How John was targeted
John was contacted by an Asian research company doing a survey of New Zealand businesses. A week later, he received another call. This time it was from a trading company based in China asking if he wanted to purchase pre-IPO shares in Alibaba Group.
After initially saying no, he was contacted again by another more professional and persuasive member of the trading company and convinced to set up a trading account. After looking at the account and believing it was legitimate (having used other New Zealand share trading accounts), he decided to purchase US$3,300 in shares.
John was then contacted by the ‘vice president’ of the fake trading company, who proposed that he buy more shares. This time the offer was for shares Alibaba Group had asked them to sell on behalf of employees who wanted to free up their share packages. These shares were more expensive but John was told the vice president was working on a sales package for all their clients for when the shares listed.
A third member of the trading company then contacted him and remained in contact with John while the deal was finalised. A couple of months later, he told John the deal was complete and asked for a further US$16,500 to convert the share options before they could be sold. John found online media coverage supporting this story and after doing some online research into the company and the vice president. He felt satisfied the deal was legitimate so made two more share purchases for US$19,950.
John made the payment and was given a ‘memorandum of agreement’. This is when he noticed the trading company’s commission was suspiciously low, and he could find no record of the company mentioned on the memorandum.
Shortly after this, the website closed and John realised he’d been scammed of US$39,750.
Since then, John has been contacted at least four more times by people claiming to be from legal firms acting on behalf of Alibaba Group. These callers have asked for further payments to help John recover his money. They’ve even claimed they can still make the share deal happen.
These callers are either part of the same scam or another group of fraudsters who’ve been sold John’s details.
John can’t get any of his money back.
The warning signs
In hindsight, John recognised some warning signs:
- The final question asked by the research company was ‘Do you invest on your own behalf? John now believes that by answering yes to this question he became a target.
- One of the ’trading room’ callers had a strong British accent and claimed to be a compliance officer for the trading company. When John called them back a few days later, the same person answered the phone (rather than a receptionist) and this struck him as suspicious.
- The online trading account had a Reuters newsfeed which suddenly disappeared.
- It’s okay to hang up if you get an unexpected call about an investment opportunity – it’s illegal to sell investments via ‘cold call’.
- Be aware that sharing personal information with a stranger can leave you vulnerable to fraud or scams. Cold calls of any kind should be treated with suspicion.
- Before investing, check that the business is legitimate. One way to do this is to check that they are licensed to provide financial services in New Zealand.
- It is not difficult for criminals to create very credible-looking websites. Don’t rely on a slick website as proof that a business is legitimate.
- Don’t rely on a good rating by the ‘scamadviser’ website. This site says it checks websites for scam risk – but it gave the company that scammed John a high trust rating.
*John is a real investor who contacted the FMA in July 2016. His name has been changed to protect his identity. The company John was scammed by was called PFM-Trading but scammers such as these regularly change their company names.