The rare earth scam

Tony Levene
by Lovemoney Staff Tony Levene on 14 July 2012  |  Comments 14 comments

The rare earth scam is the new scam on the block. Don't be a victim!

The rare earth scam

Just what is “rare earth”? It's not the name of a colour out of a paint mixing machine. Nor is it a title in a science-fiction trilogy (and if anyone uses that idea, I want a share of the royalties).

Instead, it's the description of a number of metals, many used in electronics and other high-tech applications. And it is the latest scam.

Both in my own personal experience and that of the Financial Services Authority, landbanking (the sale of worthless farmland with the valueless promise of a fortune through planning consent) is fading. It's old hat – been around for a decade, so victims are harder to find.

Many landbankers moved seamlessly into carbon credits – another scam to part vulnerable victims from their savings. That's only a year or so old, but it is already starting to get the adverse attention it deserves, here and elsewhere.

So the smart scamsters are switching to rare earth metals (sometimes called rare earth elements) to stay a step ahead of investor awareness and two steps ahead of fraud fighters.

The new scam on the block

I have not been cold-called as yet – that will come – but over the past ten days, I've had three emails from “marketing companies” inviting me to apply for further details. This will mean a glossy but dodgy brochure and a call from someone reading from a script who will pick up around a third of whatever I can be persuaded to invest.

First, a chemistry lesson. My school, and many others, displayed the “periodic table of elements” in the science lab. It started with hydrogen and ended with uranium. Seventeen of these are called “rare earth elements” - including scandium, yttrium, and lanthanum. They are called “rare” because they are mixed up with other elements in metal ores and are difficult to purify rather than due to any lack of them. And as many are used in electronics, including your laptop and smartphone, recent recycling advances mean there are new sources.

The rare earth scamsters will play on their use in expensive, often essential, items such as x-ray machines, electric or hybrid cars, and flat screen televisions. Just as the carbon credit racket plays on “Kyoto” and “combating global warming”, the rare earth hucksters love “green technology”.

And they love quoting lines such as: “You can benefit from a market boom – these rose 200% over 2010-2011 so there are big profits. These are rare, they are used in 80% of all global industry, they are essential and they cannot be replicated synthetically.”

Whatever the truth of any of those statements – and like all good fraud lines, there is an element of veracity – investors will end up buying something that is absurdly overpriced and almost impossible to sell. Some of my emails suggest I could start at £1,000 to £5,000. There is simply no market in that amount – the real worth will be a tenth of that.

In any case, metals dealing is strictly for professionals.

The benefits of ownership

The sales email lists eight “key benefits of ownership”.

  • 100% independent ownership - you would expect to own what you bought

  • Secured in a bonded warehouse and insured – So what? Insurance on a near worthless lump of ore costs little. And do they expect you to take the stuff home?

  • Used in 80% of all global industry, especially technology. Yes, some (but not all) rare earth elements are used in high-tech manufacture. So is iron or aluminium, electricity and oil.

  • Scarce commodity – increasing in demand. No, they are not scarce. Extraction is pricey, but getting cheaper as techniques improve. So more nonsense.

  • Independently verified. A metallurgist's fee will probably exceed the real value. In many cases, there will not be any metal at all. Some scams will involve shares in rare earth element mining companies. These will be phoney as well.

  • Individual ownership certificate. This will not be worth the paper it is printed on – individual ownership does not prove value. Still, victims can frame it.

The last two are even more pernicious.

  • FSA Verification – the regulator does not verify anything, let alone a piece of metal ore. This is a lie to persuade investors to buy.

  • FSA-approved money handling and escrow account. This may be true but it is meaningless. Just because your money goes from your account to their pockets via an FSA-approved bank or other facility gives no indication of value. Remember, a safe deposit company does not care whether you keep something a piece of jewellery worth £10 or £10million in one of its boxes.

More on scams:

The scammers that tried to sue me

This scam will leave you with nothing but overpriced hand cream

This scam is just a simple confidence trick

How your details end up in the hands of cold callers

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Comments (14)

  • babyhk
    Love rating 10
    babyhk said

    Just let them spend their money on sending you their glossy catalogue . Then just re-cycle it yourself .. ready for the binmen.

    Report on 14 July 2012  |  Love thisLove  2 loves
  • houstonstewart
    Love rating 25
    houstonstewart said

    I too, like I'm sure thousands of others have also suddenly started to receive these emails plugging 'rare metals' and wondered what was driving this previously unheard of market (at least to probably most) and first thoughts were, another potential scam.

    So well done Tony in applying the logic as to why this is just the next scummy scammer trick. Why can't more be done to protect the innocents/victims from these utter b******ds, why can't there be a central body that has to check their validity and verify their claims of riches?

    Even if it were voluntary registration, the cautious at least could choose those that had submitted themselves for such accreditation. The police investigate some fraud cases after it's occurred, think how much money and grief could be saved if these bodies were vetted before 'Investment Houses' put themselves out there. The Financial Services have the FSA (God help us), travel industry have ATOL and ABTA, Landlords have huge amounts of red tape and any number of 'watchdogs' etc etc. So why is it so difficult to have a similar 'watchdog' for 'alternative investments' ?

    It seems at the moment the only real way of distinguishing between the genuine and the scammer investment offerings is 'trial and error' - high risk stuff!

    Maybe that's food for thought for you Tony and your next article???

    Report on 14 July 2012  |  Love thisLove  1 love
  • CuNNaXXa
    Love rating 410
    CuNNaXXa said

    There are three ways to earn a living these days.

    1) Work for it. The majority of us work for someone else and get paid via the PAYE system. For those of us who are self employed, we fulfil contracts and get paid directly, often surviving on our reputation. Regardless of whether you are self employed or employed, someone else pays you for services rendered.

    2) Invest it. All businesses need investment of some sort, and many people have got rich by investing large sums of money into a viable business, and reaping the rewards of placing their trust into a business concept someone else has devised. Also, agents invest their time and money sponsoring individual or groups, such as those in the entertainments industry.

    3) Steal it. It doesn't matter whether you are a burglar breaking into someone's house, a scammer with a novel idea to fleece witless idiots, or an MP who has worked out that he can live the life of Reilly on expenses he is not entitled to. Simply put, this group is getting bigger and bigger, because the current batch of laws isn't effective in stemming this tide of theft.

    We need to think ahead of the scum(scam) who conceive such ideas. Obviously, if they introduce a new way of taxing us, we have no choice but to pay, but if they create a new business model designed to make us invest in worthless junk or services, we need to heed the old saying, which is, 'If it is too good to be true, it probably is'...

    Stick with stable markets. Seek advice of those in the know. Ask questions. Use Google. If it smells even remotely deceptive, or an alarm bell rings at the back of your head, question it...

    The real bonus in today's world is that information is but a push of a button away. The internet is the boon of today, allowing people like Tony Levene to communicate to us, and vice versa. It is what it is there for, so USE IT!

    Report on 14 July 2012  |  Love thisLove  0 loves
  • houstonstewart
    Love rating 25
    houstonstewart said

    CuNNaXXa - not sure you intended to be off-hand by intimating that ALL victims of scams are 'witless idiots' because I don't believe most are - 'witless idiots' by definition probably wouldn't have had the funds to invest/lose in the first place plus the scale of the sums lost and numbers of people who invested and have lost would mean we have an epidemic of 'witless idiots'. Therefore such an explanation is to simple and trite.

    Also your 'Stick with stable markets. Seek advice of those in the know.' is painfully glib - which stable markets are you referring to and who do you trust enough to seek and take the advice of? Maybe you do have an insight and are fortunate enough to have the 'right' contacts but many don't - so such remarks could be interpreted as somewhat patronising.

    No offence intended but I believe there is a value in the likes of Tony's article, if it only made one possible 'investor' following through on a scam, then it was worth reading, witless idiot or not.

    Report on 14 July 2012  |  Love thisLove  0 loves
  • peterdmare
    Love rating 0
    peterdmare said

    "They are called “rare” because they are mixed up with other elements in metal ores and are difficult to purify rather than due to any lack of them."

    Actually, a company in Quebec, Canada, called Orbite Aluminae, has just proven that it can purify/extract these elements from clay (in an affordable way), using hydrochloric acid in a loop (recyclable). Legitimate independent institutions have verified the process. They own 100% of 6,441 hectares of this clay which can be mined easily (open-pit/homogeneous resource).

    Report on 14 July 2012  |  Love thisLove  0 loves
  • logical_one
    Love rating 46
    logical_one said

    Always be extremely cautious of investing in anything that has to do with so called "green" technology or "saving planets." Just like global warming, carbon credits, wind turbines and solar panels, they will be scams feeding off fear, false conscience and the misinformation of unfounded climate alarmism.

    I agree with much of the article but do not see how hybrid or electric cars can in any way be claimed to be essential to anything.

    Scam, scam, scam

    http://www.youtube.com/watch?v=_1NpYb0bbWk

    Report on 15 July 2012  |  Love thisLove  5 loves
  • rocketflies
    Love rating 34
    rocketflies said

    babyhk had the right idea......get the scammers to send their glossy brochures then bin them. However, you can bet they will have been paid for by some government grant.....:-(

    Report on 15 July 2012  |  Love thisLove  2 loves
  • electricblue
    Love rating 769
    electricblue said

    "do not see how hybrid or electric cars can in any way be claimed to be essential to anything"

    Other than the continued existence of mankind as a civilised and mobile society?

    Neodymium is a rare earth used in creating high power magnets and is fundamental to many of the products we take for granted. It isn't actually any rarer than many other elements, but is essential to modern electric motors. Rare earths are victim to global politics and scams abound but denegrating hybrid and electric vehicles is just plain stupid. We do need sustainable and efficient power generation, but the end goal of using that power to fuel electric vehicles is the only way we can continue our mobile society as it has developed.

    Report on 15 July 2012  |  Love thisLove  0 loves
  • hopefultom
    Love rating 50
    hopefultom said

    CuNNaXXa

    " Obviously, if they introduce a new way of taxing us, we have no choice but to pay "

    I think that the likes of Gary Barlow, Jimmy Carr, Alex Ferguson, assorted Tory "non-doms" and many others may disagree with that statement.

    As one American lady said, recently, "only little people pay tax "

    Report on 16 July 2012  |  Love thisLove  0 loves
  • CuNNaXXa
    Love rating 410
    CuNNaXXa said

    @ hopefultom...

    You have to be wealthy to evade or escape taxation... The poor have no escape. If Alex Ferguson was forced to live in my bungalow, I am sure he would complain bitterly, as would those other names in your list.

    The common person is taxed to the hilt, whereas the wealthy can afford to employ specialists who know how to abuse our tax laws (loophole or not).

    @ houstonstewart...

    I say a lot of things tongue in cheek. My reference to witless idiots is obviously how scammers see us. I'll relate a little story to you, for your amusement.

    I consider myself quite savvy, so was set back when I got a phone call from a company telling me that they could recover my PPI for me. When I told them that I had not paid PPI, they then asked if I had borrowed money during the last ten years. When I replied that I had, they dutifully informed me that my bank would have collected PPI without my knowledge.

    How many people would fall for this scam?

    To them, we are witless idiots who can be convinced to go along with whatever bullshit they want to feed us.

    Thankfully, I turned the tables on the guy, by asking him if he thought I was STOOPID? When he asked what I meant, I stated that he must think I am STOOPID because I made PPI payments without knowing about it.

    These people are well briefed to deal with any questions we may throw at them. They rehearse their lines so that they appear seamless, and come across as professional and all knowing.

    It takes a really switched on person to spot when they are being led along by their nose.

    Remember that when we pick up the phone, we have no idea what the caller wants, but they are fully prepared to ensnare us in whatever scheme they have hatched, regardless of whether it is PPI or that accident you didn't have.

    So, witless idiot is a description that many sales people attach to the rest of us.

    Oh, and I know several salesmen who think of customers in that regard. As one salesman said to me, customers don't know what they want, and it is our job to make their minds up for them.

    Report on 16 July 2012  |  Love thisLove  0 loves
  • larryf
    Love rating 1
    larryf said

    Perhaps the terminology "witless idiots" is a bit strong but "idiots" applies. When I read of some of the things that people fall for I can see only one excuse they can justifiably offer......... Unadulterated greed that overcomes their common sense.

    The quoted maxim " if it looks to good to be true it probably is" has always worked for me!

    Report on 18 August 2012  |  Love thisLove  0 loves
  • alexconway
    Love rating 0
    alexconway said

    Hi, I've just been approached by this company: http://londonmetalgroup.com/

    has anyone had any dealings? i.e. should I be investing or just leaving well alone?

    Report on 27 September 2012  |  Love thisLove  0 loves
  • Gavster3
    Love rating 0
    Gavster3 said

    Its all about choosing the right company, there are profits to be reaped in this market just make sure you do your own due diligence before investing. It is clear there will be future issues surrounding supply, and with all new tech taking advantage of REE properties the price has to increase.

    Report on 05 October 2012  |  Love thisLove  0 loves
  • mr skin
    Love rating 0
    mr skin said

    i sold my land and made 26% in 9 months, anyone who is stupid enough to buy carbon credits well i say more full them!! who would spend thousands of pounds on a product and company the obviously dont know nothing about! your all a bit backwards, dog eat dog world............... if your dumb enough to buy it good luck to them selling it to you! christine skinner JP Morgan

    Report on 28 January 2013  |  Love thisLove  0 loves

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