Investment scams

What they are

An investment scam is where you are offered an opportunity to invest your money in a financial product, but the opportunity is fake and the person who offered it is a criminal. 

Investment scams will offer opportunities that often seem too good to be true, with little to low risk involved and abnormally high returns, and high-pressure tactics to convince you to invest a large amount or increase your investment.  

There are a few ways they can work but the outcome is usually the same: your money is stolen. 

How they work 

Scammers will usually pretend to be someone you would likely trust: 

• They may pretend to be a stockbroker or portfolio manager, or staff member of a bank or investment provider.
• They could be a stranger you’ve recently met on a social media platform, like Facebook, WhatsApp or WeChat. Or they could be someone you've been talking to on a dating site.
• They could pretend to be someone you know in real life, like a friend, family member, celebrity or other well-known personality. Note in these cases the person’s account has been taken over or copied by the scammer. 

Scammers may contact you through a variety of methods:

• cold calls over the phone
• messages on a social media platform
• advertisements on social media, or
• internet search results. 

Note those last two points are where the scammers wait for you to contact them, so be wary of ads in search results. 

Common types of investment scam

Foreign exchange trading 

Foreign exchange (FOREX) trading scams involve buying or selling currencies.  In this scam they may sell products that don’t perform as promised or the trading platform is a sham. Scammers may show falsified trading records to trick you into believing you are really trading, and to prevent you from uncovering the scam. 

Cryptocurrency 

Like FOREX, cryptocurrency can be traded – so some cryptocurrency scams operate the same as FOREX scams. 

In addition, some scams target cryptocurrency owners, either to try and gain access to their crypto wallet or to trick them into receiving and passing on stolen funds. 

Keep cryptocurrency secure

Comparison websites 

There are many websites which compare the investment return rates (in particular, for term deposits) of retail banks in New Zealand so that you can easily find the best rate. However, not all comparison websites are genuine.  

Fraudulent comparison websites are often a front to collect personal information from you, and then scammers contact you to offer investment options. They may provide professional looking prospectuses. Once you’ve agreed to make an investment, they’ll ask you to transfer funds. But when you’ve paid, they move the money offshore and then disappear. 

Many of these sites say the investment will be covered by a “depositor compensation scheme”. No such scheme exists currently in New Zealand.