Have you ever seen a pop-up when scrolling through social media or websites claiming a certain platform, financial adviser or celebrity can help you make thousands by ‘investing’ in programs or vehicles that seem to have the secret sauce to making bank with stocks, commodities or crypto assets?
While some scams can stick out like a sore thumb, with less than impressive graphics and fake website links, others can appear somewhat legitimate, and even the most savvy Aussie investor can fall victim to these.
The Australian Competition and Consumer Commission’s (ACCC) Scamwatch reported recently that last year alone, Australians lost $176.1 million to scams, up by almost 23 per cent in 2019. The number of scams also rose by 28.8 per cent with more than 216,000 reported in 2020.
As fears rise around losing hard-earned cash through potential scams, how do investors spot stock market scammers and, more importantly, how do they avoid them?
According to ACCC’s Scamwatch, there are a few types of common investment scams that many Australians are unfortunately victims to, including:
Investment cold calls: This is where a scammer cold-calls the victim, claiming to be a stockbroker or portfolio manager, often purporting to be associated with a high-profile ambassador. They claim to offer schemes with low-risk, high returns, or encourage victims to invest in overseas companies, often via unretrievable wire transfers.
These scammers will sound legitimate and say they have ‘resources’ to back up their false claims. It’s important to note that these scammers generally operate from overseas and will not have an Australian Financial Services Licence.
Share promotions: Here a scammer will contact the victim by email or social media, trying to offer a unique promotion, stressing that they must act quickly in order to redeem it.
They may ask that an initial capital ‘investment’ is transferred into an unknown bank account, promising to invest the money on behalf of the victim, but before long the money and the scammer will disappear.
Investment seminars: Either promoted by promising motivational speakers or ‘self-made billionaires’ who will provide the victim with expert investing advice. More often than not, these scammers will ask for large sums of money to provide the victim attendance to the seminar.
Impersonating financial institutions: This is where a scammer pretends to be from a reputable financial institution such as one of the big four banks asking for things like investments into new ‘stock market’ accounts, credentials to bank accounts, private keys to crypto wallets, or will claim to be chasing outstanding debts.