Investment scams are often very sophisticated and can happen to anyone. The people involved often sound credible and their websites look very professional, usually including testimonials from other investors. It can be hard to tell a scam apart from a genuine investment opportunity.
Warning signs to look out for
An 'investment' is likely to be a scam if you experience any of the following:
- Someone you don’t know contacts you about an investment opportunity.
- You’re promised very high returns, with little risk. These promises are nearly always too good to be true.
- The person/business gives you little or no information in writing. All legitimate investments must have documents explaining the investment.
- You’re told the offer is known only to a select few and should be kept a secret. This is often a ploy to make you feel special and to stop you speaking to an adviser or the authorities.
- You’re promised access to 'secret' overseas banking markets supposedly offering very high returns - these markets don't exist.
We also recommend you be wary of the following types of high-risk products and services:
- FX trading for profit through companies based overseas. These companies are not regulated in New Zealand and it can be very difficult to recover your money if you experience problems with them.
- Binary options. Winnings may be withheld and trades may be manipulated without your knowledge.
- Software packages and seminars. Software you’ve paid for may not be delivered or may not work. Seminars may promise to make you lots of money but are often over-hyped and misleading. Investments tend to be high risk and expensive.
- Special investment schemes promoted through friends and acquaintances. These could be a Ponzi or pyramid scheme. If so, there is a high likelihood you’ll lose your money.