Boiler room schemes
In a typical boiler room scheme, a salesperson cold-calls and offers investment opportunities to people they have targeted through identity fraud or technology. These opportunities can include:
- sports trading
- foreign exchange currency trading
- lay trading (gambling related methodology)
- cryptocurrency
- other financial investment or gambling related products.
The targets come from lists provided by lead generation agencies; some of which are controlled by other boiler rooms.
Victims are persuaded to pay a significant ‘subscription fee’ for expert trading advice, or a ‘software licence fee’ for in-house designed trading prediction software, in return for a promise of high returns. Often, fees aren't set until after establishing what the victims can afford to pay.
On investment, victims receive fabricated examples of significant investment returns. A 'critical incident' then occurs, causing the company to fail and the victims' investments to be lost.
The organised criminals behind these schemes never intend to honour the investment. The sole purpose of boiler rooms is to embezzle victims' funds to benefit the organised crime syndicate, at the cost of those who need it most.
Example: Mr Smith's devastating loss
A telemarketing salesperson operating out of a boiler room cold-calls Mr Smith, a self-funded retiree, offering a too good to be true opportunity to invest in sports trading. Mr Smith was targeted as he appeared on a list identifying those who have a high income and an interest in investing. What Mr Smith didn't know was that the investment was incapable of producing the high profits it promised.
Mr Smith investigates the legitimacy of the company, checking out their professional looking website and glossy brochures, and confirming their office was located in a major Australian city. He also searches for any negative reviews online. The boiler room anticipates Mr Smith's due diligence; their office is virtual, any complaints about the company are quickly removed and people involved in the scheme post false positive testimonials regularly.
As Mr Smith sees no cause for concern, he agrees to proceed with the investment opportunity, providing the principal funds. He is then offered another opportunity to purchase expert trading advice for a significant 'subscription fee' which he gladly accepts to increase his earning potential.
After watching his online 'trading account' tick over, Mr Smith continues to add more funds to the investment. One day, he tries to withdraw some of his earnings and he is suddenly locked out of his account. He later learns the company has gone into voluntary administration.
The boiler room never traded on Mr Smith's behalf; the information he saw in his online account was completely false. Mr Smith's investments were laundered by an organised crime syndicate to fund their lavish lifestyles and allow them to engage in even more serious crimes.
The personal impact on Mr Smith's life was devastating; not only did he suffer a significant financial loss which he'll never get back, his wife no longer trusts him to make financial decisions, he has trouble sleeping and he takes antidepressants to ease his anxiety, stress and depression.
End of exampleTackling boiler room activity
We partner with intelligence, regulatory and law enforcement agencies to detect, prevent and bring the perpetrators of financial crime to account. We make no apologies for pursuing those who break the law. This behaviour is deliberate, calculated and cheats everyday Australians out of their hard-earned savings.
How to protect yourself
Boiler room syndicates rob victims of their savings and unfortunately most do not get their money back. Victims also often need support to move forward and rebuild their lives, both financially and non-financially.
If any of the following have occurred to you, you may be at risk of becoming a victim:
- You have completed an online survey and included details such as your salary and/or your interest in self-managed superannuation. Or, you have searched for investments online or attended an investment seminar. Your details may then be sold onwards.
- A salesperson approaches you with a slick and sophisticated sales pitch involving either financial management schemes or computer software. They will claim that the opportunity you are offered is low-risk and high-reward.
You can protect yourself from boiler room activity by:
- not being pressured into making decisions over the phone. Always take the time to conduct your own research and seek a second opinion from a trusted adviser
- being suspicious of anyone that offers you easy money. You may investigate the legitimacy of the salesperson before signing up for the 'investment'. Remember, boiler rooms often have virtual offices, false identities, fake receptionists and fake testimonials
- using the ASIC MoneySmart websiteExternal Link to stay informed on how to identify an investment scam and how to check if an investment is real
- confidentially reporting fraudulent activity to the ATO by making a tip-off or phoning 1800 060 062.