What is an investment scam?


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What is an investment scam?

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In this activity, you’ll learn what an investment scam is, and how they work by promising you a quick return but ultimately end with you losing money.

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What does an investment scam look like?

Investment scams can take various forms, including offers to broker deals on your behalf, investment software for you to track your portfolio, or a website. All aim to trick you into giving the scammer your money and getting nothing in return.

Investment scammers may initially contact you via email, social media message, social media advertising, or even text message.

scammer behind phone with fake photo on it
looking at scammer with money through a magnifying glass

What are some of the more common forms?

Some of the most common ways investment scams can work include:

  • Contacting you via email with a special opportunity to get a fast return
  • Using fake celebrity endorsements to make a scam seem legitimate
  • Convincing you to access your superannuation early or in a lump sum
  • Ponzi schemes, where early investors are paid off with the money from later investors until the money runs out
  • Investment seminars (often via online video, Zoom, or similar) that charge high attendance fees.

What do all investment scams have in common?

No matter the form of the investment scam, the basic idea is always the same: The investment scam claims to offer very high returns, with very low risk. In other words, they are get-rich-quick schemes.

Money increasing in value

eSafety tip

Investment scams work by promising something that seems too good to be true. Always keep in mind that if something seems too good to be true, it always is.

scammer emptying a piggy bank

How superannuation scams work

One kind of investment scam is the superannuation scam. Super scammers ask you to agree to a story to trick your superannuation provider into letting you get early or extra access to your super.

You then invest this money in fake schemes with the scammer and the money is stolen from you.

How investment seminar scams work

An investment seminar scam offers you special insight or hot tips which will be shared via an internet video seminar. These seminars charge a very high attendance fee (hundreds or thousands of dollars), require you to buy lots of materials such as books or software, and then provide very little useful investment advice.

scammer with laptop behind an investment seminar
scammer calling the shots on investments

How stock tip investment scams work

Some investment scams involve offering supposedly hot stock tips. The scammers ask hundreds or thousands of victims to purchase stock to quickly boost the price of certain shares. The scammers then sell their own shares at the inflated price and disappear. This is also called a ‘pump and dump’ scheme because the scammers pump up the price and then dump their shares.

Well done!

This is the end of the What is an investment scam? activity. You’ve learned what an investment scam is, some of the forms it can take, and how they work.

Coming up next is the How to identify an investment scam activity, which will show you the ways to tell when an investment offer is really a scam.

scammer holding a stack of money