Crypto cons drive spike in financial scams
It sounds perverse to describe a significant increase in the number of reports of investment scams as ‘‘progress’’, but that is, in one way, what it is.
There is real loss, hardship and suffering attached to every incident. But a failure to report such crimes, for whatever reason, also compounds the problem in that the community is less aware of the risk. And the criminals are more empowered to do it again; and again – it being inconceivable that a con artist will stop at one or even a few.
For the first six months of this year, there were 582 reports of investment scams to the Australian Securities and Investments Commission (ASIC). That is more than double the 275 reports of scams for the same period last year.
Scams follow fashion just as legitimate investment opportunities do, and they vary widely. We have had reports of a crypto-currency trading platform that spruiks annual returns of 160 per cent. Other efforts have included cold-callers claiming to work for local firms and offering loans in exchange for upfront fees and insurance premiums. One ruse involved an offer to invest in shipping containers.
The tracks are often well-covered, involving what investigators call a ‘‘back story’’ in support: people impersonating reputable professionals whose LinkedIn profiles seem to check out. Or companies falsely claiming to be registered by ASIC, or even being ASIC – a popular recent addition to the fold that cuts particularly close to the bone.
In the face of the planning and sophistication of scammers, the best defence is to take time to consider any offer that sounds too good to be true. There is no shame in getting advice, doing some research or asking for a second opinion. These are all the things people do for all sorts of decisions in other aspects of their life and should be part of your financial decision making.
Often there is little authorities can do to reunite victims with lost funds. It’s too late, and the scammer has already moved on to the next mark. But importantly, the more we hear about scams, and the earlier, the greater our chances of preventing the next one. In some cases co-ordinated action between ASIC and other agencies may be able to shut these criminals down.
ASIC deputy chairman Peter Kell.
Investment scams were the most damaging type of fraud last year, estimated to have overtaken romance and dating scams in terms of the total amount taken.
They remain ‘‘estimates’’ for a reason: in many cases the crime is not actually realised, making it impossible to track. But we also know that many victims of investment scams struggle to own up to their losses, or the full extent of them. Fraud is most definitely under-reported. It shouldn’t be.
Scammers take more than money. When the stakes are very high – and there are cases of hundreds of thousands, even millions being lost by individuals – scammers rob people of their future. They can ruin the plans of families, spouses, dependants.
Plenty of sophisticated investors get conned. They are the least likely to admit and report the fact, the sense of humiliation or betrayal (when the perpetrator was a close friend or relative) making it all the more difficult to acknowledge.
Plenty of sophisticated investors get conned. They are the least likely to admit and report the fact.
Some unregistered managed investment schemes may have hundreds of investors – so you are in good company in being duped.
You may even lose money to an offshore operation (quite common, as they are beyond our reach) and then get a call from a lawyer claiming to be running a class action to recover the funds – but only if you pay first. That’s one scam chasing another. The perpetrator will likely be the same person!
And worst of all, cases where the victim has been directed into a scheme by a friend. The scammer will always make it sound alluring, even exclusive: "You can only invest directly in the company through introduction by an existing shareholder."
It is not only those with funds who lose them. Some schemes target people in mortgage default – to whom the promise of assistance in avoiding repossession or refinancing debts will sound particularly attractive. One report we received concerned a pop-up ad on Facebook promising to clear a bad credit profile. The consumer lost more than $4000 through that scam.
Investment scammers are persuasive. They ooze authority, they’re ingratiating and they somehow get you to believe that you owe it to them to take up their offer. There is nothing sophisticated about these techniques – but they work.
Victims may feel embarrassed and confused but it’s very important ASIC hear about as much of this corrosive activity as possible.
The more tip-offs we get the more vital intelligence we have to protect consumers and prevent others from falling into these traps. Reports of investment scams can be made on the link ‘Report a scam’, on ASIC’s MoneySmart website. By alerting ASIC you contribute to the process of shutting investment scammers down. We highlight emerging scams through our ‘companies you should not deal with’ and ‘fake exchanges and regulators’ lists on MoneySmart.
While you probably won’t get your money back, you never know: you might get even.
For more information go to: https://www.moneysmart.gov.au/scams/report-a-scam
Peter Kell is a deputy ASIC commissioner
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