Investment scams involve the scammer getting you to send money or provide personal details on the promise of big payouts, quick money, or guaranteed returns. According to Scamwatch, Australians lose more money to investment scams than any other type.
Investment scams can be very convincing. Scammers may look and sound highly professional, and it may be hard to tell if they are genuine investments or not.
There are various forms of investment scams. Common examples include:
Cryptocurrency scams involve using cryptocurrencies or digital currencies as a medium of exchange for an investment opportunity. Cryptocurrencies are highly volatile and can be very hard to track. Scammers may ask the unsuspecting victim to invest in a crypto platform with the promise of high and guaranteed returns. These can be fake trading platforms where the scammer is able to manipulate figures which may lead you to believe that your investment is gaining profit.
Ponzi schemes typically tend to pay existing investors with funds collected from new investors. They may promise to invest your money to generate high profit and guaranteed returns. However, it’s likely the perpetrators do not invest the money and instead they use your money to pay those who invested ahead of you and will repeat the same cycle as new investors join in.
Imposter bonds are when perpetrators present themselves as legitimate representatives or employees of financial firms offering high yield fixed term deposits or treasury bonds that are non-existent or untrue. You may be directed to pay funds into a bank account, and once you do that, it may be very hard to recover your funds.
Fake public offerings, referred to by the scammer as an IPO or an initial public offering, of shares from a “promising” company or from an industry sector that becomes “hot.” You may be directed to buy unregistered shares in a private company before the initial public is made aware of it, which usually turns out to be a bogus IPO, or such company is not engaging in an IPO.
Superannuation scams may lead to scammers creating superannuation accounts under your name or transferring your money to a fake superfund. They may promise different withdrawal methods, but you may end up losing your money and having your identity compromised.
Romance baiting is when scammers pretend to be potential future partners in a dating app or platform. After building a relationship with you online, the scammer may start asking for your personal information or finances and offer you some investment opportunities and starts asking you for money.
Celebrity endorsement scams may start with an offer of investment opportunity for a product, service, or material being endorsed by a celebrity. Often, these celebrities are linked to those products without their consent.
Gambling and sports betting may be about investing on a software with the promise of a game’s outcome or high returns. It may also be investing money to form a group with a pool of money, where the scammer will claim to bet on behalf of the group and share a percentage of the profits.
Watch out for the red flags
According to the Australian Securities and Investments Commission’s (ASIC) Moneysmart, signs of an investment scam may include:
- offering high investment returns
- the absence of an Australian Financial Services (AFS) licence
- frequent contact pressuring you to make fast decisions
- providing an investment prospectus that is not registered with the Australian Securities & Investments Commission (ASIC)
- the use of a reputable organisation’s name to instil credibility
Tips to help you protect yourself
- Take your time - Don't be pressured to make a quick decision with your money you may regret later.
- Trust your instincts - if an offer sounds too good to be true, it probably is.
- Always check any investment opportunity to make sure it's real, especially if approached through social media.
- Do your research before giving your details to an unsolicited caller or replying to emails offering financial advice or urgent investment opportunities.
- Check if a financial adviser is registered via the ASIC website and check ASIC’s list of companies you should not deal with. If the company that is asking for your investment is on the list - do not deal with them.