Scams and Swindles



Offshore Brokers
Overseas brokers can, from time to time, make contact with investors using mailing lists that they have obtained from one source or another. These overseas brokers have attractive presentation material which is delivered to you, providing some credibility. The coloured brochures are often lacking contact details, but are strong in the area of coloured photographs, enticing text and claims of long standing experience.

Such brokers often ring, offering special tips based on confidential information they have access to and are making available to a select number of clients. The brokers (who are primarily involved in the share market) offer advice regarding companies offshore whose shares are about to escalate due to some major new contract being signed, or some other similar development such as a pending take-over.

The companies whose shares are predicted to escalate are often listed on Reuters as legitimate companies. However, such companies can easily be established by those involved in the scam, especially if it means millions of dollars of investor funds flowing in.

Characteristics of this type of scam are:

  • Excellent presentation material, but lacking in communication details.
  • Contact with the brokers is often through answering services and not directly to the broker house involved.
  • Brokers encourage investors to act immediately before share prices escalate and the advantage lost.
  • No share script or share certificate is issued, claiming that the certificate remains with the stock exchange.
  • Sometimes there is confirmation of share purchases, but the company into which the investments are to be made is merely a shelf company, with little capital, and is dispensable.

It is important to be aware of this type of scam as there are many offshore brokers from suspect locations forever on the telephone or fax seeking the gullible investor who will part with even a small amount of money. When thousands of investors are involved, each investing thousand of dollars, it becomes a multi-million dollar venture for the fraudsters.


Losing Money
Losing money comes in a variety of forms. It can come about by carelessness, fraudulence, gambling, or from legitimate transactions influenced by market conditions.

It is important to realise that the old saying; "money doesn't grow on trees" is very true. As part of your overall financial plan, you should be aware of the downfalls that can occur, not only through poor money management but also through other avenues - both legitimate and fraudulent.

Being aware of the potential to lose money is essential. It will provide you (as the investor) with an alertness necessary to minimise the downside in your financial status.


Gambling and Scams

  • Gambling
    Gambling comes in many different forms, including racing, casinos and TAB betting. Lotto and similar games can also have an influence, although the contribution of funds to these categories is much less than the other conventional forms of gambling. It is well known that gambling can cripple one’s personal finances and create havoc in the domestic home. Gambling can be addictive and exhibits similar traits to other forms of addiction. People wishing to have control over their money rather than money having control over them should seriously consider avoiding this form of ‘entertainment’ if they are really serious about making money.

  • Scams
    The large scams have been covered in our section ‘Investments’. The scams discussed here are the every day structures including pyramid schemes, credit card fraud and household theft.