The fund recovery scam
Tony Levene gets a phonecall from an American scammer, promising him financial salvation.
A guy with an American accent calls. He tells me he works for a firm whose details and name he can't give me until I sign up as a client.
“So why should I become a client if I don't know who I am dealing with?” I query.
“You're not the first person to ask that,” he replies. “But to put you at your ease, our firm was founded in 2008 by President George W Bush with the support of the World Trade Organization, the World Bank and the Wall Street Journal.”
So what was this firm that former president Bush could take time off from the White House to set up? And what has all this to do with me? After all, he knew my name and phone number.
He told me the firm was into “fund recovery”, working “in conjunction with a network of accredited financial institutions, banks, brokerage firms, and legal and tax professionals throughout the world”.
Cold-calling is banned in the UK
Well, obviously none of these firms can be in the UK, where investment cold-calling is banned. So bang goes investor protection.
He informed me I had bought “about five or six years ago” a share or a fund which I had either forgotten about or that I must have thought was worthless.
Unsurprisingly, I asked the name of the share or fund which I had forgotten – perhaps to nudge my memory. He said he had about 200 on his list so he started to rattle them off. After hearing some 50 – mostly variations on common words such a mining, technology, consolidated, group, assets, property, in other words typical boiler room stocks – he admitted that he did not know the name of the stock which I was supposed to hold.
He would put me in touch with licensed brokers in the US who were the only ones who could free up my money once I became a client. So how much would this cost?
He could not tell me but he assured me his firm was a “not for profit” organisation. This is always an interesting phrase as it does not preclude those working there from paying themselves majestically – and giving themselves huge commissions and bonuses on top. Payments to staff are made before profits are declared.
He assured me his list could not be wrong – and that only the brokers he represented could recover my money.
The only road to financial salvation?
“Why couldn't I sell through a UK stockbroker?” - a not unreasonable question.
“It would be against US law,” came the reply. I argued that this was not true – after all UK investors deal through brokers every day in Exxon, Coca-Cola, Microsoft, Apple and many others. But he insisted that his was the only road to my financial salvation.
He added: “As we are a non-profit organisation, we are required to work incredibly cost-efficiently, meaning that we do not have the luxury of time to follow up with you regarding the submission of your paperwork.”
Finally, he conceded that my name could have been on a share register even though I had never bought the shares.
“You probably expressed interest in the shares so your details were added to the register ahead of receiving payment,” he helpfully explained. What a strange register where purchasers and non-purchasers are equally represented.
What’s going on here?
This is a new variant of the “recovery room” scam. In the classic version, a boiler room calls a previous victim posing as a broker acting for an undisclosed party which wants to take over your worthless shares at a huge profit. The only snag in return for this good news is you have to pay an upfront fee – typically £5,000 or more. There is, of course, no takeover and you have thrown good money after bad.
In this variation, the recovery room has a list of potential victims – it does not know the shares. So the scam is either to persuade investors that they might have bought shares that they have forgotten or to persuade them to reveal the name. Once that happens, they'll be told “good news” (as above) and asked to send the money for “legal costs” or “brokerage fees”. Whatever the story, this is bad news.
And my protestations that I held no shares were ignored. About a minute later, an email arrived with; “Following your conversation with myself today, please find enclosed the relevant documents for you to fill in and return, along with a copy of a Limited Power of Attorney which I will need returned to allow us to carry out research and to verify your holdings. “
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