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$70m gone: The investment guaranteed to lose

·5-min read
Person put credit card details into computer, woman with head in hands stares at computer in regret.
Investment scams are growing in frequency and damage. (Images: Getty).

Australians have lost $70 million to investment scams in the first six months of 2021, already eclipsing total losses in all of 2020.

Total investment scam losses are expected to reach $140 million by the end of the year, with new Scamwatch data revealing a 53.4 per cent increase in investment scam reports this year.

“Investment scams are more prevalent than ever, and scammers are capitalising on interest in cryptocurrency in particular,” Australian Competition and Consumer Commission (ACCC) deputy chair Delia Rickard said.

“More than half of the $70 million in losses were to cryptocurrency, especially through Bitcoin, and cryptocurrency scams were also the most commonly reported type of investment scam, with 2,240 reports.”

WATCH: Four tips for spotting scams.

Investment scams also carry a hidden sting, with victims also at risk of fraud or identity theft, the ACCC said.

“Be wary of investment opportunities with low risk and high returns. If something sounds too good to be true, it probably is,” Rickard said.

Cryptocurrency investment scam red flags

Cryptocurrency scams involving Bitcoin have so far cost Australians $25.7 million in 2021 - already surpassing the total $17.8 million loss in 2020.

Scammers will often pretend they have lucrative trading systems based on algorithms or expertise they’ve developed, and may also use fake celebrity endorsements to appeal to victims.

Often, victims will also be able to access small ‘returns’ in the initial stages of the scheme. However, these aren’t genuine returns: the payments are often sourced from other victims’ deposits.

Eventually, however, the scammers claim withdrawal problems and cut off contact.

400 reports of Ponzi scams

More than $1 million has been lost to Hope Business and Wonderful World Ponzi schemes in the first six months of 2021.

These scams often used social media to launch their advertisements and used official app stores to process ‘applications’.

As with the cryptocurrency schemes, entrants often received small withdrawals in the beginning from the pool of money, before the scammers cut off contact.

The Hope Business and Wonderful World scam apps have since been removed from the Google and Apple app stores, on the request from the ACCC.

However, the schemes wrought significant damage, with scammers targeting recent migrants from Sri Lanka and Myanmar.

Imposter bond scams target older Australians

Older Australians are at a greater risk of falling prey to imposter bond scams, with $6.8 million lost so far.

In this scam, scammers will pretend to represent legitimate companies and offer victims the chance to purchase fake corporate bonds.

“These scams are particularly hard to detect because scammers use the companies’ legitimate prospectuses which are registered with ASIC, link to the actual websites and have the correct ABN/ACN details. However, the scammers change key details such as contact information and bank details,” Rickard said.

“That’s why it’s really important to contact the company using details you source yourself from doing a search online or visiting the company’s website directly, and to seek independent advice no matter how confident you feel.”

Romance scams

Scammers are increasingly appealing to Australians' romantic sides, with younger people more commonly targeted.

In these scams, victims are sourced through dating apps and websites. Then, the victim develops a relationship with the scammer who encourages them to invest in cryptocurrency or bond scam.

“These scams predominantly impact younger people, who might be seeing these ‘investment opportunities’ through social media, recommendations from friends, or by registering their interest in cryptocurrency on questionable websites,” Rickard said.

“Remember, never take investment advice, send money or give credit card details, online account details or personal information to anyone you don’t know or trust, and never to someone you have only met online or over the phone, as you never know who you might be dealing with.”

Biggest signs an investment is a scam

One of the clearest sign an investment is a dud is promises of high returns with little to no risk, Genevieve Noakes, head of compliance APAC at Wise said.

Additionally, if you're approached via email or social media for an investment opportunity you weren't already seeking out, then it's a good idea to be cautious/

"Paperless services are a big red flag, investments come with paperwork and/or a contract," Noakes said.

"They will call you or email you repeatedly to keep you engaged, pushing a sense of urgency to make a quick decision or you’ll 'miss out on the deal'."

When considering an investment opportunity, Noakes said to check if they have an Australian financial services (AFS) licence, or are registered with ASIC.

It's also a good idea to check if the company is listed on ASIC's list of scam companies.

Who’s losing the most?

People aged 65 years and over have lost $18.8 million in 2021 so far, and have filed 548 reports.

However, younger people aged 18-24 have also lost more than $1.7 million - an increase of 259 per cent. This cohort has also seen a 66 per cent increase in reports of investment scams.

Indigenous Australians are also at an increased risk, having lost three times as much money in the first six months of 2021 as they did in all of 2020, with $945,270 lost.

And overall, more than 13 per cent of losses have come from people who speak English as a second language, with $9.6 million lost.

What to do if you’ve been scammed

  1. Contact your bank or financial institution immediately.

  2. Contact IDCARE on 1300 432 273, or through www.idcare.org. This service will help you if you’re concerned your personal details have been compromised.

  3. Report the scam to Scamwatch.

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