Have you received an unsolicited phone call about an investment opportunity? It could be a “boiler room” scam. Here’s what to watch out for and how you can protect yourself.
A team of scam artists set up a makeshift office, called a “boiler room” and work in stages. The scam artists first identify potential victims. They might use a phony survey to find out about your investment experience, offer you free research, or try to get information like your mailing address, phone number and e-mail address.
Next, someone else on the team will call you back with the sales pitch, often calling multiple times. The caller may boast of a business idea that sounds probable, usually in a sector that’s in the news. Here’s the catch: the investment may not exist. By the time you realize you’ve been taken, the scam artist will have closed up shop and moved on to another scam. You’ll likely never see your money again.
These networks of scam artists are highly organized, with many operations selling their victim lists to other boiler rooms. Because of this, victims of boiler room scams are at high risk of being targeted again.
What to watch out for
The scam artist may customize their sales pitch if they know anything about your personal situation or investment history. However, here are some things they’ll frequently say.
- 1. You’ve been specially selected
- The scam artist will tell you that this exclusive offer is not available to the general public.
- 2. You’re guaranteed to make a lot of money with minimal risk
- The scam artist will tell you that this is a safe investment with a high return. But real investments come with risks. If anyone promises you a high return on a “sure thing,” it’s likely a scam.
- 3. This offer won’t last long
- The scam artist may say that if you invest now, you could make a fortune. You should never feel pressured into buying an investment on the spot. Anyone selling you an investment should take time to know you and your investment goals in order to make sure the investment is suitable for you.
- 4. Send your money now
- You’ll be encouraged to send a cheque right away or wire money offshore. The scam artist may even send you an official-looking invoice for your investment, together with a prepaid courier envelope for your cheque.
Victims may be scammed again
Victims of boiler room scams are at high risk of being targeted again. The scam artist will usually use one of two tactics:
- 1. Company takeover
- The scam artist will tell you that another company has made an offer to buy your shares. You stand to make a huge profit on your previous investment. The scam artist might say that you must forward a “refundable” deposit or buy more shares to take advantage of this offer. In either case, if you send more money, you’ll probably lose that, too.
- 2. Recovering losses for a fee
- The scam artist will call you and admit that some or all of your investment has been lost. They will say that they can help recover your lost money – for a fee. Unfortunately, if you pay the fee, you’ll likely lose that money as well.
What you can do to protect yourself
The best way to protect yourself is to hang up the phone. In addition:
- 1. Don’t give out your personal information
- 2. Research the investment
- 3. Check registration and qualifications
- 4. Report scams to the Nova Scotia Securities Commission or your local regulator.