The approach being used is not unique or new, but it has proved effective at taking money from unsuspecting investors. The fraudsters initiate their ruse by cold-calling investors offering shares in US technology companies. Once convinced to purchase shares, the duped investor then receives another unsolicited call with an offer to buy back the shares at a considerably higher price.
Seeking a quick return on their newly acquired investment, unwitting investors are then requested to pay a host of fees and taxes in order to reap their financial windfall.
Julien Tournier, Senior Analyst at the FIB stated: “The stock these individuals are peddling is worthless. The companies they are claiming to sell shares in are not publicly listed on any known stock exchange.”
The fraudsters making the offer to buy back the shares are well known to the FIB. The company they claim to represent is listed on the FIB offender database. The perpetrators of these crimes do not have the authorisation to offer financial services and have been subject to warnings issued by regulatory authorities in other jurisdictions. Facing scrutiny in Asian and Asian Pacific markets, they are now targeting the Middle East.
Following the initial share purchase and inflated buy back offer, the specifics of the operation are as follows. The victim is asked to sign a confidentiality memorandum and purchase insurance to protect the transaction. Then a guarantee letter for the purchase of a warrant is sent, accompanied by a letter appearing to come from the US Securities and Exchange Commission.
Finally, the victim is initially informed he will have to pay a withholding tax of 31% of the value of the deal, but can avoid this by filling in a form and sending it with a copy of his passport and other documentation. Once this has been completed, he is contacted again and told he will actually have to pay half the tax, but that this will be refunded once the US authorities have granted an exemption.
Mr Tournier commented: “One such incident recently reported to the FIB followed this very pattern. The victim lost nearly US $60,000 to so-called offices in London, Singapore and Hong Kong.”
The FIB cautions investors to protect themselves by being extremely wary of cold-calls selling shares. Investors should not enter into any financial transaction unless they have ascertained the entity offering the exchange is authorized to provide such services in the country concerned. Shares should only be purchased in publicly listed companies whose records can be thoroughly investigated.