Scam basics

Because many scams are operated by criminals overseas, once you’ve given them any money it is very hard and very rare to get it back – even from countries with tough anti-fraud laws. Where you send it probably isn’t where it ends up. That’s why it’s vital you protect yourself by not getting involved in the first place.

Ignore uninvited investment offers 

• In New Zealand, it is generally illegal to sell financial products (such as shares) to consumers through an unsolicited meeting, for example a “cold call” or uninvited email.
• If you are contacted unexpectedly about an investment opportunity, this is a red flag for a financial fraud or scam.
• Be very cautious of any communication around financial products or services from people or companies you haven’t done business with before. This is a big red flag for potential scams. And even if you have done business with an adviser or institution before, check very carefully that you’re not dealing with an imposter – for example you can offer to call them back on a trusted phone number to confirm they are who they say they are.
• If you think you are being scammed, do not engage – if they keep trying, contact the FMA, or if they keep trying to contact you, ask your phone or email service provider to block them. If they become abusive or threatening, call the police on 105 for non-emergencies, or 111 if you are in immediate danger.
• Some online scammers may befriend you before then moving on to ask for money or get you interested in an ‘investment opportunity’ – you may think they are a friend or potential romantic partner.
• Some scammers may contact you after harvesting your details from an online ‘investment comparison’ site. It’s still an unsolicited offer and a big red flag for a potential scam.
• You can add yourself to the Marketing Association’s Do Not Call/Do Not Mail register to reduce the amount of unsolicited contact you receive – although you may still be contacted by companies and individuals who aren’t members of the Association, and will not prevent you being contacted by scammers.
• There are very limited circumstances where licensed Financial Advice Providers (FAPs) can make offers in the course of unsolicited meetings in the context of giving you “regulated financial advice”. If you’re unsure whether they’re a genuine licensed FAP, be very cautious and don’t proceed without further checks.

Do not invest through offshore, online businesses

• Financial service businesses with no offices in New Zealand are harder to regulate and police as they’re based overseas so not as easy for the FMA to contact or investigate.
• It is often impossible to recover your money if an overseas investment turns out to be a scam. We cannot help you if things go wrong.
• If a business is overseas with no office in NZ, or even if they sound like they are overseas, it’s even more important you do your research before you invest: Where are they? Is it a country with tough financial regulations like ours? How can you be sure they are who they say they are? Or even that they are where they say they are?
• Some scammers use an imposter website, designed to look exactly like a legitimate investment. They may use the same name, logo and address as a genuine business, even though they have no connection. They may even hijack a genuine website and redirect emails to themselves.

Use a licensed or registered financial service provider

• Providers of a financial service in New Zealand are generally required to be publicly registered on the Financial Service Providers Register (FSPR).
• To register on the FSPR they must provide a physical address and may be subject to criminal checks.
• If they provide financial services to ‘retail clients’ (eg most ‘mum and dad’ investors), they are also required to be a member of a third party approved dispute resolution scheme.
• When dealing with a financial service provider, you should be able to find or be told the details of which dispute resolution scheme you can contact if something goes wrong
• For some investments (such as derivatives), providers might also need to be licensed by the FMA. Those seeking a licence must first be assessed by the FMA, and will be subject to continued monitoring to ensure they meet the standards set by the regulations. View the list of companies and individuals who are licensed by the FMA. 
• Just because a provider is registered or licenced, it doesn’t mean they can do no wrong. Always conduct your own research and due diligence, and look out for the signs of a scam.

Do a reality check:

• Stop and ask yourself: "Is this for real?" Read the signs listed above and if any of them apply to your situation, write down your own list of reasons it could be a scam.
• Don’t assume something is safe just because a family member, friend, workmate, church leader or other trusted contact recommends it – they may be victims too, or scammers themselves.
• Don’t be tricked into thinking a company is legitimate because their advertising is on a credible website or social media platform, and be suspicious of ‘celebrity endorsements’.
• Ask family or friends what they think. See what someone you know who’s good with money thinks about what your suspicions. Others can help you ‘wake up’ to the reality of a scam.
• Check with your local Citizens Advice Bureau or budgeting advice service. They’re usually able to give free advice.
• Search for the company on NZ’s online Financial Service Providers Register. If it is not there, they probably can’t provide financial services in NZ.
• Note any discrepancies in their bank details. If they say they’re in one country but their bank account is in a different country, it could be a scam.
• Check the website registration details. 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.
• 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.
• Ask to see the Public Disclosure Statement (PDS) for the investment. Almost all legitimate investments offered in NZ must have some form of disclosure document.

Take decisive action:

• Tell them to communicate by email. Get what they’re saying in writing, and ask for summaries of your investments to date, so you can begin a paper trail.
• Stop paying them money: Make no more payments even if they say it will help get your money back. This is all part of the scam.
• Ask for all or some of your money back. Say you need it urgently. Most investments traded on financial markets can usually be sold immediately, at most within days. If they can’t or won’t trade yours that quickly, or say you must pay more to get it back, it’s probably a scam.

 

• Stop contact with the scammer. If they phone, hang up. If they send emails or letters, don’t reply. If you maintain contact they will only try to get more money or information out of you.
• Contact your bank immediately. They will have a policy to deal with fraud. If you have sent money through another bank or transfer service, contact the service you used to do that.
• Contact us: We can give you advice or put you in touch with someone who can. We’re limited in what we can do if the scammers are overseas, but if they are in NZ we can investigate and warn others. Contact the FMA. 
• Tell family or friends what’s happened. It can be hard to admit that you’ve been tricked and lost money, but scammers rely on this shame and secrecy because it helps them keep scamming others.
• Contact Victim Support on 0800 842 846 or visit their website. They can provide free emotional and practical support and information.

• 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.

Boiler room scams

Teams of scammers cold-call strangers from temporary offices, offering non-existent, worthless or overpriced investments; mostly shares but also foreign exchange ("FX"), digital currencies ("crypto"), binary options and sports investment schemes.

First they convince you to make a small payment, then give more reasons why you must invest more.

They are professional, persistent and convincing. Tactics include fake surveys, social media ads, hoax calls from ‘senior executives’, celebrity endorsements, polished websites and glossy brochures. When you try to get money back, they give excuses why they can’t or won’t, or simply stop responding.

Further reading:
Read Bob’s real life experience with a boiler room scam

Ponzi schemes

This is where a scammer takes money from one victim, then takes money from a new victim in order to pay back the first. Their ability to pay money back gives the illusion their scheme is successful, which lures in more money and victims. It collapses when they stop getting money from new investors.

The fraudsters often prey on a group of people who trust each other, such as members of a religious, social or cultural group. They may pretend to be members, and use the ‘affinity’ within the group to trick more victims, on the recommendation of the first who have fell for them, even group leaders.

NZ’s worst Ponzi scheme to date was run by David Ross of Ross Asset Management. More than 1,200 people were scammed out of $115 million. In 2013, Ross was jailed for nearly 11 years.

Further reading:
See our timeline for the Ross Asset Management case
Read what Ross’s victims said about the way he operated

High-risk products

Some investments are high-risk in more ways than one: not only risky if they’re legitimate, but also prone to fraud because of little or no international regulation:

• Cryptocurrencies (‘crypto’): globally unregulated and prone to scams as well as online ads that bait people into giving away personal financial details. Exchanges based in New Zealand that let retail customers in NZ trade in cryptocurrencies must be registered on the FSPR.
• Foreign exchange (FX): currency trading is highly volatile, but especially risky if it’s via offshore traders who aren’t regulated by NZ law.
• Binary options: Quick trades on price fluctuations with 50:50 odds of making a ‘win’ or losing it all. Winnings may be withheld and trades manipulated without your knowledge. Any firm offering trading in these products to retail customers in NZ must be licensed by the FMA, no matter where they are based. You can check if the firm is licensed on our Licensed entities page.

Further reading:
Read about Samena’s run-in with a global crypto scam
Read Diana’s real life experience with binary options

Share scams

Scammers offer investments in shares that they have no intention of actually buying on your behalf, or in companies that don’t exist or aren’t worth the price you’re paying. They may even offer money for shares you already own, at an inflated price, but say you first need to pay a fee before you sell.

Signs of a shares scam:

• Offers of shares in major global companies
• High pressure tactics to get you to ‘get in quick’, eg pre-IPO
• Requests for more money to buy more shares
• Excuses why you can’t sell your shares in a hurry
• Fees you must pay before you can sell and get money back

Further reading:
Read John’s real life experience with a shares scam

Recovery scam

A recovery scam is a form of ‘advance fee’ scam, where money is requested before funds can be returned. Targets of recovery scams are those people who have already been a victim of a scam.  

The victim is approached with an offer of help in recovering funds lost in the original scam. The scammer might be posing as an authority or with some kind of official agency, then make promises about getting lost funds back, before asking for a fee or payment to proceed.  

If you’ve already fallen victim to a scam, be particularly alert. A recovery scam attempt might come from the same people behind the original scam, or they might be acting on your personal information that’s been passed on or sold to other criminals.  

Be very wary about sharing any personal information about experiences as a victim of a scam. A social media post sharing details of being a financial crime victim can attract the attention of recovery scammers and lead to being re-targeted.  

Be suspicious of cold calls of any kind and be especially wary of unsolicited calls or messages from people claiming to be from government agencies.  

Discontinue any contact with the potential scammer – you could also directly contact the agency that the person is claiming to work for, and check if it’s authentic. 

Further reading: Recovery room scams – Banking Ombudsman 

Real life scam story: Recovery room fraudsters prey on past victims

Software packages and seminars

Salespeople may offer you software that uses ‘state-of-the-art’ financial market analysis, or the chance to attend an ‘exclusive’ event where you’ll learn the secrets to financial success. They usually promise high returns that are often too good to be true, and the only ones making money are them.

If you buy such software, it may not be delivered or may not work – and often similar or better software and education packages are available for free online. If you attend such events, they’ll probably try to talk you into investments that are high-risk, overvalued and/or attached with fees and commissions. If you invest in either, there is a high chance you will lose money.

Imposter websites

Some scams will involve the use of an imposter website, designed to look as much like a legitimate investment offer as possible.

The scammers may use the details of a New Zealand company on their website even though they have no connection to it, or they may hijack the real website of a genuine New Zealand business and redirect any contacts to themselves.

Either way, they are using the phony website to seem attractive to investors.

It can be tough to pin down exactly what makes a particular website an imposter, but there are a few things you can do to check it out.

Some things to watch out for are:

The offer

• Promises of high returns
• Unclear exactly what is being offered
• Says it’s secure or guaranteed without any details of how

The website itself

• Phone numbers or physical addresses overseas are mixed up with local NZ contact details.
• The website domain name (the address you see when you check the address bar at the top of the browser) doesn’t seem to match the content of the website.

If you have any doubts there are further checks you can make: 

• Check Google Street view - do the premises align with the street address the business claims?
• Don’t use contact details from the website. Check the company’s phone number from an independent source, such as the White Pages or a business directory, and call the business directly to check whether the website belongs to them
• Check any claims of being licensed or registered in NZ.
• Check the domain name. If it’s a domain name that ends in .nz you can find out who the domain name holder is by doing a registration data query at dnc.org.nz.  If the domain name ends in .com, you can use the ICANN’s WHOIS service. 
• Read more about how to check genuine websites at the NZ cybersecurity agency CERT. 

Can you spot the difference between an imposter site and a genuine one?

Do not send money to any website or online platform that raises alarm bells.

Who to contact

• 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 be in touch.
• Consumer Protection’s Scamwatch publishes a list of scam alerts. You can report a scam on their website too.
• Department of Internal Affairs lists a range of scams by format, eg, email, text message, phone, fax and postal scams. You can report scams to them, including forwarding text message scams to the free shortcode 7726 (SPAM).

IOSCO is an important resource

IOSCO receives alerts and warnings from its members about firms which are not authorized to provide investment services in the jurisdiction which issued the alert or warning.

If you believe that a warning has been published in error, or there are other good reasons for us to take down a warning that has been published, please contact us, providing the following information:

• your contact details
• the warning you would like removed
• your reasons why the FMA should take down the notice
• evidence to support your reasons.

We will assess your request and, if appropriate, remove the notice as soon as possible. The more information you provide, the easier it will be for us to act quickly.

We may contact and consult with other people who have an interest in the outcome of a request to remove a warning.

Since the start of the pandemic in early 2020, the FMA has seen a rise in the number of complaints about investment scams and fraud.

Scammers are taking advantage of the crisis either by using COVID-19 as part of their ‘pitch’, or using the economic climate to prey on peoples’ fears and desires.

The FMA has received significantly more complaints about scams in the first half of 2021 – and subsequently issued more public warnings about them – compared to both 2020 and 2019.

• From January to June 2021, we received 158 complaints about investment scams and fraud – up 79% on the 88 complaints received during the same period in 2020, when the pandemic began, and up 49% on the 106 complaints in the first half of 2019.
• As a result, from January to June, we issued 36 public warnings about suspected scams and other non-compliant entities – up 29% on the 28 warnings issued during the same period in 2020, and up 80% on the 20 issued in the first half of 2019.

The FMA has seen a rise in the following types of scam activity since the start of 2020:

• Social media contact scams – scammers using social media platforms to identify and/or make contact with possible victims – friending and messaging them, asking questions or making suggestions in post comments, conducting fake surveys. Read Nisha’s encounter with a scammer she met on LinkedIn in May 2021.
• Romance-investment hybrids – targeting prospective victims on popular dating apps, winning people’s trust with sophisticated back-stories and accomplices, before convincing victims to transfer money overseas to buy supposed investments. How Jane lost over $100k to a scammer she met on Hinge in early 2021.
• Imposter websites – using the names, logos, addresses, certifications and other details of legitimate NZ businesses, to fool investors that the website and/or its managers are part of, or associated with, the legitimate business. How a small Christchurch investment company was imitated in late 2020.

International scams

Since the start of the COVID-19 pandemic, international regulators have been issuing warnings about investment scammers who are exploiting the current market conditions and uncertainty.

These include the following investment offers and activities observed overseas:

• Goods or industries experiencing strong demand, such as sanitary products or pharmaceutical companies,
• Products supposedly effective against COVID-19, such as vaccines, medications, protective gear or equipment,
• So-called "safe haven" assets, including cryptocurrencies or precious metals such as gold, silver or platinum,
• Promises of “passive income” or “cash flow” to appeal to people looking for new sources of regular income,
• “Pump and dump” of low priced stocks, “pumped” up by fraudsters spreading false information about a company, then “dumped” by them once unsuspecting investors rush in.

Scammers are also using common techniques to trick anxious consumers:

• Phishing emails, claiming to be from health authorities, banks or insurers, trying to trick people into sending sensitive information, or open attachments with malware,
• Telephone scams, pretending to be from health authorities, claiming that a relative has fallen sick and requesting payments for medical treatment.

Related information

Reports of COVID-related scams by offshore regulators

• UK Financial Conduct Authority: ”Avoid coronavirus scams”
• Interpol: “Interpol warns of financial fraud linked to COVID-19”
• US Securities and Exchange Commission: “Look Out for Coronavirus-Related Investment Scams”
• US Federal Trade Commission: "Scammers are taking advantage of fears surrounding the Coronavirus”,