:

• be able to sell anytime

• get a refund for non-performance

• have insured or ‘guaranteed’ transactions

• be able to swap one investment for another

• inside information on initial public offerings or discounts for early bird investors, often falsely impersonating real companies to pitch their offer

3. The hook

Scammers will look at the latest investment trends for opportunities. They often use well-known company names, platforms, and terms (such as ‘crypto’) to lure investors in and appear credible.

This may include fake:

• crypto-asset (virtual currency) investments

• trading companies, getting you to invest with them through real apps and trading platforms

• offers of inside information on public company floats, often naming ones that have been hyped in the media or on social media

• offers to get your money back from a sharemarket fall, often using losses resulting from the COVID-19 pandemic as bait

How to spot an investment scam

The investment offer may be a scam if the person:

• does not have an Australian financial services (AFS) licence or says they don’t need one

• constantly contacts you (phone calls or emails) and pressures you to make a quick decision

• uses the name of a reputable organisation to gain credibility (for example, NASDAQ, Bloomberg)

• has an investment prospectus that isn’t registered with ASIC

• offers you very high investment returns

If you spot any of these signs, hang up the phone or delete the email. If you manage to record any of the scammer’s details, report them to the Australian Securities and Investments Commission (ASIC).

Other tactics used by investment scammers

Operate from overseas

Overseas-based scammers target Australians because ASIC does not have international jurisdiction to prosecute them and they are very difficult to track down. They may ask you to deposit into different bank accounts every time you make a payment.

Investing in overseas companies can be risky. If you invest and something goes wrong, you won’t be able to get help from ASIC.

Convincing you not to pull out of the investment

They may try to swap your current investment for another one, convincing you the value will increase, or threaten you with legal action or fees. A common tactic is to ask for ‘insurance’ or ‘taxes’ before funds invested can be released. This is just another method to extract more money out of victims.

‘Pump and dump’ scams

Scammers use social media and online forums to create fake news and excitement in listed stocks to increase (or ‘pump’) the share price. Then they sell (or ‘dump’) their shares and take a profit, leaving the share price to fall. Any other investors are left with low value shares and will lose money.

How to check an investment is real

1. Ask questions and request information

Check the legitimacy of the person offering the investment by asking them:

• What is your name and what company do you represent?

• Who owns your company?

• Does your company have an AFS licence and what is the licence number?

• What is your address?

• Is your investing prospectus registered with ASIC?

If they try to avoid answering these questions, their investment offer is probably a scam. Hang up the phone, do not respond to the email. Stop dealing with the person or delete and block them if it’s through social media.

But, even if they can answer these questions, it doesn’t always mean the investment is legitimate.

2. Do your own research on the company

Don’t rely only on the information the person gives you to make your decision — always verify what they tell you from independent sources. Don’t be pressured to make a quick decision you could regret later.

Follow these steps to do your own research — check:

• ASIC’s OFFERlist database — If the company is offering shares or interests in a managed investment scheme, see if the company has lodged a disclosure document with ASIC.

• Publicly listed phone directories — Check whether the address and contact details are correct.

• ASIC Connect’s professional registers — Check the company has an AFS licence or Australian credit licence. Also check that the number given matches what is on ASIC’s registers. 

• The list of companies you should not deal with — Make sure the company name is not on our warning list.

• International Organization of Securities Commission’s (IOSCO) investor alerts — Make sure the company is not named.

• The list of fake regulators and exchanges — Check if the investment offer mentions an entity on this list.

Reduce the risk of investment scams

Protect yourself

• Do your own checks on any investment opportunity to make sure it’s real.

• Take simple steps to protect yourself from identity theft

• Make sure your privacy settings are up to date on your social media accounts.

Be cautious

• Be wary of unexpected contact, particularly if you have replied to something on a website or social media platform.

• Don’t trust any offer to invest if approached through social media. You don’t know who you are dealing with.

• Always get independent financial advice before you invest.

If you think you’ve been scammed

• Stop sending money to the company.

• Report it to your bank or financial institution.

• Be wary of falling for a follow-up scam or offers to recover your money.

• Report it to ASIC or your report it to your local police.

• Get support if you need it from Lifeline (13 11 14) or the National Debt Helpline (1800 007 007).

Source:
Reproduced with the permission of ASIC’s MoneySmart Team. This article was originally published at https://moneysmart.gov.au/investment-warnings/investment-scams

Important note: This provides general information and hasn’t taken your circumstances into account.  It’s important to consider your particular circumstances before deciding what’s right for you. Although the information is from sources considered reliable, we do not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, we do not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person.  Past performance is not a reliable guide to future returns.

Important
Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author. Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.