Investment Scams — How to Spot Them Before You Lose Money

How Common Are Investment Scams?

Investment scams are the most financially damaging type of scam in Australia. In 2023 alone, Australians lost over $837 million to investment scams, according to the ACCC's Scamwatch. The true figure is likely higher as many scams go unreported. Scammers are becoming increasingly sophisticated, using fake websites, social media, and even AI-generated content to appear legitimate.

Common Warning Signs

Most investment scams share common red flags. Unsolicited contact via phone, email, or social media — legitimate advisers rarely cold-call about investment opportunities. Promises of high returns with little or no risk — if it sounds too good to be true, it usually is. Pressure to act quickly — scammers create false urgency to stop you from thinking critically. Requests for upfront fees before you can access your investment returns. Unregistered or unlicensed operators — always check the ASIC Register and the investor alert list before investing.

Types of Investment Scams

Common scams include Ponzi schemes (early investors paid with new investors' money), pyramid schemes (recruitment-based), fake cryptocurrency and forex trading platforms, imposter bond schemes (posing as legitimate government or corporate bonds), and precious metals or land banking scams. The ACCC publishes an investor alert list of known scams and suspicious companies on the Moneysmart website.

What to Do If You Suspect a Scam

If you think you have been approached by an investment scam, stop all communication immediately. Do not send any more money. Contact your bank to see if any transactions can be stopped or reversed. Report the scam to the ACCC via Scamwatch, and to ASIC if it involves a suspected unlicensed financial service. If you have lost money, contact your bank and the police. You can also seek free legal advice through community legal centres. Protecting your personal information is also critical — see our guide to preventing identity theft for more advice on keeping your data safe.

Common Types of Investment Scams

Investment scams come in many forms, but they all share the goal of separating you from your money. Common types include: Ponzi schemes (where returns are paid from new investors' money, not genuine profits), phishing scams (fake emails or SMS pretending to be from legitimate financial institutions), romance scams (where scammers build relationships to convince victims to invest), "pig butchering" scams (long-term trust-building followed by fake cryptocurrency investments), and fake trading platforms that look professional but are completely fraudulent.

The ACCC's Scamwatch reported Australians lost over $2.7 billion to scams in 2023, with investment scams accounting for the largest losses. In 2024, losses remained high with scams becoming more sophisticated using AI-generated content, deepfake videos of celebrities endorsing fake investments, and professional-looking websites that mimic legitimate financial institutions.

Red Flags to Watch For

All investment scams share common warning signs. Be suspicious of: guaranteed high returns with no risk (all investments carry risk); pressure to act quickly or miss out on a "limited opportunity"; unsolicited contact via phone, email, or social media; requests for upfront fees before you can access your investment; promises of "insider" information or "exclusive" opportunities; and investment offers that seem too good to be true.

Other red flags include: the "adviser" is not on the ASIC Financial Advisers Register; the investment is not on ASIC's list of licensed products; you are asked to transfer money to an overseas account or cryptocurrency; the documentation is professional-looking but contains errors or inconsistencies; and the person you are dealing with becomes aggressive or evasive when you ask questions.

What to Do If You Have Been Scammed

If you suspect you have been targeted by an investment scam, act quickly. First, stop all communication with the scammer and do not send any more money. Contact your bank or financial institution immediately to report the scam and attempt to stop or reverse any transactions. Then report the scam to Scamwatch via the ACCC website, which helps track scam activity and warn others.

You should also report the scam to ASIC and, if you have lost money, to the Australian Federal Police (AFP) or your state police service. If you provided personal identification documents, contact the relevant issuing agencies (e.g., passports, driver's licence) and consider placing a credit ban with credit reporting agencies to prevent identity theft. For recovery, beware of "recovery scams" where scammers pose as lawyers or investigators offering to recover your lost money for an upfront fee.

Frequently Asked Questions

Can I get my money back if I have been scammed?
It depends on the circumstances. If you acted quickly, your bank may be able to stop or reverse a transaction. In some cases, the bank may reimburse you if the scam originated from a compromised bank account. However, once funds are transferred overseas or into cryptocurrency, recovery is extremely difficult.

How do I check if an investment is legitimate?
Check the ASIC Financial Advisers Register to verify the adviser is licensed. Check ASIC's list of licensed products and companies. Search for the company name plus "scam" or "complaint" online. Be wary of investments that are not regulated by ASIC, such as some offshore or cryptocurrency schemes.

Are cryptocurrency investments always scams?
No, legitimate cryptocurrency investments exist, but the unregulated nature of crypto makes it a favourite vehicle for scammers. Only invest in crypto through regulated Australian exchanges, and be extremely cautious of anyone promising guaranteed returns from crypto trading or mining.

What is a Ponzi scheme?
A Ponzi scheme uses money from new investors to pay returns to earlier investors, creating the illusion of a profitable business. They collapse when new investor money dries up. Warning signs include consistent above-market returns, complex or secretive investment strategies, and difficulty withdrawing your money.