Rare earth metals: the scam that's got the FSA worried

Tony Levene
by Lovemoney Staff Tony Levene on 01 December 2012  |  Comments 14 comments

This week the financial regulator felt compelled to issue a public warning about rare earth metal scams. Here's why it's becoming the favourite scam for crooks and conmen.

Rare earth metals: the scam that's got the FSA worried

The Financial Services Authority posted a warning on rare earth metals (also known as rare earth elements) earlier this week. So it's worth revisiting this scam, particularly as I have just been offered a six kilo package of rare earth elements in a so-called 'green energy bundle' for £6,744.

This seller told me I would get a kilo each of Yddrium and Dysprosium and two kilos each of Lanthium and Neodymium. I don't know what I would do with them (or what they are for), but I was assured they would be stored in a bonded warehouse near Gatwick controlled by HM Customs & Excise, part of HMRC.

Now I have no doubt there are bonded warehouses near airports, but all they do is act as storage until UK duties and taxes are paid when the goods can be released. Bonded warehousing is no guarantee of value.

An FSA-approved metallurgist?!

Even more fancifully, the salesperson assured me that these were not just any old lumps of metal – other firms sell low-grade metal ore – but they were high quality, with the assurance they had been checked out by an FSA-approved metallurgist. “An FSA company checks all metals,” I was informed.

That is news to me – and more importantly to the FSA, which has nothing whatsoever to do with metals or with anyone offering to verify the purity of a lump of unprocessed metal ore. My asking the FSA whether it regulated metallurgists was probably the most obscure question posed to the watchdog for many a year, and may have played a part in the FSA publishing its warning.

The scammer assured me that my six kilo package would be insured with Lloyd's of London. Even if this was true (and it is unlikely) the policy would cost peanuts. Criminals are hardly lining up to raid lumps of ore from secure warehouses. They are either bright enough to realise the metals are an overpriced swindle or they are out selling the stuff themselves to vulnerable investors.

On top of that conversation I was targeted with three phone calls from other unauthorised sales outfits and several emails which lead to yet more dodgy sales peoples.

It is a veritable epidemic as dishonest salespeople try to scoop up cash as fast as possible before they are rumbled. As I wrote last week, rare earths have replaced carbon credits as the scam of choice, and many of the salespeople currently peddling them can trace a career back to landbanking and, before that, wine and whisky.

A grain of truth

The rare earths scam story depends on some basic supply and demand factors. And as usual, there is a grain of truth, but not much more, in what they say. So we have a quote from Barack Obama where he apparently said: “The U.S.'s energy future depends on rare earth elements". Yes, until someone comes up with a better idea, then the elements are needed.

But that is not a reason to invest in a market which has no visible price markers, unlike gold or silver, and where the metals are dealt on private markets rather than public exchanges. I have literally no idea of the real resale value of the six kilo pack I was offered. And it means I cannot check statements such as “the price of rare elements has jumped on average 200% over the last few years, outperforming all other investments” where just about every word is either vague or untrue.

I was also told that these are “the most crucial elements for human evolution since steel and oil”. Maybe, but steel and oil have never turned in the quick gains scammers promise.

And what about “the Chinese and North Korean governments are already holding secret talks to exploit Korea's $6 trillion rare earth elements supply and monopolise the world's supply”?

North Korea is a new one – added in to give a feeling of conspiracy. But a recent article in the august Financial Times provides useful background to the reality, rather than the fanciful stories the sellers peddle. This relates how China is trying to increase production to boost its own manufacturing sector and increase world demand for the consumer goods on which its factories depend. And the article makes it clear that others are moving in on processing the metals, which are not rare at all but difficult to extract without pollution.

This is hardly surprising in metals – as prices rise, new producers come on stream. Non-Chinese production could rise tenfold between now and 2015.

No viable market

The FSA says in its warning: “We are yet to see any convincing evidence that there is a viable market for retail investors to make money from investments in rare earth metals. Companies that use the metals almost always buy in very large quantities, making it highly unlikely they will deal with small independent retail consumers.”

That does not sound hopeful for whoever bought those six kilos that I turned down – assuming they ever existed.

More on scams:

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The email phishing scam that relies on your stupidity

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Comments (14)

  • DrWealth
    Love rating 0
    DrWealth said

    "That does not sound hopeful for whoever bought those six kilos that I turned down – assuming they ever existed."

    Anybody who did chemistry at school will tell you right now that two of those "metals" don't actually exist at all. Yddrium and lanthium? Pure figments of someone's warped imaginings. Maybe they should spend a couple of milliseconds online looking for a periodic table to get their facts right, at least. (For those who want the answer, 10 points if you said yttrium, and another 10 for lanthanum.)

    Thankfully, it's the usual acid-test which unearths scammers - that they invariably cannot spell! If I'd got an otherwise trustworthy-looking email, which went on to talk about yddrium, I'd have deleted it post haste.

    Report on 01 December 2012  |  Love thisLove  0 loves
  • amwell44
    Love rating 84
    amwell44 said

    Thanks Tony. I always read your informative pieces. The only thing that puzzles me is why the scammers try their luck with you every time and never with me, for instance. I would have expected your number to be blacklisted by now.

    Report on 01 December 2012  |  Love thisLove  2 loves
  • Overtone
    Love rating 46
    Overtone said

    Interesting article - I was phoned last night by Joseph Hannam from a company calling itself Richmond Clevely. He said he'd got my name from another broker who'd tried to sell me carbon credits a few weeks ago. He was offering rare earths, the names of which I didn't recognise, though I'm not an expert in the upper reaches of the periodic table. His line was that these elements are essential for the production of things like iphones, but they are mostly produced in China, which intends to forbid their export elsewhere. We didn't get as far as the quantity I might buy, because I asked him who he had got my name from, and it appeared that he himself is the person who previously wanted to sell me the carbon credits. Through Google I got to the Companies House info about Richmond Clevely, which showed it was set up six weeks ago, director and secretary Joseph Hannam aged 23. I like the classy kind of names these people use for their companies. You could almost say that if you get a call from Richmond Clevely, or Delacour, or Carrington Energy Markets, or any similar name, warning bells should sound.

    Report on 01 December 2012  |  Love thisLove  1 love
  • Michael Smith
    Love rating 1
    Michael Smith said

    It's an interesting article, yes. There are countless scams out there. Surely, anyone with any sense, would ignore any approach from such scammers. Is this article supposed to target those without any sense? I have investigated many times of fraud, and like many crimes, or attempts to commit, I have to say that in many cases the victims must share the blame for their ability to allow themselves to be sucked in.

    The FSA, police and other authorities have one hell of a job picking up the pieces of victim's blind, and often greedy ventures. How much does ignorance cost us?

    Report on 01 December 2012  |  Love thisLove  1 love
  • Dudleyjock
    Love rating 0
    Dudleyjock said

    got a phone call myself off some one i cant recall, but he'd already e-mailed me and wondered if I'd read it. These people are 99.9% of the time operating a scam so I just kept him talking (I was in the car being driven home from work, nothing particularly important to do) as he assured me how valuable my investment would be, how I could make money hand over fist in a short period of time. I have to admit he sounded like he knew what he was talking about, tho thats partly because I had no idea so he was plausible.

    Strangely as he asked me if I'd be interested I threw a curve ball and fabricated a story of my own saying I was coming out of bankruptcy soon and may well be interested. I think the conversation lasted about 20 more seconds and I've heard nothing since :)

    Report on 02 December 2012  |  Love thisLove  0 loves
  • CuNNaXXa
    Love rating 415
    CuNNaXXa said

    Overtone said...

    Through Google I got to the Companies House info about Richmond Clevely, which showed it was set up six weeks ago, director and secretary Joseph Hannam aged 23.

    Why doesn't he go out and get a proper job like all the other kids of his age.

    It is bad when scammers are middle aged ex double glazing salesmen, or estate agents dabbling on the side, but when someone just out of puberty tries to con people, it makes me wonder what sort of education they have had.

    I apologise if I offend anyone in their twenties,, but when you reach fifty odd, twenty seems an eternity ago. Besides, when I was selling my last house, I had some twenty something estate agent trying to teach me to suck eggs regarding the marketing strategy they would employ.

    (NOTE: An agent told me that she knew more about selling a house than I did because she had sold thousands of homes. 'You've moved a lot', was all I said).

    Actually, an estate agent is a pertinent point in this article, because an estate agent has absolutely no qualifications whatsoever. There are no degrees or City & Guilds exams, diplomas or other certificates that the job requires. This means anyone can proclaim to be a property professional, even if they have only been doing it for one day.

    Bare this in mind when dealing with any sort of salesman. If someone is selling you rare earth elements, ask them what qualifies them to sell this? Ask them what makes them better than the competition? Get them to quote qualifications earned, and where they earned them?

    If someone is genuine, they will list what they have achieved and where they achieved those qualifications. Someone who is ad libbing will want to control the conversation, rather than allow you to control the conversation.

    Ad lib yourself to throw them at every opportunity. If they are speaking, they stay in control, but if you interject questions at every opportunity, they start to lose control. If they manage to ad lib answers, question their answers, so if they state they have a chemistry degree from Oxford University, ask them who their house head was, or the name of their best mate, or what pub they used when they lived in Oxford.

    It doesn't matter whether you know the answers to the questions you pose. All you want to see is the response. If there is a delay while they think about an answer, you probably have them banged to rights, but if they answer easily, they are probably giving you genuine answers.

    Always remember that when people are lying, they can only go so deep before they lose track, whereas someone relying on their memories of actual events can call up numerous information.

    Finally, as amwell44 has stated, these criminals must be extremely thick, because they should all realise by now that Tony Levene writes for LoveMoney, and will expose them for what they really are.

    Report on 02 December 2012  |  Love thisLove  0 loves
  • Extremist
    Love rating 18
    Extremist said

    What colour is the boat house at Hereford?

    Report on 03 December 2012  |  Love thisLove  0 loves
  • oldhenry
    Love rating 350
    oldhenry said

    Rare earth is used in the manufcature of solar panels, another 'scam' in my book but one that we energy users are all paying for. It is not just the finance sector up to scamming, the governmnet are doing all the time.

    Report on 03 December 2012  |  Love thisLove  0 loves
  • CuNNaXXa
    Love rating 415
    CuNNaXXa said

    Extremist said

    What colour is the boat house at Hereford?

    Straight out of Ronin.

    If it works for Robert De Niro, it can work for any of us.

    Report on 04 December 2012  |  Love thisLove  0 loves
  • finnol49
    Love rating 29
    finnol49 said

    If I were offered any rare earth metals, I would insist on testing them myself with AES spectroscopy before buying. Some rare earth metals are used in modern technology. Neodymium is particularly useful as it makes very strong magnets. Most rare earth metals are only mined in China, & with the increase in electronic manufacturing in China, there is less available for the rest of the world. There used to be a mine in California, but the run off was so poisonous that the mine was closed on environmental grounds.

    Report on 09 December 2012  |  Love thisLove  0 loves
  • electricblue
    Love rating 785
    electricblue said

    I can't find any trace of Rare Earths having anything whatsoever to do with solar panel production. I suspect that Oldhenry knows about as much on the subject as the Muppet Obama does.

    Report on 10 December 2012  |  Love thisLove  0 loves
  • Mugs
    Love rating 0
    Mugs said

    @ electricblue

    Oxford University researchers may have cracked open a new route to exploiting solar power with the discovery of a low-cost alternative to indium, the scarce - and expensive - rare earth element that has been the key ingredient in photovoltaic panels for half a century.

    Read the rest yourself ;)

    http://www.flightglobal.com/news/articles/abundant-zinc-could-replace-rare-earth-staple-in-solar-panels-373646/

    Report on 27 December 2012  |  Love thisLove  0 loves
  • electricblue
    Love rating 785
    electricblue said

    @Mugs

    Indium, atomic number 49, is NOT a rare earth metal it is a main group, or p-block metal. That is why it is not on the list of Rare Earth Metals. It is a rare element, however.

    As defined by IUPAC, rare earth elements or rare earth metals are a set of seventeen chemical elements in the periodic table, specifically the fifteen lanthanides plus scandium and yttrium.[2] Scandium and yttrium are considered rare earth elements since they tend to occur in the same ore deposits as the lanthanides and exhibit similar chemical properties.

    These elements are on the periodic table from atomic number 57 to atomic number 71.

    Report on 27 December 2012  |  Love thisLove  0 loves
  • Mugs
    Love rating 0
    Mugs said

    @eb

    I believe the term is schooled ?

    lmao merry xmas :-)

    Report on 27 December 2012  |  Love thisLove  0 loves

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