What is a scam?
A scam is a plan to trick someone out of something valuable, usually money or personal information. Other names include a con, fraud, rip-off, racket, hustle, sting. It is a form of theft.
Investment scams are specific to financial products and services such as shares, bonds, managed funds, and investing or trading through an online or app-based trading platforms.
Scammers can be very friendly, charming and convincing, but also persistent and impatient when it comes to getting your money. They can resort to scare tactics, and even abuse, ridicule or threats.
What are the warning signs?
- They call or email you “out of the blue". It is illegal to sell financial products this way in NZ. Anyone doing so is breaking the law.
- They offer high returns with low or no risk. In finance, higher returns almost always mean a higher risk of losing some or all of the money.
- The offer is for a “select few” or “limited time”. This is often a ploy to make their victims feel special, or to rush them into investing.
- They are based overseas / have no NZ address. Scammers are often – but not always – based in countries with little policing of scammers.
What types of scams are out there?
- Ponzi schemes – where a scammer takes money from one victim, keeps it for themselves, then takes money from a new victim in order to pay the first victim back.
- Affinity fraud – preys on people who trust each other, such as members of religious, social or cultural groups. They abuse the trust that exists within these groups to steal money.
- 'Boiler rooms’ – teams of scammers who cold-call strangers offering non-existent, worthless or overpriced investments, then later claim the investment has failed.
- Shares and ‘options’ scams – offers of shares or options that they have no intention of buying on your behalf, or in companies that don’t exist or aren’t worth the price being paid.
