Common types of investment fraud in Australia

17 December, 2018

International investment fraud is a growing problem. The number of investment scams reported to the Australian Consumer and Competition Commission increased by 33 per cent in 2017 and is set to rise further this year.

Most of these scams originate overseas and target high net worth Australians. They are designed to appear sleek and professional, so they can often be hard to distinguish from real opportunities, even by experienced investors.

If you're worried you might have invested unwisely, learning about different types of financial fraud in Australia can give a clearer picture. Then you can decide what action to take and begin the process of asset recovery.

The most common types of investment fraud in 2018 were:

Ponzi schemes

These and other pyramid schemes are illegal in Australia, but that doesn't stop them being used by local and international criminal syndicates. Ponzi schemes are the most notorious, based on the principle of "robbing Peter to pay Paul". As there is no real investment behind the scheme, investors are paying to join the scheme and can only earn money by recruiting other investors – until the scheme collapses. 

Boiler room scams

A ‘boiler room’ scam uses call centres, usually based overseas, whose operators make cold calls to wealthy Australians and persuade them using high-pressure sales tactics to invest in disreputable stocks. These investments drive up the value of the scammer's shares so they earn a profit while the investor receives little or nothing back.

Read how IFW Global recently brought down a boiler room scam based in the Philippines.

Cryptocurrency scams

Online cryptocurrencies such as Bitcoin can offer genuine investment opportunities, but they are also open to financial fraud. Any organisation can launch its own cryptocurrency and make an Initial Coin Offering (ICO) to investors with the promise that it will gain value in the future. Investors, however, have no guarantee that this will happen.

Find out more about cryptocurrency scams.

Binary options scams

A binary options scam is another type of securities fraud. Binary options can be a legitimate but risky type of investment that offers investors "all or nothing" based on the performance of underlying assets. A binary scam invariably offers the "nothing" option and is believed to be responsible for around US$10 billion in stolen assets every year.

Sports trading scams

Sports betting scams have made headlines over the past decade in Australia and worldwide. Common scams include sports arbitrage schemes that involve betting on all outcomes of an event for "guaranteed" profits and auto-betting "prediction" software. Both of these schemes often defraud investors with criminals pocketing the cash.

Private placement programs

Private placement programs (PPPs) are used by some companies to raise capital from high net worth investors with high returns promised. However, these platforms are also operated by criminal syndicates using professional-looking websites that can be difficult to distinguish from the real thing. These platforms typically charge high fees to access – even before the investment is made.

Advance fee scam

Also known as the '419 scam' or ‘Nigerian scam’, this online investment scam requests a modest initial investment for a share of a larger fund. The scam may end after the initial investment or further requests for payments continue until the investor realises the situation is doomed.

What should I do if I've been scammed?

Cyber criminals become more sophisticated every year. It is increasingly difficult to tell a genuine opportunity from an investment fraud. If you think you have been scammed, it's important to act quickly to improve your chances of asset recovery.

To find out how IFW Global's international fraud investigation team can help you, click below to download our free ebook 'Online Investment Fraud: Recover Your Stolen Assets'.

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