Teams of scammers cold-call strangers from temporary offices, offering non-existent, worthless or overpriced investments; mostly shares but also foreign exchange ("FX"), digital currencies ("crypto"), binary options and sports investment schemes.
First they convince you to make a small payment, then give more reasons why you must invest more.
They are professional, persistent and convincing. Tactics include fake surveys, social media ads, hoax calls from ‘senior executives’, celebrity endorsements, polished websites and glossy brochures. When you try to get money back, they give excuses why they can’t or won’t, or simply stop responding.
This is where a scammer takes money from one victim, then takes money from a new victim in order to pay back the first. Their ability to pay money back gives the illusion their scheme is successful, which lures in more money and victims. It collapses when they stop getting money from new investors.
The fraudsters often prey on a group of people who trust each other, such as members of a religious, social or cultural group. They may pretend to be members, and use the ‘affinity’ within the group to trick more victims, on the recommendation of the first who have fell for them, even group leaders.
NZ’s worst Ponzi scheme to date was run by David Ross of Ross Asset Management. More than 1,200 people were scammed out of $115 million. In 2013, Ross was jailed for nearly 11 years.
Some investments are high-risk in more ways than one: not only risky if they’re legitimate, but also prone to fraud because of little or no international regulation:
Cryptocurrencies (‘crypto’): globally unregulated and prone to scams as well as online ads that bait people into giving away personal financial details. Exchanges based in New Zealand that let retail customers in NZ trade in cryptocurrencies must be registered on the FSPR.
Foreign exchange (FX): currency trading is highly volatile, but especially risky if it’s via offshore traders who aren’t regulated by NZ law.
Binary options: Quick trades on price fluctuations with 50:50 odds of making a ‘win’ or losing it all. Winnings may be withheld and trades manipulated without your knowledge. Any firm offering trading in these products to retail customers in NZ must be licensed by the FMA, no matter where they are based. You can check if the firm is licensed on our Licensed entities page.
Scammers offer investments in shares that they have no intention of actually buying on your behalf, or in companies that don’t exist or aren’t worth the price you’re paying. They may even offer money for shares you already own, at an inflated price, but say you first need to pay a fee before you sell.
Signs of a shares scam:
Offers of shares in major global companies
High pressure tactics to get you to ‘get in quick’, eg pre-IPO
Requests for more money to buy more shares
Excuses why you can’t sell your shares in a hurry
Fees you must pay before you can sell and get money back
Salespeople may offer you software that uses ‘state-of-the-art’ financial market analysis, or the chance to attend an ‘exclusive’ event where you’ll learn the secrets to financial success. They usually promise high returns that are often too good to be true, and the only ones making money are them.
If you buy such software it may not be delivered or may not work – and often similar or better software and education packages are available for free online. If you attend such events they’ll probably try to talk you into investments that are high-risk, overvalued and/or attached with fees and commissions. If you invest in either, there is a high chance you will lose money.
Some scams will involve the use of an imposter website, designed to look as much like a legitimate investment offer as possible.
The scammers may use the details of a New Zealand company on their website even though they have no connection to it, or they may hijack the real website of a genuine New Zealand business and redirect any contacts to themselves.
Either way, they are using the phony website to seem attractive to investors.
It can be tough to pin down exactly what makes a particular website an imposter, but there are a few things you can do to check it out.
Some things to watch out for are:
Promises of high returns
Unclear exactly what is being offered
Says it’s secure or guaranteed without any details of how
The website itself
Phone numbers or physical addresses overseas are mixed up with local NZ contact details.
The website domain name (the address you see when you check the address bar at the top of the browser) doesn’t seem to match the content of the website.
If you have any doubts there are further checks you can make:
Check Google Street view - do the premises align with the street address the business claims?
Don’t use contact details from the website. Check the company’s phone number from an independent source, such as the White Pages or a business directory, and call the business directly to check whether the website belongs to them
Check the domain name. If it’s a domain name that ends in .nz you can find out who the domain name holder is by doing a registration data query at dnc.org.nz. If the domain name ends in .com, you can use the ICANN’s WHOIS service.