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Investment scams

Reduce the risk of investment scams

Page reading time: 6 minutes

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:

In any case, the money you 'invest' goes straight into the scammer's bank account and not towards any real investment.

Anyone can be scammed and every scam is different. Scams are often very hard to spot and can feel legitimate in the moment.

How scammers get you to invest

To get you to give them your money, a scammer may tell you they're offering:

Warning signs of investment scams

The investment offer may be a scam if the person:

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.

Create websites with fake professional endorsement

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.

They may even claim to be endorsed by ASIC by showing the ASIC logo. ASIC never gives permission for its logo to be used to promote financial products or services.

Operate from overseas and use multiple accounts

Many investment scammers operate from overseas to offer foreign investments, because their activities are illegal in Australia. Overseas scammers target Australians because ASIC does not have international jurisdiction to prosecute them.

Scammers may ask you to deposit into different bank accounts every time you make a payment. They may say it is ‘for a security reason’ or because the company is so large it has accounts all over the world. 

Stop 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
  • threaten you with legal action or hefty fines

Use 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 may 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 inflate 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. 

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:

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:

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.

Reduce the risk of investment scams

Make sure you don't fall victim to an investment scam:

If you think you have been the victim of an investment scam, you should:

Man texting looking serious.

Nathan gets unexpected calls offering share trading software

Nathan got an unexpected phone call from a financial technology company. The caller offered Nathan an exclusive licence for share trading software. The software promised to make trading on the ASX simple and provide better returns than a bank.

The caller promised Nathan that an upfront payment of $18,000 would guarantee returns of more than $30,000 in 16 months. He also promised a money back guarantee if after 12 months Nathan did not double his initial $18,000.

Nathan was hesitant – the offer sounded too good to be true. The caller insisted that this was a limited time offer. He warned Nathan would miss out on learning how 20 minutes a day of simple trading would secure his financial future.

Nathan wasn’t ready to commit so he declined the offer and hung up. He checked the company’s website and online reviews – they looked professional, but the reviews seemed too positive.

The calls continued for several months, and the sales pressure grew quite aggressive. Nathan blocked the number and reported the company to ASIC.