Beware… thieves about

news: Beware… thieves about

INVESTORS TODAY run a higher risk of losing their savings through investment scams and dishonest or unreliable schemes than ever before.

These operations are becoming increasingly sophisticated and the perpetrators are finding new ways of marketing them, with the result that many otherwise intelligent people get ripped off. According to the UK Financial Services Authority, the most typical victims of boiler room scams are middle-aged professional men with considerable investing experience.

Most people would be tempted by an opportunity to get rich quick. The reality is, though, that it is rarely possible, if at all, and any opportunities presented to you are likely to be created by people whose sole aim is to make money themselves by fleecing you of your savings. Never ignore the old adage if it sounds too good to be true, it probably is.

419 or the Nigerian email

This scam is now well known and variants of it have been doing the rounds for some time. The average individual loss in the UK is £35,000.

The email comes from someone related to a dead Nigerian dictator who needs help in taking the family’s millions out of the country. In return they promise you a nice percentage, but they need financial assistance up front and access to your bank account to deposit the money. You’ll never see any of the money, instead you lose any money given to them and stand the risk of them clearing out your bank account if you’ve given them details.

Surprise lottery wins

These scams are becoming increasingly widespread. You receive an email informing you that your address has been randomly selected and you’ve won a lottery. Before you can receive the prize you must pay out money to cover administration fees, taxes etc. Even if you pay out, you’ll never see the lottery winnings.

Pump and dump

This phrase refers to an illegal practice where a group of people buy a stock before recommending it to thousands of investors. The result is a quick hike in the stock price – followed by an equally fast downfall. The perpetrators sell off when the price peaks and make a huge profit.Everyone else makes a nice loss when the price falls.

Boiler rooms

The name originates from the time when pushy telemarketing salesmen would rent out cheap office space. Today it’s used to describe sales offices packed with telephones and sales people using high-pressure selling tactics, usually unregulated companies selling dodgy shares by providing false or misleading information.

They just offer one particular stock, promising that it’s a sure-fire investment. The stocks they sell are usually their own, or worthless or, at best, dubious. If you tried to sell your investment you won’t be able to, and at some point the firm will close down and disappear.

Pyramid schemes

These are fraudulent investment plans that have cost people worldwide their hard-earned savings.

The scheme appears attractive at first, which is why so many people have fallen for it. In its simplest form, you are asked to hand over an amount of money and then recruit a number of people to contribute the same amount. In return you receive a sum close to the total amount of money your recruits have paid in. In effect the money is just changing hands between contributors, there is no investment to earn returns or any products to sell. No wealth has been created, and, mathematically, all pyramid schemes are doomed to fail. It’s impossible for the cycle to sustain itself and people will lose their money somewhere down the line.

Ponzi schemes

Ponzi schemes differ from pyramid schemes in that only one person takes people’s money, from an investment promising extraordinary rates of return. Great efforts are taken to disguise this fake investment vehicle.

Like pyramid schemes, the return on the investment is generated from money taken from new investors and no actual wealth is being generated.


You need to be very vigilant as this scam is on the increase.

Phishing is the practice of sending emails at random which purport to come from genuine companies. They trick people into disclosing information which can then be used to access bank accounts or run up credit bills. Most emails claim to be from a bank asking you to verify your personal details. A link takes you to a genuine looking website that looks like that of your bank. You innocently fill in your details, with the result that the conman can go on a spending spree with your money. Some fraudsters use the telephone to the same effect.

Earlier I used the adage if it’s too good to be true, it probably is; here’s another one:it’s better to be safe than sorry. Don’t be tempted by offers to make a quick buck.You are much better off investing in more traditional investments, ones which may not promise very high returns but which will work well for you over the long-term.

Always ask the right questions before you invest: How will your money actually be invested and with whom? Research it and discuss it with an independent financial adviser. Always invest with care, and I cannot stress the importance of diversification. Maintaining a well diversified portfolio will ensure that, even if you do put a small amount of your money into something that turns out to be a scam, it won’t affect your overall wealth too much.

Contributed by


Financial Correspondent

Blevins Franks Trustees