Boiler room fraud

Often, boiler room fraud brokers are not legitimate or regulated brokers. They are typically salespeople who pretend to be brokers, but who are very well-spoken, with knowledge in shares and investing and who are confident in their cold-calling approach, providing a level of legitimacy to their front. Most often, these brokers will have experience in working in the stocks and shares market. 

Boiler room fraud brokers are very persistent in their approach and will initially cold call investors, then call them again several times, trying to get them to invest. They may use tactics such as saying that a company will soon announce a major discovery and that, if invested in now, will increase the price of shares purchased. Often, immediate payment is demanded or the brokers will issue threats for noncompliance, intimidating the investor into purchasing the stocks or shares. 

A broker using boiler room fraud tactics will give investors only positive information about the stocks at first, discouraging them from conducting any further research. Catchphrases such as “it’s a sure investment” or “this is a once in a lifetime opportunity” in an attempt to reel investors in. Usually, we find that brokers will target middle-aged investors who may have bought shares, with their details typically found on share-related registers or databases. 

Boiler room fraud often has some telltale signs, including: 

• Being asked for money upfront, or asked to pay unexpected fees before shares can be released
• You are put under pressure to agree to invest in the shares or stocks
• The broker asks you to keep the details of the investment secret
• You know the company is overseas (it is illegal for UK-based companies to cold call investors to sell them shares)

Boiler room scams take full advantage of the emotional aspect involved in order to get their money. Using high-pressure sales tactics, such as cold-calling, intimidation and using their limited knowledge to appear confident. By assuring investors that their investment will generate a return, this then causes doubt in the investor’s mind and makes them feel as though they are missing out if they don’t take the investment. If you ever receive a cold call with the promise of getting a high return on your investment and the above tactics are used, then it is highly likely that this is a form of boiler room fraud.

“Dial and Smile” is a term often mentioned when discussing boiler room fraud. It refers to the technique used by telemarketers when cold-calling potential buyers. As implied, the techniques used rely on high-pressure sales tactics and highly emotive intimidation and manipulation in order to try and persuade people into buying things that they wouldn’t typically want. Essentially, “Dial and Smile” is essentially a slang term for cold-calling someone.

Boiler room scams are illegal in the UK, however, the brokers are usually based overseas where UK regulations don’t come into play. Boiler room fraud brokers operate out of many different countries, however the most popular we see are from Spain, Bermuda, Japan and America.

“Pump and dump” is where scammers use illegal market manipulation to artificially boost the price of their own shares in order to then go on and sell them at a profit. Pump and dump scams are just one of the many cryptocurrency scams due to the lack of market regulation. In a typical pump and dump scam, scammers will use cold-calling techniques or contact victims on social media and then try and persuade them to buy, usually with the promise of securing a high guaranteed profit. Once the price starts to increase, the scammers will then sell their shares, leaving investors now having almost worthless stocks.