Fake companies and investment fraud
Investment scams are often so professional, slick and believable
that it is hard to tell them apart from genuine investment
opportunities. Our tips break down how investment scams work.
Consumer Fraud Week (15-19 May 2017) we are urging people to be
particularly aware of investment scams operating on social media
How to identify an
Investment scams can come to you via a phone call, email or
social media. They may even be an offer from someone you trust.
There are three main types of
- The investment offer is totally fictitious and does not exist.
- The investment offer exists but the money you give the scammer
is not going towards that investment.
- The scammer says they are representing a well-known investment
company but they are lying.
In all cases the money you 'invest' goes straight into the
scammer's bank account and not towards any real
Investment scams are growing
In 2016, the number of investment scams reported to Scamwatch
increased by 40% from the previous year, according to the
ACCC's Targeting Scams report.
What a scammer will say to get you to invest
The scammer will offer you:
- High, quick returns and sometimes tax-free benefits
- Share, mortgage or real estate investments, 'high return'
schemes, option trading or foreign currency trading
- No risk or low risk investment, as you can sell anytime, get a
refund for non-performance, have insured or 'guaranteed'
transactions or swap one investment for another
- Inside information, the opportunity to invest before a public
float or discounts for early bird investors
Remember that a glossy brochure or website is not evidence that
an offer is a good investment or even a real deal.
Warning signs of investment scams
The investment offer may be a scam if the person:
- Does not have an Australian Financial Services licence or says
they do not need one
- Rings you many times and tries to keep you on the phone or
emails you a lot to keep you engaged
- Says you need to make a quick decision or you will miss out on
- Claims they are a professional broker or portfolio manager and
sounds professional but is actually following a script
- Uses a name or claims to be associated with a reputable
organisation to gain credibility e.g. NASDAQ, Bloomberg
- Offers you glossy prospectuses, brochures, share certificates
or receipts or directs you to a slick website
If the investment offer has some of these signs hang up the
phone. If you manage to record some of the caller's details please
report the offer to
Tactics used by investment scammers
Scammers will use a range of tactics to get you to invest in
their company. Here are some of the common strategies.
Many investment scammers operate from overseas or offer foreign
investments as their activities are illegal in Australia. Overseas
scammers target Australians as ASIC does not have international
jurisdiction to prosecute them.
Many scammers use the internet to make their investment appear
legitimate. They use highly sophisticated websites and issue online
press releases that make false claims of outstanding corporate
performance. They even provide some victims with logins to view
fake investment balances and growing returns.
Fake social media profiles
Some scammers contact you through social media messaging,
advertisements displayed on your social media feed, or by
requesting to be your 'friend' first. They may pose as someone you
know or have a connection to, in order to gain access to your
profile information and to send you offers to invest and make quick
They may also use your information to impersonate you and create
a fake social media account to approach people in your friends
list. See identity fraud for more details.
Passing your call along the line
Investment scammers use a team of less experienced staff to make
the initial call. The junior staff follow a tight script to check
your interest. If you take the bait they hand you onto a more
senior person. This can happen two or three times.
The more senior people are called 'closers'. They are extremely
skilful sales agents and their job is to make you feel compelled to
close the deal and send your money.
Long or persistent phone calls or emails
Investment scammers will call you endlessly or keep you on the
phone for a long time with promises of wealth or opportunities lost
if you do not take up the offer. They will not take no for an
answer and ask you about your worries to reassure you. As long as
they can keep you talking or emailing, you have not really said
Remember that there are Government standards that outline when
and how telemarketers can contact you but investment scammers will
contact you within and outside these times. Telemarketers are not
allowed to call you before 9am or after 8pm weekdays (or after 5pm
Saturdays), and never on a Sunday or public holiday. See the Do not call register for
Stop you pulling out of the deal
Scammers may try to swap your current investment for another one
if you try to change your mind about the deal. They may also try to
convince you that your investment will increase in value soon. Even
though they know you will never get your money back, they still
want to try and get more money from you.
Scammers can also threaten baseless legal action to keep you
from pulling out of the deal. This is usually just a threat and
they don't carry it through.
True stories of investment
Read these true stories of people caught up in
schemes: Maria invests money in a scheme promising
very high returns.
How to check an
investment is real
Before signing up to any investment, do your checks to make sure
it's legitimate. Asking questions and doing some research on the
company, could save you from losing money to a scam.
Questions to ask
Check the legitimacy of the person offering the investment by
asking these questions:
- What is your name and what company do you represent?
- Who owns your company?
- Does your company have an Australian Financial Services
Licence and what is the licence number?
- What is your address?
If they try to avoid answering these questions, it is probably a
scam. Hang up the phone, do not respond to the email, stop dealing
with the person or delete and block them if it is through social
No legitimate company would use harassment to get a person
How to do your own research on the company
It is important to do your own research on the company and take
the time to seek independent professional or legal advice. Don't
rely only on their information to make your decision and do not be
pressured to make a quick decision you could regret
If they answer the questions above, you can then take these
steps to do your own research
- Cross check their address details on publicly listed phone
- Check to see if the company has an Australian Financial
Services Licence or Credit Licence for any investment or credit
opportunity. being offered on ASIC Connect's Professional
- Check if their company name is on our list of unlicensed overseas
- Check IOSCO's (International Organization of Securities
investor alerts and search for overseas companies that are not
authorised to provide investments services in the country that has
issued the alert.
- Check our list of fake regulators and
exchanges if they have mentioned them.
- Check IOSCO's list of real
overseas market regulators.
Why investing overseas is risky
Remember that investing with overseas companies can be risky.
They are outside Australian jurisdiction so you won't be able to
get help if something goes wrong. Companies based within Australia
are required to have an Australian Financial Services Licence
(AFSL), which means that you are better protected if things go
wrong. Find out more about an Australian
Financial Services Licence.
There are plenty of legitimate overseas investments that you can
make through mainstream companies based in Australia. Don't part
with your hard-earned money unless you understand the risks
What to do to protect yourself from investment scams
There are many things you can do to make sure you don't fall
victim to an investment scam.
- Always get independent financial advice before you
- Don't accept a message or friend request on social media from
someone you do not know.
- Ensure your privacy settings are up to date on your social
- Be wary of random or unexpected contact, particularly if you
have replied to something on a website or social media
And if you think you have been the victim of an investment scam
Report it to ASIC or your local police (the company name,
location and contact details, if you have them).
- Stop sending any more money to the company - be wary of falling
for a secondary scam or offers to recover your money.
Find out more tips on how to avoid scams.
Investment scammers are skilled at convincing
people that the investment is real, the returns are high and the
risks to your money are low or non-existent. Be suspicious of
anyone offering you easy money. There is almost always a catch.
Last updated: 15 May 2017