Boiler Rooms and Recovery Room Scams
Boiler rooms – the theme of the film of the name six years ago – attempt to persuade investors to purchase shares, but there are also scams involving options, futures and currencies. Some offer shares that promise huge returns but turn out to be worthless; others sell shares in companies that do not even exist. Scamming people for money using the psychology of greed (which we all have in us to a certain degree) is most probably as old as prostitution. 500 years from now it will still be going on and I bet the foundations will be basically the same.
What is a Boiler Room?
The term ‘boiler room’ originates from a time when pushy telemarketers would rent cheap office space in the basement of buildings. These offices were often close to, or actually in, the room where boilers were situated — hence their name. But today, a boiler room is a general term that refers to unregulated companies that use high-pressure selling tactics to flog dubious shares by providing false or misleading information. Basically a boiler room is a place full of salesmen (con men really), who are unregulated, and will cold call you to try and tempt you to part with your money and invest in some “amazing” company which will make you a millionaire. The stocks are usually unlisted and therefore difficult to sell once you have bought them. In reality they are likely to be worthless. They tend to target people who already own shares, and will get your phone number/contact details from lists that they have bought, including shareholder lists. More often than not, they are based overseas. Whatever, you should NEVER deal with them, and NEVER deal with anyone who cold calls you from a company who you have never dealt with before.Another boiler room scam are the newsletters (TODAY’S TOP PICKS!!!). The subway.com just got hit with a big fine for their pump-and-dump act.Also, any company with the word ‘Global’ in its name, especially a financial one is a company best avoided. Case in point Argos Global Equities. Trade on fundamentals, not news. Make sure there is sufficient daily trading liquidity, otherwise the market makers are calling the shots. There is no way in hell I would buy a stock based on an unsolicited phone call, email, etc.Another scam targeting people ‘of a certain age’ revolves around manipulating people to invest in “Regulation S” shares (These are junk (?) shares that are too risky to be sold in the USA but can be pushed to foreigners like us). Regulation S shares come with the secondary scam of a smooth talking lawyer contacting the victim and offering to take up their case and petition to have the shares made freely tradeable. In reality, shocking as it may seem, anyone can set up a company and sell shares to the public in it, you don’t need to be a broker, or to be in possession of a license,and as a result, you have absolutely no protection at all. If a company is genuinely going to float on an exchange, the issue would be handled by a brokerage house, the bigger the better from the company’s point of view. Also, you would see at least some independent press regarding their imminent floatation. Selling stock in an unlisted company is not illegal, neither is selling it without a license, under these kind of circumstances, it is down to the individual to do their own due diligence behind the company promoters.
The Typical Boiler Room Victim
Neil – a 54 year-old victim of a boiler room ‘broker’ comments – : “All I saw was an opportunity to invest in something risky but with a great up-side and the possibility of getting out if the share price dropped. They forgot to mention the shares were restricted until they had me well and truly hooked in. Naive – yes- but common to a lot of people with $$ in their eyes and little experience of share dealing. And you’re right – I’ve not seen a penny of the fantastic’profits’
Profile Victim
If you are male, over sixty years old, reside in the South East or London, and also have some experience in investing |then you’re already a possible target for boiler rooms.Thing to always take into account is the idea that boiler room operators are incredibly good at the things they do — persuade! In accordance with the FSA 15% of victims were swayed to purchase shares in the course of their first call. And nearly half of many victims succumbed because they were called four if not more times!The FSA emphasize that boiler room salesmen often won’t take ‘no’ for the answer.They are able to constantly call a target, attempting to build a relationship and obtain their confidence. They are able to appear knowledgeable and highly professional though they are only attracted to taking your money. Additionally even if they purchased shares, six out of ten targets were pursued for about 30 days, and nearly a quarter said they have been receiving calls coming from the same boiler room for longer than half a year. That’s such that you could wear a lot of people down.
These People will not take No as an Answer
Bligh comments…My parents that are both in their 70s were recently cold called by Argus Global Equities Limited (from Nevis within the Caribbean) and that they spent approximately 1 hour at the phone before convincing my father to put money in GBP1500. They sent him the application forms by email which he was unable to open on account of some virus restriction – this meant Argus needed to post the forms. This gave him a while to discuss with myself in regards to the investment as well as for me to perform a certain amount of digging – after discussing with a financial adviser and forwarding him the resulting information he decided not to go for it in the investment. Naturally, the sales person called back to verify that my father had received the forms and was disappointed that my father was not going ahead in the investment but apparently quite pleasant regarding this – informing my father he ought to keep a close watch on a certain one of many recommended stocks understanding that he should remember GBP1500 have not been a big sum of money too invest.I had been firstly concerned that somebody would consider selling higher risk investments to retired people in their 70′s who probably cannot afford to take a position with this sum of money, and secondly if GBP1500 is taken into account along side them not to be a big sum of money and then it made me think that perhaps my parents will be asked to put money in further sums sooner or later. Having done a Google search It is possible to not find any feedback from investors for this company. What exactly are your ideas for this?Bligh this effect is what could have happened. Basically he invests £1500, the trade surprise…surprise… is quite a winner (although if he decides to profit you will find there is a 99% chance he will never be capable of getting his hands on the ‘profit’ not to mention the first£1500).So say the £1500 travels to £3000. Then he’ll be told to purchase another stock which can likely be another excellent winner. Then comes the best play; ‘Hey Mr Bligh Snr, am I a great broker or what? All you have to do gramps is listen to me and I’ll help you to a ton of money, but let’s not mess around with such small money anymore, what about putting up £20k or perhaps £50k, {just imagine|imagine what you are able to do after i double your hard earned cash, which in turn stock ABC which we’re getting ready to obtain will probably go ballistic, they’ve just found a cure for cancer,will probably be the following google, have developed newer and more effective something etc…Avoid seeking to find feedback, obtain a check of both your along with your father’s greed all humans have it in us) and NEVER send money abroad especially to a tin pot crappy country within the Caribbean. And of course the salesperson all sound very friendly and therefore are very professional simply because firms employ {a number of the world’s best salesman, Why? Since they are capable to as greedy suckers coming from the world throughout are sending them multi millions of pounds a year. As a matter of fact I’d reckon these scammers together rake in between $100-$300 million of profit a year…of course you intend to report them to the FSA use this link
I actually have friends who’ve lived in South East Asia in which a great deal of the boiler rooms can be found. They may be very creative in how they generally do business. The way in which they acquire data bases will amaze you – bribing people in banks, five star hotels, clubs, air lines, accountants, lawyers……….anybody who has usage of lists of individuals with cash to shell out are potential targets. Advertising in magazines is yet another way they generally do it and then they will get responses from those who are curious about investing.They even create legitimate front companies in places like the united states of america or Europe and set up websites as a way to design the picture of the ‘opportunity’ they need and want to sell you. Other areas from where boiler rooms conduct business would be the Philippines (a great deal) South Africa (a considerable increase opening shop), Thailand (not exactly many nowadays), Indonesia and Malaysia (smaller operations). They are in countries where they will be able to bribe the relevant authorities that provides a layer of safeguard against them. I recall once meeting a man who worked in a single one of these boiler rooms and he was pleased with it – bought 3 houses together with the money he made out of robbing people blind and felt nothing whilst functioning.The way in which to not get stung by these folks would be to only put money into shares of companies which are listed on large exchanges just like the FTSE…etc. The next time someone desires to sell you pre IPO stock that’s set to explode and you really are tempted, then take that money to a race track, purchase a drink and figure out if your horse wins – at the very least you’ve got a slight chance of winning and still have some good times whilst performing.Please don’t kill yourself, many of us} live and learn, Treat this being a valuable lesson, to examine things first in small quantity in addition to become more careful. Never become involved in anything you don’t understand, most especially when people you do not know call you unintentionally offering you easy money…In closing, this is a posting coming from the now defunct IC Forum, circa December 2004. You will need to excuse the language, however still the message is the same. Boiler Rooms HURT PEOPLE.
