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.
Read Bob’s real life experience with a boiler room scam
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.
See our timeline for the Ross Asset Management case
Read what Ross’s victims said about the way he operated
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.
Read about Samena’s run-in with a global crypto scam
Read Diana’s real life experience with binary options
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
Read John’s real life experience with a shares 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
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.
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:
- 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 differences between an imposter site and a genuine one?
Do not send money to any website or online platform that raises alarm bells.