How to avoid becoming the victim of investment fraud
Most people like to think they are not easily fooled, yet every year thousands of Australians lose millions of dollars to investment scams that are operating right here in our own backyard.
Earlier this year, police raided a number of commercial properties on Queensland's Gold Coast, suspecting more than $60 million was swindled from Australians by three Queensland-based syndicates in the last few years.
These types of investment frauds, also known as "boiler-rooms", masquerade as share brokers, foreign currency traders and sports bet traders.
They offer customers enormous returns in just a few months.
ABC News spoke to Dr Cassandra Cross, a senior lecturer from the Queensland University of Technology's School of Justice, and private investigator Ken Gamble, to formulate five easy steps to help protect someone from becoming the next victim.
1. Be cautious of referrals, even from friends
In many cases, customers were drawn in by bogus success stories.
Offenders promoted examples of current clients who quit their jobs and worked from home while raking in the rewards.
The orchestrated scams often involved a "patsy" customer or company representative who was lavished with cash and benefits to create a perception to other investors.
Many victims I have spoken to had a 'gut feeling' at some point which told them that something wasn't right.Dr Cassandra Cross
Tax office employees, accountants and small business owners were among about a dozen victims spoken to recently by ABC News, with the vast majority of them becoming involved after referrals from friends.
Dr Cross said it could be difficult to identify fraudulent investment opportunities, as they frequently masqueraded very well as legitimate and professional enterprises.
"We cannot underestimate the skills of the offenders, and the time and effort they will go to, in order to increase the likelihood that a potential victim invests," she said.
"They are ruthless individuals who will manipulate and exploit victims relentlessly, and in many cases, victims are unaware of this occurring until it is too late."
2. Fancy websites and swanky offices can be deceiving
Queensland Police said scammers often employ legitimate web designers to create real homepages that enhance the perception of legitimacy.
Dr Cross said scammers knew the average investor would be looking for tell-tale signs.
"Offenders will spend a lot of time producing glossy brochures, websites, testimonials and other associated materials which give potential investors the illusion of a genuine and trustworthy enterprise," she said.
"Don't be fooled into thinking that just because it looks professional it is legitimate."
Mr Gamble said there was nothing more convincing than a company that seemed above board.
"Once they've got the company up and running, they'll set up bank accounts, they'll set up a website, and they'll usually invest quite a lot of money into marketing," he said.
"Then they will get hold of investors lists, which are sold in between syndicates, and they'll start cold calling people all over Australia, telling them how amazing this investment is and how much money you can make out of this type of trading."
3. Access to your investment money does not last forever
Mr Gamble said many of his clients trusted the company after thinking they had access to their funds at any time.
[Investment scammers] will never, ever refund someone the full amount - they'll make up all sorts of excuses or they'll liquidate the company in order to not pay back the money.Ken Gamble, private investigator
He said it began with small withdrawals but would eventually go pear-shaped when customers tried to retrieve the principal.
"When they start trading, clients will test the waters and ask for certain withdrawals to come out of the account and just like a classic ponzi scheme, the company will allow them to take withdrawals which will then result with the investor putting more and more money in," he said.
"So they do allow withdrawals to a certain degree - when an investor says: 'I want to close my account' and 'I want my $50,000, $100,000 or $200,000 back', that's when the problems begin.
"They will never, ever refund someone the full amount — they'll make up all sorts of excuses or they'll liquidate the company in order to not pay back the money."
4. Do not rely on authorities to retrieve your money
There are currently about 320,000 fraud related complaints reported to police that have not been investigated, recently released figures by Queensland Organised Crime Commission of Inquiry said.
Queensland Police warned customers it was highly unlikely to retrieve money lost to fake investment companies once funds had changed hands.
When investors willingly handed money over to a company, quite often it was syphoned off into overseas bank accounts, making it harder to trace.
Once the money was given to the company, it no longer belonged to the individual but was pooled into the business' finances as a whole.
Detectives said in recent Queensland-based cases, the majority of funds were spent on supporting the lavish lifestyle of offenders.
The Australian Competition and Consumer Commission (ACCC) may have some power to investigate products that do not stand up to their advertised purpose, such as trading software that does not work.
The only other way to access lost investment funds was by filing a civil claim against the company, which could take years.
Dr Cross said offenders were highly skilled to get customers across the line using many social engineering techniques.
"These include high pressure sales and persuasion techniques, where the offender emphasises the urgency — 'You must invest now or the offer will no longer be available' — and the scarcity: 'There are only limited opportunities for you to invest or you will lose out of the offer'," she said.
"These techniques are intended to overcome any doubts of questions you might have as well as the ability for you to go away, seek advice and think about it.
"It is designed to overwhelm and confuse people to avoid rational thinking."
5. If it's too good to be true, it usually is
Dr Cross said trust your instincts.
"Many victims I have spoken to, had a gut feeling at some point which told them that something wasn't right," she said.
"Many victims ignored their suspicions, or confronted the offenders who were able to dismiss any doubts or questions raised, through lies and manipulation.
"In hindsight, several victims saw red flags in what was being presented to them, and taking notes of these could have reduced some of the losses they experienced."
Source: ABC News