Latest Investment Scams (And How To Avoid Getting Burned)
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How can you tell the difference between a scam or a genuine opportunity? The golden rule of scams is that if it’s too good to be true, it probably is. That should be a warning bell that something isn’t right. But what about the sophisticated scams?

There are a lot of people out there who are keen to get you to part with your money. Aside from your children (who seem to think that you are a money tree), there are also scammers who will calculate, plan and scheme to fleece you of your hard-earned cash. Before you take up any financial opportunity, take some time to do some research into the latest investment scams and save yourself money- and heartache.

What are the latest investment scams?

An investment scheme could be a variety of things, but basically a person’s end game is to take all of your money and leave you with nothing.There are a handful of common schemes, which periodically change but do not really deviatefrom the three main schemes below.

‘Boiler room’ scams

You will be contacted from a cold call and offered an investment opportunity. This could be in shares, binary options or even sports investment schemes. A small initial investment will escalate with requests for more.

They may also offer to buy shares you already own for a great price. However, you’ll need to pay a fee beforehand.

These offers may be easily researched and are genuine – except the person offering it to you will take your money and not invest it as promised.

<H3>Ponzi/ pyramid scheme

These schemes are when money from new investors are used as payments of returns for earlier investors. These pyramids collapse when no new investors are lured in.

Advance fee fraud

The executor of a will has found out you are actually the sole descendent of a Nigerian prince! Or maybe you won a lottery you don’t remember entering. Or shares you own have made a huge profit. Whatever it is, the fraudster requiresyou to make a payment in order for your money to be unlocked and given to you.

What are the warning signs of investment scams?

It can be difficult to tease fact from fiction for some scams.Scammers invest a lot of time and effort into creating a scenario that looks and sounds very real. However, there are a range of tactics and methods that should alert you to the fact that this ‘amazing opportunity’ will leave you considerably lighter in the pocket.

  1. You will be contacted by someone you don’t know. It might be by email, phone, Facebook or LinkedIn, but a person you are not acquainted with will approach you cold.
  2. If there are shares offered, it may be for well-known companies such as Apple to give it that sheen of reputability. The latest investment scams may feature shares that are currently in the media.
  3. There will be pressure for you to act quickly or risk missing out.
  4. The investment will offer high returns with no risk. In real life, this does not happen, there is always risk.
  5. There will be very little information provided in writing.
  6. This amazing investment will only be known by a select few. This is designed to make you feel special, part of their tactics to draw you in.
  7. You might be asked to keep the opportunity a secret. While this is sold to you as a way to stop other people investing in it to keep it exclusive, it’s just to stop the authorities hearing about it.
  8. They’ll offer ‘inside information’, an opportunity that others don’t know about. Even if this information is true, it’s called insider trading and it’s illegal.
  9. Information about who is behind the offer isn’t available. Often, there will be no physical address. Real businesses have an address and names of staff.
  10. You may be promised secret information about ‘overseas banking markets’. These do not exist.
  11. The requests for money will escalate. An original investment of $5000 might suddenly ‘not be enough’, with more required to make a minimum purchase. They may claim taxes need to be paid, transfer fees or international exchange fees.

Tactics often used by scammers.

Don’t be swayed by slick websites and glitzy brochures, they are easy to fabricate. Scammers have the time, technology and money to make something look very convincing.

Scammers will often ingratiate themselves with you. Part of the sales process is gaining your trust, and they work hard to this end. They may claim to be a professional broker or claim to be associated with a credible organisation such as NASDAQ or NZXE.

You may receive calls from CEO’s or other ‘major players’ that sound very convincing. These people are part of the scam. A cold call will typically start with a junior scammer, and once they’ve ascertained you’ve taken the bait, you’ll be fed up the line to a skilful ‘closer’ to talk you into the final deal.

They may stop you from pulling out of a deal, trying to swap for another. Or they may threaten you with legal action or fees while you backpedal out of a deal.

A major warning sign is that they call persistently, make a lot of promises, and will not take no for an answer. Also if they are operating from overseas, be doubly cautious- there is not much that the Financial Markets Authority (FMA) can do about them, nor can your bank retrieve your money once it’s gone.

Avoiding investment scams

It’s trite, but do your research before investing in anything. In New Zealand, all legitimate investments must have a product disclosure statement.

Find out the legal name of the business you’re dealing with. Go to the FMA (Financial Markets Authority) site and try to find it on the list of licensed providers. Check if the business is listed on the site as one of the latest investment scams (the list is horrifyingly long). Check if the business name is registered with www.companies.govt.nz (if in New Zealand) or similar if overseas. Ask for the broker’s details- name and registration number. In NZ, the broker must be registered with the FMA, and overseas they have similar groups such as ASIC in Australia.

Report suspected scammers to Netsafe (if online) and with the FMA.

And finally, get professionaladvice from a qualified and registered AFA. Even intelligent and experienced businesspeople and investors are tricked; these schemes are sophisticated and very convincing.