 We’ve all heard of someone who has been tripped up by a scam masquerading as an Australian Post tracking link, or given half their savings in gift cards to a ‘family member’ trapped overseas. In some ways, these scams have become cliches. Many know to avoid those mysterious links, and the words ‘gift card’ in an email have become synonymous with ‘scam’. But what if the scam wasn’t dressed up like one? What if it seemed human? Approachable? Safe? The Investment Scam Where some scams are easily identifiable, investment scams are often covered in the shiny veneer of celebrity endorsement and advice from people falsely pretending to be “financial advisers”. Investment scams generally promise “low risk” while emphasising outlandish rates of return that no other company can compete with—and for good reason. These scammers scour social media sites such as TikTok and Facebook to find users they believe are suspectable to falling for these scams. They will comment on your posts or send you direct messages enquiring into your investment habits or asking you about your financial situation. Unlike scams of old, they don’t send you emails about Nigerian princes needing gift cards to aid their cash flow. Instead, they pray on young people looking to invest for the first time or retirees who lack proper funds for retirement. They form a personal connection with you, making you feel like what they’re saying is in your best interest. Often, they will bait you with free money. Invest $2,000 and get $500 cash back! Or they will lure you in by starting with small initial investments. You might contribute $500 to it and see your account grow by 28%. Then you put $3,000 into it. The returns just keep growing! 32%, now 41%, and then you’ve doubled, tripled your initial investment. It feels safe, so you decide to place all your savings in it. And then? Nothing. Your access to the account has been closed off. Your life savings are gone. This is the plight of the investment scam. It prays on people in vulnerable financial situations. Those who are retiring, or who don’t have much financial knowledge.  The allure of cryptocurrency However you feel about cryptocurrency (and everyone will feel a different way) its popularity has risen rapidly over the past few years. Yet cryptocurrency is still in its infancy. The legislation surrounding it is still being implemented and lacks in certain areas. Many crypto currency providers are not licensed and therefore guarantee you varying levels of protection if the platform were to fold. This means that a cryptocurrency scam may be even more difficult to recover money from than a traditional scam. Many crypto-asset providers are not licensed, making reimbursement even rarer. According to Money Smart, if a crypto asset fails, you will most likely lose all the money you put in. Crypto coins such as FTX have taken years to provide compensation after it was found they were defrauding investors. Even then, they are the exception rather than the rule. It is not guaranteed that you will recover any funds if a crypto platform is not licensed.  Case Study: TikTok hit up A client of ours was approached by someone on social media. They spoke on multiple socials accounts over a prolonged period. Contact: The scammer lured them into a false sense of security by encouraging them to make small contributions over several weeks. Allure: They were shown fake returns and testimonials that made them feel secure in the investment. They even were able to withdraw a small amount of the money, making them feel secure that it was legitimate. Rug-Pull: Only after they had deposited a significant amount of money, our client spoke to their daughter who warned them that it could be a scam. When they tried to withdraw the funds, they found that they were no longer able to access them. Consequences: The client was unable to get his money back as the scammer only communicated through burner accounts. He also willingly put the money in which complicated legal remedies.  Case Study: Cold calls galore When a client was dissatisfied with their returns in their existing superfund, they did some research online. Contact: An adviser then contacted them promising large returns and charging high fees. Allure: The returns were higher than their current superannuation fund was able to provide. Rug-Pull: The advice firm that recommended the returns was then found to be acting fraudulently and the funds were frozen by ASIC. Consequences: Fortunately, he was able to regain his frozen funds as the investment was made in an established and reputable fund, but he was left in limbo for months as ASIC handled the fraud. How to avoid these scams
1. Don’t transfer any funds until you have confirmed the legitimacy of the investment. There are several steps you can take to ensure an investment is legitimate.
2. Wait a while before investing. A few days will not cost you much in returns, but giving up your retirement savings to a scammer will. 3. Talk to your friends and family. Often, they will be able to identify red flags that you might not pickup. 4. Get financial advice from a registered adviser. You can check the legitimacy of an adviser through the following: What to do if you think you’ve been scammed.
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