20/3/2008

Police are warning of a scam involving the illegal selling of worthless shares known as boiler room fraud. In a recent case involving Dyfed-Powys and the City Of London Police more than two million pounds was stolen by one single boiler room based in Southern Spain.

How Boiler Room Frauds Operate

This type of fraud has been in existence for a number of years and it basically occurs when victims are 'cold called' by persons claiming to be brokers. They claim that they have an investment opportunity in companies that have yet to be floated on the stock exchange. They are very convincing and will groom victims over a number of weeks, persistently calling them trying to persuade them to part with their money.

They are often backed up by false prospectuses and websites that have been copied or 'ported' from genuine company web sites. Once the victim has agreed to invest, they are sent purchase orders normally over the internet and are told that the funds should be paid into a foreign bank account. These accounts can be anywhere in the world ranging from mainland Europe to the Far East and the USA.

Victims are assured that the value of their investment will grow and that the companies they have invested in are about to 'float' and most do receive share certificates. Normally the victims will not become suspicious until they decide, normally months later, to see how their investment is going. Only then do they find that the contact telephone numbers they were originally given no longer exist and no record of the companies can be found in any of the financial markets.

In effect what has happened is that the 'boiler room' has shut down and then opened up again under a different name selling shares in other companies. Often the same people that were originally targeted are contacted again by the new boiler room with the brokers claiming that they can take the original shares off their hands providing of course that the victim invests even more money in the new stock.

Investigating Boiler Room Fraud

In a recent case involving Dyfed-Powys and the City Of London Police, over two million pounds was stolen by one single boiler room based in Southern Spain. T

hese are very complex cases to investigate because the 'set up' will probably include persons based overseas using UK phone numbers that are then re-routed to various parts of the world. Any money deposited is quickly moved by the offenders through various bank accounts across the world making it very difficult to follow the trail. Normally by the time the police are alerted the boiler room has closed down and moved on to a new location making the apprehension of offenders even more difficult.

Who to Contact

If you are concerned about the credibility of any brokers or indeed any individual selling financial products, information can be found on the website of the Financial Services Authority who are the regulatory body for the entire financial industry in the UK.

If you suspect that you have been a victim of a ‘boiler room’ fraud you should contact your local police, who will refer the case to the Fraud Squad for further investigation if necessary.