Be suspicious of anyone that offers you easy money. Scammers are skilled at convincing you that the investment is real, the returns are high and the risks are low. But there's always a catch.
How to spot an investment scam
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 investment 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.
How scammers get you to invest
To get you to give them your money, a scammer may tell you they're offering:
- high and quick returns or sometimes tax-free benefits
- share, mortgage, real estate or virtual currency investments, 'high return' schemes, option trading or foreign currency trading
- 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, the opportunity to invest before a public float or discounts for early bird investors
Warning signs of investment scams
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
- rings you repeatedly, keeps you on the phone, or emails you a lot
- says you need to make a quick decision or you'll miss out on the deal
- offers you professional-looking prospectuses, brochures, share certificates or receipts, but their prospectus isn't registered with ASIC
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).
Tactics used by investment scammers
Some of the common tactics scammers use to trick you into investing:
COVID-19 phishing scams
A scammer may try to steal your information using 'investment opportunities' to make your money back from sharemarket losses. The scammer may pretend to be someone you know, like your fund manager or your financial adviser. They may contact you by email, phone or text, or on social media.
Signs of a phishing scam:
- The email address doesn't match the company name (also look for hotmail, gmail or outlook in the address).
- There are spelling mistakes or the information doesn't make sense.
- You're asked to update or confirm your personal details.
- You're asked for immediate payment.
Don't click on any links. Delete the email or message straight away.
Directing you to a fake website
Scammers use sophisticated websites and issue fake online press releases that make false claims of outstanding corporate performance. They may provide some victims with logins to view fake investment balances and growing returns.
Stopping you pulling out of the deal
If you try to pull out of the deal, scammers may try to:
- swap your current investment for another one
- convince you that your investment will increase in value soon
Threatening legal action
Scammers may threaten you with prosecution or hefty fees to keep you from pulling out of the deal.
Using social media to approach you or your friends
Scammers may message you, advertise or send you a 'friend' request.
They may pose as someone you know or are connected to. If you 'friend' them they get access to your profile information. They can also send you offers to invest and make quick money.
Scammers may use your information to impersonate you. They may create a fake social media account to approach people in your friends list. See identity theft for more information.
Artificially inflating the share price
Scammers buy shares in a small company at a low price. They then send out false tips about the company having great prospects. As more people invest, the share price rises. The scammers sell their shares at the peak of the price rise, then the share price falls and the shareholders are left holding them at the reduced value.
Passing your call along the line
Investment scammers use a team of less experienced staff to make the initial call. The junior staff follow a tight script to check your interest. If you take the bait, they hand you over to a more senior person, called a 'closer'. Closers are extremely skilful sales agents and their job is to make you feel compelled to close the deal and send your money.
Calling or emailing you persistently
Investment scammers may call or email you persistenly. They may keep you on a phone call for a long time, insisting you'll miss out if you don't take up their offer right away. They will not take no for an answer and will ask you about your worries to reassure you. As long as they can keep you talking or emailing, you haven't really said no.
Operating from overseas
Many investment scammers operate from overseas or offer foreign investments, because their activities are illegal in Australia. Overseas scammers target Australians because ASIC does not have international jurisdiction to prosecute them.
How to check an investment is real
Simple research to make sure an investment is legitimate could save you from losing money to a scam.
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. Don't be pressured to make a quick decision you could regret later.
Take these steps to do your own research — check:
- ASIC's OFFERlist database — See if the company has lodged a prospectus with ASIC.
- Publicly listed phone directories — Check whether the address and contact details are correct.
- ASIC Connect's professional register search — Check the company has an AFS licence or Australian credit licence.
- Our list of companies you should not deal with — Make sure the company name is not on our list.
- International Organization of Securities Commission's (IOSCO) investor alerts — Make sure the company is not named.
- Our list of fake regulators and exchanges — Check if the investment offer mentions one.
If you invest through overseas companies and something goes wrong, you won't be able to get help. A lower risk option is to invest overseas through licensed companies based in Australia.
Protect yourself from investment scams
Make sure you don't fall victim to an investment scam:
- Always get independent financial advice before you invest
- Do your own checks on any investment opportunity to make sure it's real.
- Remember the common signs and tactics so you can spot an investment scam.
- Don't accept a message or friend request on social media from someone you don't know.
- Make sure your privacy settings are up to date on your social media accounts.
- Be wary of random or unexpected contact, particularly if you have replied to something on a website or social media platform.
If you think you have been the victim of an investment scam, you should: