WANT TO GET POOR QUICK? AN INVESTMENT SCAM SHOULD DO THE TRICK

We are constantly hearing that scams and frauds are becoming more and more sophisticated and harmful. They are, in fact, as old as civilisation itself. As soon as the first person managed to amass some wealth, there were likely countless others scheming ingeniously and tirelessly to relieve them of it.  As Charles Caleb Colton, the eccentric early 19^th-century writer, cleric, and gambler, wrote, ‘There are some frauds so well conducted that it would be stupidity not to be deceived by them’. It was true then; it is even more so now. Thanks largely to the digital world we live in, perpetrators of scams and frauds have an enormously expanded range of potential victims to target and tools and types of scams at their disposal to do it with.

The Little Book of Scams

The Little Book of Scams, published by the Australian Competition and Consumer Commission (ACCC), is an excellent source of information about the latest scams and how to protect yourself against them.

Get poor quick

This article focuses on just one of the many and varied types of scams out there, the so-called investment scam. You know the line. This is where someone is saying you can ‘get rich quick’, usually by giving them some, often lots, of your money. Which seems a little counterintuitive.  Invariably the promoter (or ‘scammer’ in these circumstances) will tell you that the investment is ‘guaranteed’ or that you cannot lose. In reality, these scams are a guaranteed way to get poor quick.

Investment scams come in many different shapes and sizes, but the main feature of many is that the product, service, or investment that the scammer is trying to manipulate you into buying is a complete fake. Another common feature is a fake celebrity endorsement, often spread through social media. Here are three common examples of investment scams.

1. The phantom trading platform

The Australian Securities and Investments Commission (ASIC) has warned consumers about fake online trading platforms. These fakes are sometimes very convincing in their appearance, even showing the victim their trading ‘balance’, investments, returns, and fees. Often the scammer will lure the victim by suggesting a small opening investment, perhaps a couple of hundred dollars.  There will be an apparent profit shown in the victim’s ‘account’. But the entire thing is a fiction and after the victim is enticed into ‘investing’ a larger amount of money, they are not able to get it back.  Sometimes their account simply vanishes and is inaccessible, or the scammer claims that there are exorbitant ‘fees’ or ‘taxes’ to be paid before they can withdraw their funds.

2. Incomparably fake websites

Another method used by scammers is a fake comparison website or a website which impersonates that of a legitimate organisation; this has even happened to the Australian Taxation Office and AUSTRAC the organisation responsible for combating money laundering. Consumers are encouraged to enter their details into the fake website. They are then contacted and sold an equally fake investment. It is therefore vital that you check the legitimacy of any website you are using and that you do not give your personal details to anyone who you are not sure about. The genuine ScamWatch website offers some tips on how to protect yourself from website scams.

While we are on the topic of comparison websites, even legitimate ones have limitations. They are a useful tool but we encourage you to follow the guidance from ASIC’s MoneySmart if you use one, which includes:

• Being clear about what features you want in a product
• Shopping around using different comparison websites
• Making a short list of the products which look suitable
• Doing your own research by reading the product disclosure statement (PDS) for any product you are considering investing in.

3. Bonds, fake bonds

In a recent media release, Scamwatch warned the public about a fake investment bond scam.  Scammers were allegedly pretending to be from a legitimate business and offering consumers ‘bonds’ which were, according to the scammer, guaranteed by the government and, of course, offering high returns. Again, the scammers were encouraging consumers to enter their details into a fake website—dressed up to look like a legitimate business’ site—and were then using this information to contact them and offer the fake bonds, as well as to commit other fraudulent activity.  One such site impersonated the Bunnings website, offering fake ‘investments’ for $50,000 to $250,000 with the entirely false promise of high returns.

How can we avoid investment scams?

The MoneySmart website provides clear guidance on how to spot and avoid an investment scam as well as some top tips on things to check before you invest.  The golden rule that we tell people is that ‘if something seems too good to be true, it probably is’. If you apply the rule to the 3 investment scams above, they would raise red flags: ‘guaranteed’ high returns and ‘risk-free’ are very attractive and also extremely unlikely to be real.

What can we do if we get caught up in a scam?

The ScamWatch website has clear guidance on steps to take if you think you have been scammed, things you can do to help someone who has been scammed, and how to report a suspected scam in order to protect others. Our message is simply to always act without delay. Go to the trusted websites provided in this article and follow the suggested steps immediately.

Want to know more about scams?

Who doesn’t? You can start by reading our short guide, which gives you links to other reliable sources where you can learn more and get help.