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Investment scams a 'heartbreaking' reality as Australians lose millions

24 Jul 18

Scamwatch has issued yet another warning to Australians to be vigilant about investment scams because too many people are being left out of pocket.

So far in 2018 Australians have lost more than $26 million to investment scams. Already monthly losses have increased 117% since last year.

ACCC Deputy Chair Delia Rickard says the investment scam losses are horrific, and every week it hears heartbreaking stories of how people are losing thousands or even millions of dollars.

"Last year, Australians reported they lost $64.6 million to investment scams to Scamwatch and the Australian Cybercrime Online Reporting Network (ACORN). If the current trend continues, combined losses reported to Scamwatch and ACORN in 2018 could be in excess of $100 million."

She notes that people between ages 45-64 are most at risk and make up more than half of the report that are sent to Scamwatch.

She also says scams are sophisticated and convincing. Many scams still use stocks, real estate, or commodities as bait.

“For example, scammers will cold call victims claiming to be a stock broker or investment portfolio manager and offer a ‘hot tip’ or inside information on a stock or asset that is supposedly about to go up significantly in value. They will claim what they are offering is low-risk and will provide quick and high returns,” Scamwatch says.

Rickard adds that scammers also spend a lot of time and effort grooming victims for investment.

“They will use the right technical language and also offer professional looking websites and documents to convince victims they are legitimate. It’s often only when people try to cash out their investment that they realise their money is gone.”

Beyond traditional investment tactics, cryptocurrency trading and binary options scams are also becoming prevalent. Cryptocurrency scams are now the second most common type of investment scam.

“The rise in popularity in cryptocurrency trading has not been missed by scammers who are latching onto this new trend to con people. These are similar to any other investment scam: the scammer will claim to have inside knowledge about price movements they will use to make you a fortune. If you invest, your money will quickly disappear,” Rickard explains.

“Binary options trading involves scammers pretending they can predict the movements of a commodity, asset or index prices over a short time. They direct you to a website with a login, account details and a trading platform. They appear to put your money into the account and demonstrate a number of successful trades to encourage you to invest greater sums. Then your money begins to disappear and so too does the scammer.”

Rickard adds that the clearest warning signs that people may be dealing with an investment scammer is how scammers make contact and the promises they make.

“It can be very difficult to tell what is and isn’t legitimate these days. If someone calls, emails or texts you out of the blue with investment advice, don’t engage with them no matter how legitimate they sound. Hang up the phone, or delete the email or text. If you’re searching for new investment opportunities online, don’t always trust what you read. It’s easy for scammers to create professional looking investment websites,” Rickard says.

“Any claims like 'risk-free investment', ‘low risk, high return’, 'be a millionaire in three years', or 'get-rich quick' are also easy tells that you’re dealing with a scammer.”

“If you are keen to invest, start by visiting ASIC’s MoneySmart website. This a fantastic resource that explains the steps you should take before committing to an investment and how to avoid scammers. Always check ASIC’s list of companies you should not deal with before you invest,” Rickard concludes.

You can report investment scams to ASIC or Scamwatch.