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.
Further reading:
Read Bob’s real life experience with a boiler room scam
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.
Further reading:
See our timeline for the Ross Asset Management case
Read what Ross’s victims said about the way he operated
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:
Further reading:
Read about Samena’s run-in with a global crypto scam
Read Diana’s real life experience with binary options
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:
Further reading:
Read John’s real life experience with a shares scam
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:
The offer
The website itself
If you have any doubts there are further checks you can make:
Do not send money to any website or online platform that raises alarm bells.
Check out our latest warnings and alerts to see the kind of suspicious websites that you should be wary of.
Contact us if you think you might be dealing with an imposter site so we can warn others.