Investment Scams

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. 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:
• 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:
o be able to sell anytime
o get a refund for non-performance
o have insured or ‘guaranteed’ transactions
o be able to swap one investment for another

• inside information, the opportunity to invest before a public float or discounts for early bird investors

NOTE: ASIC is alerting investors about a suspicious investment opportunity through Beurax Corporation offering
very high and ‘guaranteed’ returns. ASIC has received complaints from investors who cannot access their invested money.

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.

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 (https://moneysmart.gov.au/banking/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:
• 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 OFFER list 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.
• ASIC’s list of companies you should not deal with — Make sure the company name is not on the list.
• International Organization of Securities Commission’s (IOSCO) investor alerts — Make sure the company is not named.
• ASIC’s list of fake regulators and exchanges — Check if the investment offer mentions one.

NOTE: 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:
• Take simple steps to protect yourself from identity theft
• 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:
• Report it to ASIC or your report it to your local police.
• Stop sending money to the company.
• Be wary of falling for a follow-up scam or offers to recover your money.

CASE STUDY
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.

 

Chris Connolly
P 03 9591 8000 F 03 9530 8375
E chris@connollywealth.com.au
W www.connollywealth.com.au
Level 1, 441 South Road, Bentleigh VIC 3204
PO Box 5074, Bentleigh East VIC 3165
Connolly Wealth Management Pty Ltd

 

ATF The Connolly Wealth Management Trust
Authorised Representative of:
Sentry Advice Pty Ltd ABN 77 103 642 888 | AFSL 227748

Sources:
https://moneysmart.gov.au/investmentwarnings/investment-scams
https://asic.gov.au/about-asic/newscentre/news-items/suspicious-websitealert-beurax-com/
https://asic.gov.au/about-asic/contactus/how-to-complain/report-misconduct-toasic/
https://asic.gov.au/about-asic/newscentre/news-items/scam-alert-fakeendorsements-misleading-investors/
https://moneysmart.gov.au/companiesyou-should-not-deal-with
https://moneysmart.gov.au/fakeregulators-and-exchanges
In this article we have not taken into account any
particular person’s objectives, financial situation or
needs. You should, before acting on this information,
consider the appropriateness of this information
having regard to your personal objectives, financial
situation or needs. We recommend you obtain
financial advice specific to your situation before
making any financial investment or insurance
decision