An investment scam tricks people into putting their money into fake investments with false promises of high returns. These scams can involve fake investments in stocks, bonds, real estate, or cryptocurrency, and they can ruin your finances. 

What Are the Most Common Types of Investment Scams? 

• Ponzi Schemes: Scammers pay returns to earlier investors using the money from newer investors, rather than from profit earned by a real business. These schemes collapse when there are not enough new investors to pay earlier investors. 

• Pyramid Schemes: Similar to Ponzi schemes, pyramid schemes rely on recruiting new investors to pay returns to earlier investors. Participants must recruit others into the scheme, creating a pyramid structure. These schemes are unsustainable and illegal. 

• Pump and Dump: Scammers artificially inflate the price of a stock by spreading false or misleading information. Once the price is high, they sell their shares at a profit, causing the price to drop and leaving other investors with worthless stock. 

• Cryptocurrency Scams: With the rise of cryptocurrencies, scams involving fake Initial Coin Offerings (ICOs) or fraudulent crypto trading platforms have become more common. These scams promise high returns and use complex jargon to confuse and trick investors. 

How Do Investment Scams Spread Online? 

• Email Phishing: Scammers send unsolicited emails with tempting investment opportunities, often using professional-looking materials to appear legitimate. 

• Social Media: Fraudsters use social media platforms to promote fake investment opportunities, sometimes creating fake profiles or hacking into real accounts to make their schemes look legitimate. 

• Online Ads: Scammers place ads on websites and search engines, directing users to fraudulent investment websites that mimic real ones. 

• Fake Websites: Scammers create professional-looking websites that offer fake investment opportunities, complete with testimonials and fake regulatory information. 

What Are the Red Flags in Investment Scams? 

• Unrealistic Returns: Promises of high or guaranteed returns with little or no risk. Real investments always carry some level of risk. 

• Pressure Tactics: High-pressure tactics create a sense of urgency, pushing you to invest quickly without giving you time to think it through. 

• Unregistered Investments: Investments not registered with regulatory authorities such as ASIC or the FMA. Registration provides oversight and accountability. 

• Lack of Documentation: Little to no written information about the investment. Real investments come with detailed documentation, including prospectuses and financial statements. 

• Complex Strategies: Overly complex or secretive investment strategies that are hard to understand. If you can’t easily explain the investment to someone else, it may be a scam. 

• Unsolicited Offers: Be wary of unsolicited investment offers, especially those that come via phone calls, emails, or social media messages from unknown people or companies. 

What Should You Do If You Fall Victim to an Investment Scam? 

• Cease Communication: Stop all contact with the scammer immediately. Do not provide any additional information or money. 

• Document Everything: Keep detailed records of all communications, transactions, and any other relevant information. This documentation will be crucial when reporting the scam to authorities. 

• Report the Scam: Contact regulatory authorities, such as ASIC as well as the FMA, and law enforcement to report the scam. Provide them with all the information you have gathered. 

• Alert Your Bank: Inform your bank or financial institution about the fraud. They may be able to freeze your accounts, reverse transactions, or take other measures to protect your funds.