Member Article

Serious fraud office get tough on ‘boiler-room’ scams

Boiler-room scams are common place. They are quite simply an operation selling shares to investors in companies which are usually either fake or are not successfully trading.

Scammers will usually cold-call people and use hard-sell tactics to sell shares in UK or overseas based companies. They often target more vulnerable investors, such as the elderly, and bully them in to parting with their money. These companies later prove to be worthless.

The operations are usually operated from overseas locations and the fraudsters will profit by either just pocketing investors’ money without providing shares or selling the shares to them at highly inflated prices.

The Serious Fraud Office have announced that seven men are facing a combined total of nearly 40 years in prison after being convicted at Ipswich Crown Court for their involvement in a boiler-room fraud, which netted over £8 million. The operation was based in Spain and targeted thousands of investors in the UK. They applied high pressure telesales techniques to sell shares in a bio-diesel company, Worldwide Bio Refineries.

Members of the public were led to believe that their investment in a successful bio-diesel enterprise would net them significant short term returns. However, the reality was far different. The UK bio-diesel plant produced no output and the company was not being managed with any intention of it becoming a growing commercial success generating profits from sales of bio-diesel.

Andrew Swan, financial crime solicitor at Short Richardson and Forth LLP commented: “Investors should be very wary of promises of high rates of return on their money, particularly from those cold-calling them. They should at the very least carry out simple checks to make sure the people selling the shares and the company are legitimate. Visit the Financial Services Authority website and research those involved against the FSA Register.”

This was posted in Bdaily's Members' News section by Andrew Swan .