The Meteoric Rise of the Internet Investment Scams

Have you seen ads for triple-your-money crypto strategies on X/Twitter? Has Warren Buffet sent you a direct message on Facebook inviting you to take part in his new investment account? Or you’ve seen the likes of Scott Pape (Barefoot Investor) or Alan Kohler or Peter Switzer inviting you to their private Telegram group.

These are all scams.

A recent media release from the Australian Securities and Investments Commission (ASIC) states that Australians lost a whopping $1.3 billion to investment scams in 2023 alone. These scams take the form of fake investment platforms, phishing scams (a fake site masquerading as a legitimate site), or crypto investment scams.

ASIC has also observed an increase in the use of fake news articles and AI-generated deepfake videos that falsely depict notable public figures endorsing scams. ASIC reports that it has taken down over 7,300 fraudulent websites.

So, how can you distinguish a legitimate service in this environment?

ASIC enforces strict requirements for operating an investment business in Australia. To help you identify legitimate services, consider the following guidelines:

Verify Licensing and Disclosures: Ensure the business provides a Financial Services Guide (FSG) and an Australian Financial Services License (AFSL) number. Additionally, a Refund Policy and a Risk Statement must be clearly available. Legally, all Australian businesses offering financial services must display these details on their website.

Look for a General Advice Statement: It is mandatory for any business providing financial services to include a general advice statement in all communications, including on their website.

Check Payment Details: If the service involves payment methods like credit cards for subscriptions, the business is generally required to display its full address and phone number prominently on the website.

Evaluate the Method of Communication: Australia enforces strict anti-hawking laws, which prohibit unsolicited offers of financial advice or investment products. If you are being contacted via direct messages on social media platforms, or through apps like WhatsApp or Telegram, this is unsolicited and highly likely to be a scam. If the contact is through email, examine the email address carefully. Scammers often use addresses that mimic legitimate ones but with subtle differences, such as [email protected] or [email protected].

Do Your Research: If you’re still uncertain about the legitimacy of a service, conduct a quick Google search to see if there are warnings associated with it. ASIC or public figures may have issued alerts about ongoing scams. Consider contacting the company directly for verification.

Above all, trust your instincts. If an investment opportunity seems too good to be true or if you have any doubts about the offer’s legitimacy, it is wise to err on the side of caution. For instance, it is highly improbable that a US-based investment manager handling $10 billion for institutional clients would personally contact you for a ‘special’ offer targeting Australian retail investors.

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