Investment Scams: How to Spot Red Flags and Avoid Costly Traps

• investment scams
• crypto fraud
• ponzi pyramid schemes

Discover how to recognise investment scams, crypto fraud, Ponzi and pyramid schemes. Learn key warning signs to protect your money in Australia.

Understanding Investment Scams

Investment scams are becoming increasingly sophisticated, targeting Australians with fake news, misleading statistics, and even phoney celebrity endorsements. These scams promise 'get-rich-quick' opportunities, multi-level marketing (MLM) investments, or so-called 'guaranteed' returns with little to no risk. Their ultimate goal is to pressure you into handing over your hard-earned cash.

Common Types of Investment Scams

• Get-Rich-Quick Schemes: These offer extraordinary profits with minimal effort or risk, but the reality is you’ll likely lose your money.
• Multi-Level Marketing (MLM): Some schemes pose as legitimate businesses, but require recruitment of others rather than actual sales, making them unsustainable.
• 'Guaranteed' Investments: Any investment claiming guaranteed returns should raise red flags—especially if it sounds too good to be true.

Cryptocurrency Scams

Crypto scams often appear highly credible, with professional-looking platforms that mimic real trading sites. Victims believe they’re investing in cryptocurrency, but the money is funnelled straight to the scammers. Scammers may reach out directly or use fake websites to lure you in.

• Fake Trading Platforms: Fraudsters build replica websites that appear identical to reputable platforms, tricking users into making deposits they’ll never see again.
• Cryptocurrency ATMs: Be wary if you’re asked to send money via a crypto ATM. This is a common tactic in crypto scams. Once your funds are converted to cryptocurrency, recovering them is almost impossible.

Remember: No legitimate business or government agency will ever ask you to use a cryptocurrency ATM to send money. If you’re asked to do so, it’s likely a scam.

Ponzi Schemes

Ponzi schemes work by using money from new victims to pay supposed returns to earlier investors. This tactic keeps doubts at bay and entices current members to keep investing or recruiting others. Ultimately, these schemes collapse when it becomes impossible to recruit enough new victims, leaving most people out of pocket.

Pyramid Schemes

Pyramid schemes blur the lines between investment and employment scams. Participants are promised financial rewards for recruiting new members, not from actual sales of a product or service. These schemes rely on continuous recruitment and, by design, most people—especially those at the bottom—end up losing their investment.

How to Protect Yourself

• Be sceptical of unsolicited investment offers, especially those with high returns and low risk.
• Don’t be pressured into making fast decisions—scammers rely on urgency to catch you off guard.
• Check the legitimacy of any investment opportunity through official channels or independent financial advisors.
• Never send money via cryptocurrency ATMs if instructed by someone online or over the phone.
• If something seems off, trust your instincts and seek a second opinion.

What to Do If You’re Targeted

If you suspect you’ve encountered an investment scam, report it immediately. You can visit your local police station, call the Police Assistance Line on 131 444, or file a report online at ReportCyber through www.cyber.gov.au/report-and-recover/report.

Remember, staying informed and vigilant is your best defence against investment scams. Always do your research before handing over any money.