By ANNA USHER

Police are warning residents of a recent surge in “pump and dump” investment scams, where fraudsters use fake celebrity endorsements and messaging apps to fleece innocent victims of their savings.

One Mosman man lost $800,000 two weeks ago, after being lured on social media.

North Shore Police Area Command told Mosman Collective the man was contacted via a social media message and provided with stock market tips.

“On the recommendation of the “investment team”, the victim purchased shares and was told when to sell them, making a small profit,” a police spokesperson said.

The victim was advised on two further occasions and “encouraged to invest as much as possible.”

“The victim followed this advice and within a week, the share price collapsed,” police told Mosman Collective.

Police say the Mosman man unknowingly fell victim to a “pump and dump investment scam”.

“This is a scheme where scammers artificially inflate (“pump”) a low-liquidity stock’s price with false hype or tips, sell (“dump”) their own cheap shares at the peak, and leave unsuspecting investors with massive losses when the price instantly crashes,” police said.

It is a timely reminder to the community to be vigilant when making investment decisions and to only deal with reputable, licensed financial professionals and established investment platforms.

“Scammers often use social media and messaging applications to build trust and create a false sense of legitimacy before encouraging victims to invest increasing amounts of money,” police said.

Pump and dump scams: how they work

Many pump and dump scams follow a similar pattern

• A person sees an investment opportunity on social media
• The post uses the image of a well-known commentator, investor or financial institution to build credibility
• The opportunity is actually fraudulent, generated by the scammers
• The consumer clicks the post and is directed to a messaging platform such as WhatsApp
• A scammer impersonating the expert provides stock recommendations, often on foreign exchanges
• Fake investors, often part of the scammer’s team, post messages about their supposed profits to build credibility and reel the victim in
• The victim buys the recommended shares, causing the share price to rise (scammers often ask for screenshots or proof of purchase)
• The scammers suddenly sell their existing holdings at the inflated price, causing the price to collapse
• The victim is left holding shares worth significantly less than what they paid

What to do if you’re scammed

• Call your bank as soon as you realise it’s a scam
• Seek support through ID Care if you need to recover your identity
• Help others by reporting scams to Scamwatch
• Unfortunately, scammers are often overseas and out of reach of Australian law
  The chances of getting your money back are very low

Source: ASIC