Wall Street address behind boiler room scam

A division of the International Chamber of Commerce’s Commercial Crime Services, the FIB monitors developments in global financial fraud and provides the business community with warnings, updates and advice. FIB has issued a number of recent reports detailing the illegal activities of boiler operations largely targeting investors in the Middle East.

Acting on information from as far away as Papua New Guinea, Belgium and Finland, the FIB has recently been investigating the activities of a company employing a Wall Street business address.

FIB Assistant Director Jon Merrett stated: “This latest New York based case contains many of the typical characteristics of a boiler room share buy-back scam. These financial frauds often utilize impressive websites, detailed documentation and a request for advance payment. In this instance, the distinguishing feature is that all of these trademarks are far more sophisticated and believable.”

The scam operators cold-called investors, offering to buy back previously purchased shares, claiming their value tripled or quadrupled since the date of purchase. They requested that the fees associated with the buy-backs be paid in advance and sent to Hong Kong. The documentation accompanying the trades included detailed information regarding the vendor’s bond payment (4% of the total) and the agent’s commission (3% of the total). The documents were notarized and included a ‘guarantee’ from a well-known international insurance company.

A few weeks later, a second company operating from exactly the same New York address contacted two other FIB members’ clients offering a similar service, but operating under a different name. This time they offered to buy back shares in a Cypriot company allegedly based in Los Angeles. FIB investigation found that the company was not in fact registered in California.

“Manipulating the same scam under a variety of different business names is a common tactic in financial fraud,” added Mr Merrett.

FIB investigation into the case points to a known individual who has masterminded numerous similar illegal activities. Ironically, there is strong suspicion that one of those involved in the scam may be operating from behind bars, having been previously found guilty of a fraud operation that involved selling telecommunications-related securities. This elaborate operation netted in excess of US$50 million stolen from approximately 3 000 US victims.

To prevent unsuspecting investors falling pray to financial frauds of this nature, the FIB recommends asking the following questions of any unsolicited offer:

• Are the shares being offered those of a publicly listed company?
• Is the buy-back offer price vastly higher than the purchase price?
• Is the company making the offer authorized to operate in the applicable jurisdiction?
• Is the offer always conditional on the advance payment of certain expenses, bonds, guarantees, insurance policies, warrants, taxes, etc?
• Are these payments requested to be made at several different banks/financial institutions outside the country of operation?
• Does the offer require the submission of sensitive personal information that could be used to steal identity at a later date?
• Does the documentation associated with the offer look genuine and appear to come from, or be endorsed by, reputable companies/government departments?
• Can these companies and or government departments be contacted to verify the offer?