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Page last updated: 07 October 2024

Scam basics

Investment scams are becoming increasingly more sophisticated at targeting even the most vigilant person. 

This section of the website arms you with the information you need to protect yourself from being scammed. We recommend that you bookmark our Scam warnings and alerts page as a quick check before you invest with a company. Remember, if it sounds too good to be true, it probably is! 

Before you invest your money, check basic facts about what you are investing in and who with. 

 

Scam basics

What to do before you invest

Do a reality check:

  • Check it out with someone else. Be wary if you are told the offer is limited or the opportunity is secret, it could be a scam. If you’re thinking about investing online, consider talking in person with a friend, a workmate, a family member or someone you trust before you send money. With their help, you can feel more confident in the decision you’re making.
  • Real investments don’t just come out of the blue. Be cautious about who is contacting you and that they are a licensed financial advice provider. Only licensed financial advice providers in New Zealand are allowed to cold call or send an e-mail you haven't agreed to receive and to sell a financial product. You can check this by searching the Financial Services Providers Register.

Do some digging:

  • Type the name of the company and 'scam' or 'legit' into your search engine.
  • Check whether the company is registered in New Zealand to provide financial services by searching the Financial Services Providers Register. Use a “who is” web tool to find out who registered it, and when. If it wasn’t in a country where the business says it is based, and/or was recently set up when they claim to have been operating for years, be very suspicious.
  • The International Organisation of Securities Commissions (IOSCO) receives alerts and warnings from its regulators across the world about firms which are not authorized to provide investment services in the jurisdiction which issued the alert or warning. They can be a good source to check overseas investment opportunities against.
  • Take a look at the Financial Markets Authority's scam warning page to see if the entity has already been flagged.
  • Ask to see the Product Disclosure Statement (PDS) for the investment. Almost all legitimate investments offered in NZ must have some form of disclosure document. If they are providing little or no information or documents, it could be a scam.
  • Note any discrepancies in their bank details. Ask yourself, are the payments unusual? If they say they’re in one country but their bank account is in a different country, it could be a scam.
  • Reverse search any images on their website. Sites like Tineye.com let you copy and paste images into their search engine, and they will tell you where else it’s been used.

Give yourself time:

  • Ask questions.
  • Be suspicious of deadlines.
  • Repeated contacts.
  • Understand the risk.

If you don't understand it, walk away:

  • Before you make any investment, make sure you understand how the investment works. If you don't understand the investment, walk away.

All investments come with risk:

  • All investments have an element of risk. If someone is telling you there is no risk, then it is likely to be a scam. No returns are ever guaranteed.
  • If your money is going offshore or being invested in Crypto/Digital Asset – be really careful – it's almost impossible to get it back.

Report a scam

When to contact us:

  • Contact the FMA if the scam relates to an illegal investment offer or scheme. Please ensure you include your contact details so that we can get in touch with you.
  • Consumer Protection NZ publishes a list of scam alerts on their Facebook page. 
  • Department of Internal Affairs lists a range of scams by format, e.g., email, text message, phone, fax and postal scams. You can report these types of scams to them, including forwarding text message scams to 7726 (SPAM).

Report a scam

Use this list to check:

  1. Are they licensed  – is the company or person licensed by the FMA to advise on or offer this investment? Check whether the company is registered in New Zealand to provide financial services by searching the Financial Services Providers Register.

  2. How does it work – can you explain the investment to someone else?

  3. Is it real – are there signs of an investment scam?

  4. What if something goes wrong – how do you complain, do you have access to a dispute's resolution service?

Signs of a scam

 

  • They give you little or no information in writing. Trustworthy investments should have written documents that clearly explain the investment in plain English to you, including any important details. Generally, offers of financial products (such as shares) also have specific rules around what must be disclosed to investors to help ensure that they receive accurate information that is not misleading or deceptive.
  • They ask for unusual payments. Scammers don’t like using ‘normal’ banks. If they want you to pay using wire services or credit cards, by cryptocurrency such as Bitcoin, or into an overseas bank account or a NZ bank with a different name than their company, such as a personal account, they’re probably not legit.
  • They claim you’ve already made a profit despite not yet paying them any money. This is to fool you into paying an ‘initial deposit’. Legitimate providers generally don’t let you invest on credit.
  • They keep wanting more money. They may tell you the sale can only go ahead if you buy more of the investment, or that there are taxes or fees to be paid.
  • They can’t or won’t pay you back.  Legitimate investments in financial products such as such as shares, foreign exchange and derivatives can usually be sold within hours or days. You should be able to get some or all of your money back that quickly. Exceptions include shares that no one wants. Investments sold outside licensed markets may take longer to sell, but you should only deal in those investments through licensed firms.
  • They’re on the FMA’s Warning and Alerts list of known scams. BUT beware scammers regularly change their names, so just because they’re not on our list doesn’t mean they’re not a scam.

Check the list of Warnings and alerts

Types of scams

A pig butchering scam is a type of investment fraud that lures individuals into online relationships to build trust before convincing them to invest their money in seemingly legitimate and profitable ventures. Typically, the scammers promise high investment returns within a short period. Pig butchering scammers often use stolen images and fake investment websites to convince victims of the legitimacy of their schemes. Once victims are hooked and have invested money, the scammers suddenly disappear, leaving victims with no way to recover their funds.

The term “pig butchering” is derived from the idea that scammers fatten up their victims with the promise of lucrative returns and allowing small initial withdrawals of purported profits before “slaughtering” or “butchering” them for their money.

Imposter sites are created quickly using generic stories, opinion pieces, and out-of-date information. Any content that is easy to gather and inexpensive to create is fair game for this type of predatory website. Scam websites work in a wide variety of ways, from publishing misleading information to promising wild rewards in a financial exchange. The end goal is almost always the same: to get people to relinquish their personal or financial information.

Scammers draw in victims through advertisements placed on social media platforms and news aggregators. There are several variations of these advertisements. These advertisements link to fake news articles featuring false quotes and endorsements, usually promoting an investment platform. These articles are often made to appear as though they are being published by legitimate New Zealand media organisations. 

These fake news articles have links to other websites, advertising investment platforms or promoting educational materials about investments. The websites include registration forms, where potential victims are prompted to enter their contact details. 

Scammers will then contact the victim claiming to be an investment broker and give instructions for investing through the platform. Victims are encouraged to make a small investment at first and requests for larger investments will likely follow. 

Use extreme caution when engaging with social media advertisements or links in news aggregators that include endorsements promoting investment opportunities. Do not click on these ads or links, and do not enter your personal information into these websites. If you have been contacted by a scammer after entering your personal information into one of these websites, do not make any payments or transfer any money to the scammers. 

The scammer creates an ad on social media platform offering free education or tips on investment trading. Users are then prompted to join a message group after clicking the ad. The groups promise unrealistic returns within a short timeframe, with their help.

They will then introduce and recommend an investment platform to the victim. Scammers have gone to great lengths to make these online platforms appear authentic.

The investment platform will message users, helping them set up an account and make transfers.

The user will then be able to make several trades, believing the platform to be authentic, which encourages them to invest more money.

When the victim asks to withdraw funds, they are told they must first pay a fee to release the money; even if these fees are paid, no money is paid out.

If you come across these ads or investment platforms, do not click on them and don't give them your personal information or identity documents.

A fraudulent investment scheme where returns are paid to earlier investors using the investments of more recent investors.

A business model that recruits members via a promise of payments or services for enrolling others into the scheme, rather than supplying investments or sale of products or services.

Recovery room scams happen when a victim, who has already been scammed, is contacted by another scammer, who says they can help them recover their money from the original scam, in exchange for a fee. They may pretend to be from law enforcement or a bank. But once the fee is paid, the scammer disappears, and the victim loses money a second time.

What to do if a relative or friend has been scammed

 

  • Tell them you think it’s a scam. Scam victims usually don’t realise what’s happening until it’s too late and they can’t get money back, or they may not want to believe they have been tricked.
  • Suggest they visit the FMA website. Some victims don’t even know what a scam is, or they can’t believe that scammers can be so good at tricking people. Ask them to read the warning signs of a scam listed above, and to do some digging online. Help them to do this if necessary.
  • Use Consumer Protection's "Could this be a scam?" worksheet to help them understand if they have been scammed.
  • If you believe someone is in danger, Call the police on 105 for non-emergencies, or 111 if you or someone else is in immediate danger