We'd like to remind Forumites to please avoid political debate on the Forum... Read More »
We're aware that some users are experiencing technical issues which the team are working to resolve. See the Community Noticeboard for more info. Thank you for your patience.
📨 Have you signed up to the Forum's new Email Digest yet? Get a selection of trending threads sent straight to your inbox daily, weekly or monthly!
Scams and Boiler Rooms: How to spot them
Options
BurntEarth
Posts: 14 Forumite
Ok so why am I starting this thread? Who am I to point the finger? simple. I used to work in a boiler room. In fact, I've worked in several. I now know how to spot them.
OK to begin with, most believe that any company that cold calls you offering investments is a boiler room. This is usually true. Not always, usually. Secondly, most believe that typical boiler rooms offer stocks and shares in penny companies or companies that don't exist. This, nowadays, is rarely true. With the power of the internet at everyones fingertips it only takes a quick google search to check the validity or existence of a company. The main avenue for boiler rooms thesedays is alternative investments. Of course, these are completely unregulated by the FSA. Here's a shortlist of the least trustworthy investments and why they're to be avoided.
CCs - Carbon Credits
There's two types of CCs. CERs (Compulsory Emissions Reductions, CCs that companies HAVE to buy) and VERs (Voluntary Emission Reductions, self explanatory). Some brokerages will say they're selling CERs while actually selling VERs. Others will sell you VERs and a massive overprice. How much are VERs actually worth? anywhere between 10p and £1.40. How much will these companies try and sell them for? usually between £7 and £12 although I've heard up to as much as £20. So what happens? Well usually when it's time to sell the credits, companies aren't going to pay that much for them so the brokerage sells them on anyway at the massively deflated price (you make around 85% loss) or they just give you the certificates so you're left with a load of carbon credits you don't need and can't sell. Also be wary of Climate Reserve Tonnes. These are basically Californian CCs and while a little more reliable (I understand they're going to be on Bloomberg in february) still one to avoid. For now at least.
REMs - Rare Earth Metals
Another awful one. In theory, a great investment. Rare earth metals are used in Androids, Iphones, Ipads etc. They're bought by companies like Apple, Samsung etc. Not by small companies, by conglomerate businesses. These companies buy in extreme bulk. Several tonnes at a time. They will not be interested in the ounce or two that you have bought. The brokerage will of course tell you that they put all their clients REMs together to sell in bulk but unless this is FSA regulated which it definitely isn't is completely illegal. And even if it wasn't, it still wouldn't amount to anywhere near the amount that the buyers would be interested in. Some REMs liquidate if not stored properly.
Fine Wines
While not all bad, it's especially important to do your due diligence with these. Often the quality of the wine is poor so the wine is being mis-sold or sometimes doesn't even exist. Also sometimes wines like Chateau Lafite Rothschild (an extremely valuable and expensive wine) is sold as a crate of 6 or 12 when it's in fact a bottle. You will be told that 1 unit means one crate when in fact it's one bottle you're paying 6/12 times as much for. Naturally the returns reflect this.
Land Banking/Land generating income or carbon credits
Very common scam with words in such as "guaranteed 125% buyback". I was selling one (before I realised what it was) in Pelsall, Birmingham which was supposed to be for allotment plots. The figures are all very believeable etc. First I grew suspicious when I was told the development company wished to remain anonymous. Then finally when I was directed to their website which has been up and running for all of 2 hours and discovered the company had only existed for a couple of weeks. Chances are they don't have planning permission and the ground will become useless. As for generating income, anything that is in a different country and agricultural is usually a scam. You're being sold the land for 1000-2000% of what it's actually worth and the income generated from this (usually 10-15% per harvest) will reflect the actual price of the land not what you bought it for. Land that generates Carbon Credits, usually rainforest plots and the like is even more dodgy than actual Carbon Credit selling as the credits generated have yet to be accredited by the VCS and so may not even be legitimately recognised as carbon credits. As usual though the land is massively overpriced as are the credits.
Diamonds
Not entirely sure how these work although many boiler rooms that offer one or more of the above also offer diamonds and I'm aware of a few boiler rooms that only sell diamonds and give their brokers around 30% commission.
A few final points - brokers LIE. Always. Even those selling honest products. What you will hear a lot is "I am a performance related broker, I am only paid on what your returns are, so if you don't make money, neither do I." These brokers do not exist. Brokers/Traders that work in ForEx and stocks and shares ARE paid a commission based on their clients returns but they are also paid a commission for the initial investment. Brokers delaing with alternative investments such as the ones mentioned here are ONLY paid commission for the inital investment. Usually around 5% for opening the client and 10% for closing them. Listen to a few of the brokers stories about their experience. There was a guy at a place I used to work who was only just 17 but he'd say in his thick essex accent on the phone "Ok a bit about me, I'm 25 got 2 kids been in this market for 6 years, started in equities, was one of the first brokers to take advantage of the gold rush and brought my clients in 3 years ago at $600 a troy ounce and pulled them out the back end of last year at $1700 a troy ounce" Of course, 0% true.
Comments and questions welcome
OK to begin with, most believe that any company that cold calls you offering investments is a boiler room. This is usually true. Not always, usually. Secondly, most believe that typical boiler rooms offer stocks and shares in penny companies or companies that don't exist. This, nowadays, is rarely true. With the power of the internet at everyones fingertips it only takes a quick google search to check the validity or existence of a company. The main avenue for boiler rooms thesedays is alternative investments. Of course, these are completely unregulated by the FSA. Here's a shortlist of the least trustworthy investments and why they're to be avoided.
CCs - Carbon Credits
There's two types of CCs. CERs (Compulsory Emissions Reductions, CCs that companies HAVE to buy) and VERs (Voluntary Emission Reductions, self explanatory). Some brokerages will say they're selling CERs while actually selling VERs. Others will sell you VERs and a massive overprice. How much are VERs actually worth? anywhere between 10p and £1.40. How much will these companies try and sell them for? usually between £7 and £12 although I've heard up to as much as £20. So what happens? Well usually when it's time to sell the credits, companies aren't going to pay that much for them so the brokerage sells them on anyway at the massively deflated price (you make around 85% loss) or they just give you the certificates so you're left with a load of carbon credits you don't need and can't sell. Also be wary of Climate Reserve Tonnes. These are basically Californian CCs and while a little more reliable (I understand they're going to be on Bloomberg in february) still one to avoid. For now at least.
REMs - Rare Earth Metals
Another awful one. In theory, a great investment. Rare earth metals are used in Androids, Iphones, Ipads etc. They're bought by companies like Apple, Samsung etc. Not by small companies, by conglomerate businesses. These companies buy in extreme bulk. Several tonnes at a time. They will not be interested in the ounce or two that you have bought. The brokerage will of course tell you that they put all their clients REMs together to sell in bulk but unless this is FSA regulated which it definitely isn't is completely illegal. And even if it wasn't, it still wouldn't amount to anywhere near the amount that the buyers would be interested in. Some REMs liquidate if not stored properly.
Fine Wines
While not all bad, it's especially important to do your due diligence with these. Often the quality of the wine is poor so the wine is being mis-sold or sometimes doesn't even exist. Also sometimes wines like Chateau Lafite Rothschild (an extremely valuable and expensive wine) is sold as a crate of 6 or 12 when it's in fact a bottle. You will be told that 1 unit means one crate when in fact it's one bottle you're paying 6/12 times as much for. Naturally the returns reflect this.
Land Banking/Land generating income or carbon credits
Very common scam with words in such as "guaranteed 125% buyback". I was selling one (before I realised what it was) in Pelsall, Birmingham which was supposed to be for allotment plots. The figures are all very believeable etc. First I grew suspicious when I was told the development company wished to remain anonymous. Then finally when I was directed to their website which has been up and running for all of 2 hours and discovered the company had only existed for a couple of weeks. Chances are they don't have planning permission and the ground will become useless. As for generating income, anything that is in a different country and agricultural is usually a scam. You're being sold the land for 1000-2000% of what it's actually worth and the income generated from this (usually 10-15% per harvest) will reflect the actual price of the land not what you bought it for. Land that generates Carbon Credits, usually rainforest plots and the like is even more dodgy than actual Carbon Credit selling as the credits generated have yet to be accredited by the VCS and so may not even be legitimately recognised as carbon credits. As usual though the land is massively overpriced as are the credits.
Diamonds
Not entirely sure how these work although many boiler rooms that offer one or more of the above also offer diamonds and I'm aware of a few boiler rooms that only sell diamonds and give their brokers around 30% commission.
A few final points - brokers LIE. Always. Even those selling honest products. What you will hear a lot is "I am a performance related broker, I am only paid on what your returns are, so if you don't make money, neither do I." These brokers do not exist. Brokers/Traders that work in ForEx and stocks and shares ARE paid a commission based on their clients returns but they are also paid a commission for the initial investment. Brokers delaing with alternative investments such as the ones mentioned here are ONLY paid commission for the inital investment. Usually around 5% for opening the client and 10% for closing them. Listen to a few of the brokers stories about their experience. There was a guy at a place I used to work who was only just 17 but he'd say in his thick essex accent on the phone "Ok a bit about me, I'm 25 got 2 kids been in this market for 6 years, started in equities, was one of the first brokers to take advantage of the gold rush and brought my clients in 3 years ago at $600 a troy ounce and pulled them out the back end of last year at $1700 a troy ounce" Of course, 0% true.
Comments and questions welcome
0
Comments
-
interesting read thanks0
-
All a bit self-evident. To the sort of people looking at this forum I suspect.
There again, people do fall for these scams, but I suspect they are either
* the old / vulnerable
* the greedy / ill-informed0 -
Interesting how you state "Brokers lie" and then on another thread you post up that a company selling carbon credits as per the MO described above is not a scam.
https://forums.moneysavingexpert.com/discussion/4178919
Is that another broker lie?Remember the saying: if it looks too good to be true it almost certainly is.0 -
Interesting how you state "Brokers lie" and then on another thread you post up that a company selling carbon credits as per the MO described above is not a scam.
Is that another broker lie?
You'll notice that I say at the beginning of this post that the cold calling
brokerages are usually, not always, boiler rooms? Well the company I mention there are one of the few that I believe are trustworthy. As for carbon trading, yes it's certainly dodgy but not ALL carbon trading is dubious otherwise it simply wouldn't sell. I understand Barclays Capital and JP Morgan sell carbon credits. Now, would I personally invest in carbon credits? No. No matter how much I trusted the source.
BTW jimjames sorry I had to delete the link from your quote, as a new user it wouldn't let me post.0 -
G_M not sure one can over do it in regard to warnings and hopefully the old, gullable and ill-informed may pass by here unseen. As for the greedy
Yeah good structured readable post. Well done for that burntearth.
Can I ask why you worked for them and why (hopefully) now you do not?
On a personal note a little bit, a tiny bit, of me is annoyed. I never get approached despite being a share holder and lover of wine. I get calls regarding PC security, PPI, Consumer whatever, but never any good scams to take the p1ss out of.
Is that because I use HL and Tesco I wonder?
:beer:I believe past performance is a good guide to future performance :beer:0 -
On a personal note a little bit, a tiny bit, of me is annoyed. I never get approached despite being a share holder and lover of wine. I get calls regarding PC security, PPI, Consumer whatever, but never any good scams to take the p1ss out of.
You should be able to change that quickly - first, make sure you aren't registered with TPS. Then google for things like 'carbon credit' and give a few sites your contact details.
Though there's a fair chance you would, quite quickly, regret that you did this. Good scammers don't give up easily, and they will also sell your details to their mates so you could get inundated.0 -
srcandas I worked for them because I didn't know any better! Now I'm practically an expert on them I know what to look for everytime I get job offers. Usually companies with the words Global, Capital or Alternatives in the company name I just hang up. Then I ask what they sell and what their security is0
-
Innovate, the TPS thing is irrelevant. Loads of people I called were TPS. They were fun because they'd go mental. "I'M TPS! I PAY TO AVOID PEOPLE LIKE YOU!!!"
"Well I guess it's not value for money since we're talking. How about I show you something that is..."
or "TAKE ME OFF YOUR LIST"
"You're the first person that wants off my list of succesful people"0 -
BurntEarth wrote: »Innovate, the TPS thing is irrelevant. Loads of people I called were TPS. They were fun because they'd go mental. "I'M TPS! I PAY TO AVOID PEOPLE LIKE YOU!!!"
"Well I guess it's not value for money since we're talking. How about I show you something that is..."
or "TAKE ME OFF YOUR LIST"
"You're the first person that wants off my list of succesful people"
Along with "some of my best customers said that initially".0 -
On a personal note a little bit, a tiny bit, of me is annoyed. I never get approached despite being a share holder and lover of wine. I get calls regarding PC security, PPI, Consumer whatever, but never any good scams to take the p1ss out of.
Is that because I use HL and Tesco I wonder?
:beer:
Not exactly. I guess its because you hold your shares through a fund or nominee instead of holding them directly in your own name, so they can get your contact details from the share register. The reason I say that is because I hold shares direct and have had loads of these calls. They brighten my day :rotfl:“It is difficult to get a man to understand something, when his salary depends on his not understanding it.” --Upton Sinclair0
This discussion has been closed.
Confirm your email address to Create Threads and Reply
Categories
- All Categories
- 350.9K Banking & Borrowing
- 253.1K Reduce Debt & Boost Income
- 453.5K Spending & Discounts
- 243.9K Work, Benefits & Business
- 598.7K Mortgages, Homes & Bills
- 176.9K Life & Family
- 257.1K Travel & Transport
- 1.5M Hobbies & Leisure
- 16.1K Discuss & Feedback
- 37.6K Read-Only Boards