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Beware of scams online


The internet is a portal to boundless information, but unfortunately not all of the information out there is helpful or honest. Worse still, there are people on the internet who will deliberately try to prey on your trust, with the promise of an incredible deal.

For example, one of my clients was attracted to an advertisement featuring Dick Smith and Andrew Forest about their success in trading Bitcoin. The ad promised high returns and simplicity, to make money from trading the cryptocurrency. The use of successful people added to the credibility of the promotion, so my client gave their email address and phone number to access more information.

Later that day, an affable man from the company behind the advertisement rang my client telling them that they too could make money trading cryptocurrency. The man did not push for money on the first call. He explained what he does, how he does it, and why it is easier to make money trading cryptocurrencies than shares because there are less people trading and market movements are simpler to spot.

Over several phone calls the man from the Bitcoin trading company proved his credibility and asked my client to transfer $250 to show how well their computer trading can make money. Over several phone calls, they were told how well the computer trading program was going and how much money was made. The $250 had grown to $400 and it all sounded easy. My client was sceptical, so they asked for the money to be returned – and, it was. This was followed by more calls, including a call to speak with my client’s spouse, and a further request for more money to be sent.

My client obliged by sending the $400 that had been returned plus an additional $600 so the trader could make more money. The man on the end of the line explained that there was a better way than computer trading. He was a specialist trader and wanted my client to be one of his personal clients. Under this proposed arrangement, the man would trade cryptocurrency on my client’s behalf with 5% per month returns. The catch? To access this level of support, the minimum buy in was $50,000.

This where my client asked me to speak with the man to see if it is legitimate. I quickly told my client that this was a scam and that when they sent the larger amount of money, it would never be returned. I researched the scam online and sent them information about the scams and how they work.

This is a classic example of why scams are so effective. False advertisements draw you in with fake endorsement by celebrities. In this example, the person on the other end of the phone presented as knowledgeable, confident, likeable, and trustworthy. They started out by getting my client to agree to small actions, knowing that once small actions are agreed to, it is easier to get you to take bigger actions. They attempted to allay concerns by sending $400 back to show that they are legitimate. They were willing to speak to their spouse and their adviser to show credibility. Luckily, we intervened before it was too late for my client – but sadly, that’s not the case for everyone.

The ACCC recently released its Target Scams report for 2019, writing that a total of $634m reported as lost in the year, an increase of 34% over 2018. This includes all scams, such as romance and dating, and business email scams. Investment scams alone reportedly make $126m of this share, however the ACCC believes this number is significantly lower than the true amount lost.

The impact of scams is significant. Emotional distress, loss of self-confidence, lost time and energy in extricating yourself from the scam and coming to terms with the loss. Older Australians may also lose independence if family limit their access to money to protect them.

One of the ways to reduce the number of scams out there, and to prevent others from falling for the same mistake, is to tell people about your experience. This is the reason for writing this article.

The Hopkins Group aims to provide the best advice to grow your wealth. Often, this involves advising against actions that are likely to result in loss. One of the best ways we can grow your capital is avoid losing money. A permanent loss of money significantly damages your wealth. There are no magic tricks to get your money back or to boost your returns to compensate for your loss – but we can learn from mistakes and help others to avoid making them.

Scamwatch is a government website which has a range of information about scams and how to avoid them. They suggest the following to protect yourself.

  • Learn about clickbait and avoid engaging with it.
  • Do your own research and consult with independent experts before making investment decisions.
  • If a price seems too good to be true, check for hidden catches.

If you are tempted by an attractive investment email but are not sure of its legitimacy, please speak with your adviser at The Hopkins Group, undertake your own independent research into scams and assess the opportunity with an understanding how much you can lose, rather than how much you can make.

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