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