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Boiler Room Scheme

Using high-pressure sales tactics, fraudsters cold call potential investors and persuade them to buy.

What is a Boiler Room Scheme?

Boiler rooms cold call potential investors and pressure them to buy shares. Boiler room operators often set up in a different jurisdiction or country than the people they target in order to avoid detection by securities regulators and enforcement agencies.

How Does a Boiler Room Scheme Work?

This scheme starts with an unsolicited phone call. Once the caller has you on the phone, they try to persuade you to invest in the company they are promoting. In many cases, the company is private and is doing business in an industry that is in the news – for example, gold mining.

Promoters, or their agents, will advise you to wire the money to a bank account, and they promise to send you stock certificates. Once you invest, you may be put on a list that is traded or sold to other boiler rooms or recovery room operations.

In the end, you may discover that the investment and company do not exist. You will likely never see your money again.

Watch out for one or more of these common characteristics:

  • Aggressive sales techniques are used to get you to buy the investment immediately.
  • Websites or offering documents that contain vague, promotional language, and not a lot of real disclosure about the investment.
  • Predictions promising unrealistic returns.
  • Repeat phone calls about investing in stocks, bonds, etc. – there have been cases of people being called 20-30 times.

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