How an investment scammer can find and target you

What is an investment scam?

Investment scams involve a victim investing money in a specific asset class or product, such as cryptocurrency or a term deposit.  Investment scammers are agile and typically will offer whatever is attracting interest and attention in the market. 

A core characteristic of an investment scam is they will generally offer an opportunity with promises of returns above market rate within a relatively short period – sophisticated scammers will be particularly careful to ensure their promise is believable. Scammers are also typically seeking personal and financial details as part of this exchange. 

According to the 2022 figures from The Australian Competition and Consumer Commission’s Scamwatch, investment scam losses in the first half of 2022 increased 314% compared to the same period in 2021. Scamwatch estimates actual losses are higher, because many Australians don’t report their scam event.¹

Specific types of investment scams to be aware of include: 

• Cryptocurrency opportunities: often via encrypted messaging services and other non-traditional channels, such as social media. 

• Unsolicited investment offers: often claiming to be from reputable businesses.

• Celebrity endorsement: usually a fake endorsement of an investment or other business opportunity.

• Ponzi schemes: often through social media and asking victims to download apps, promising fast returns.

• Romance baiting: involving scammers meeting people on dating apps, developing a relationship, then introducing them to investment opportunities. 

• Superannuation: scammers will offer early access to your super – for a fee.

• Comparison sites: to enable fake transactions for goods and financial products.

Many people think they wouldn’t fall victim to an investment scam and would easily identify a scam from a legitimate investment opportunity. However, with some scam types, it can be extremely difficult to spot the difference based on appearances and first impressions alone. 

For example, Scamwatch says it is particularly hard to tell legitimate cryptocurrency investments from scams, as scammers have the advantage of cryptocurrency being less regulated than traditional investments and wholly online.²

Your losses and liabilities

An investment scam is very different, and often substantially more complex, than intercepting a fraudulent transaction on your bank account. 

Part of the reason that investment scams can have higher stakes, with higher losses, is they often have a long lead time. You may not know you’ve been scammed until months down the line, by which time the funds are lost or offshore. 

Further, personal recovery for investment scams is typically limited. This is a fact scammers have capitalised on, by offering victims of scams assistance in recovering their funds – only to scam them again. You can read more about these types of scams here. 

12 tell-tale signs of an investment scam

Scammers mimic professional selling and marketing tactics, making it harder to spot fake offers from real ones.  Contrary to what you might think, scammers are also often smart and engaging. They’re good at selling, articulate, know exactly what they’re talking about, and they’ll have come up with great ‘opportunities’ for you to invest in.

Every scam is different, but there are some tell-tale signs to watch out for, including: 

1. Promise of low risk, but high returns.
2. You’re asked to transfer funds quickly and directly to an institution.  
3. High-pressure sales tactics, including from someone purporting to be from a verified institution. 
4. You’re contacted ‘cold’ by a person or organisation you’ve never dealt with.
5. You’re contacted by someone purporting to be from a financial institution, but they got your details from a comparison site you used. 
6. Requests for funds to be sent to a cryptocurrency exchange, or a request to create a cryptocurrency account for non-cryptocurrency assets.  
7. Celebrity endorsements of an investment opportunity. 
8. Invitation to deposit into multiple accounts. 
9. No Australian Financial Services Licence (AFSL) or Australian Business Number (ABN), or claims they’re not needed.
10. Investment prospectus not registered with the Australian Securities and Investment Commission (ASIC). 
11. Links in emails or text messages sending you to logins or requesting personal details. 
12. Requests for remote access to your computer to set up accounts and make transactions.

Ultimately, the golden rule is that if an offer sounds too good to be true, it’s likely to be a scam.  

Tips for checking if an opportunity is legitimate

If you’ve been approached with an opportunity or feel nervous about an opportunity you’ve found, trust your instinct and do some research. Do not let a scammer isolate you from the institutions or professionals you would normally engage with before investing. Steps you can take to investigate an offer include:  

• Do your own independent research on the company. This research can include checking ASIC’s Moneysmart list of companies you should not deal with. 

• Be wary that investing with an international operation you’re not otherwise familiar with can be a high-risk decision. Thorough due diligence may be needed, which can include getting an understanding of local regulations and guidance or seeking professional advice. 

• You can ask for a prospectus – but not using the phone or email contacts provided by the potential scammer.  

• If the company name is known to you, a scammer may be impersonating one of their representatives. Find the company’s website or phone number and confirm with them directly if the opportunity is legitimate. Do not use the information you’ve been given, find and verify it independently. 

Finally, remember: no legitimate financial institution will ask for your personal information in an unsolicited communication, put pressure on you to invest or ask for remote access to your computer or other devices. 

Key take aways

• Australians lose more money to investment scams than any other type of scam. Keeping your knowledge of how to protect yourself up to date is key to ensuring you can stop a scammer in their tracks. You can monitor sites like Scamwatch to stay informed and up to date on scamming trends and tactics. 

• Unsolicited calls, texts and emails to discuss or encourage investment are the starting point for many investment scams. You should independently verify the company contacting you before engaging any further, if at all. 

• If it sounds too good to be true, it probably is. If in doubt, simply don’t act. Always do your own independent research or speak to your financial adviser before you act.  

¹ Based on data from January 2022 to May 2022, https://www.scamwatch.gov.au/news-alerts/australians-are-losing-more-money-to-investment-scams 
² https://www.scamwatch.gov.au/types-of-scams/investments/investment-scams