Case study boiler room scam
Mark invests in an overseas company
Mark received a call on his mobile from a salesman
offering him discounted shares in a well-known company on the
London Stock Exchange. The salesman said that if Mark invested he
would see immediate gains as the offer was for shares at 30% less
than current market value.
Mark was an experienced investor so was keen about the deal but
suspicious. He told the stockbroker he didn't have time to talk but
to call back.
That night a more senior salesman called Mark and directed him
to the company's website. Mark was told he was lucky that the offer
was still available.
The shares were almost sold out but a few
had become available as another investor had pulled
out. Mark said he would think about it.
The next day Mark received another call from the salesman and
was urged to make a decision quickly as the shares were being
snapped up by other investors.
Mark looked at the company's website which seemed to back up the
salesman's claims. He also searched for the investment online and
discovered it listed on an overseas regulator's website.
Mark decided to buy the shares before it was too late. He
transferred $7,000 from his investment fund into the broker's
overseas account. He was told to put the money in an offshore
account to reduce tax on the transaction.
A few days later, Mark checked the company's website again. It
showed his investment was worth $10,000 and he was happy with his
$3,000 gain. He also received a dividend payment of $750 into his
The salesman contacted Mark the following week to check whether
he had received his payment. He also urged him to invest in a
similar offer which required a higher minimum investment of
$100,000. Mark agreed as the first deal had gone so well.
Once he was off the phone Mark had second thoughts about making
such a large investment. He thought it was risky to put all his
eggs into one basket.
When the broker called to confirm the funds transfer, Mark
explained his concerns. The broker said Mark couldn't pull out
of the deal as the investment had already been made on his behalf.
If he didn't send through the funds, the broker's company would
have no choice but to take him to court. Mark felt he had no
choice, so he transferred the $100,000.
Two weeks later Mark received a call from the Federal Police. He
was told that other clients of the broking company had complained
to the Police and to ASIC that they'd never seen their investment
money or any return except for a few small dividends. He was
devastated to find out that he was another victim of the scam.
The Federal Police told Mark that he could not get his money
back because the company was operating from overseas and was
outside their jurisdiction. When Mark checked online he found the
company was listed on MoneySmart's list of companies you should not
deal with, as they were known scammers.
This case study is based on real victim profiles collected
by the Australian Federal Police. These scams are called 'boiler
room scams' because of the pressure put on clients to invest and
the chain of calls received from apparently more and more senior
salespeople. The websites set up by the scammers are fake and some
of the overseas regulator websites are also fake. Before you
deal with a company always check that it is licensed in Australia
by checking ASIC Connect's Professional
Last updated: 18 Apr 2017