What does it look like?
We've written this story to show you how scammers trick people. It describes common tactics we know scammers use, based on insights from our fraud and scams team.
The Ponzi scheme
Adam was part of large, friendly community where everyone knew each other. One day, someone from the community told him they were making lots of money from an investment they’d made. They offered to invest some of his money for him, so he could benefit too.
Adam was unsure, but they promised there was no risk and showed him how much money they’d made so far. Adam agreed to try it and a few weeks later, the person started paying Adam the promised returns.
Adam was excited to be making easy money and encouraged others in the community to start investing too. Soon the whole community was asking the person to invest their money for them and for a while, everyone was getting the returns they expected.
A few months later, Adam wanted to buy a car and asked to withdraw his investment. The person told him his money wasn’t available. Others in the community were worried and asked to withdraw their money too. A few days later the person disappeared, and nobody got their money back.
What's the scam?
The investment didn’t exist. The person was using some of the money from each new investor to pay the previous investors, then stealing the rest. Because everyone was getting regular payments, nobody suspected anything. The person had targeted this community because they knew there was a high level of trust among members.
When people started asking to withdraw their investments, the person knew they’d be exposed and wouldn’t be able to steal any more money, so they disappeared.
The investment company scam
Mina wanted to start investing. She wanted to get a good rate, and searched online for a high-return investment account. The top result was a company she'd heard of before, so she followed the link to their site. Their accounts looked great, with high but realistic rates, so she signed up to receive more information.
A few days later, Mina got a call from an investment manager at the company, who helped her open two bonds. She was given online access to her accounts, and confirmation by post, and was impressed at how quickly and professionally everything was handled.
Over the next six months, Mina's investment manager contacted her regularly – reassuring her that the investments were doing well, and encouraging her to invest more and more money.
Suddenly, Mina stopped hearing from them. She tried to check her investments online, but the website wouldn't load… and when she tried to contact the company, there was no answer.
What's the scam?
Mina hadn't been dealing with the real company. A scammer had created a fake version of the website and was calling anyone who signed up. There were never any bond accounts – Mina had sent all her money to a scammer.
