Investment Frauds
On my wrist is a nice watch. It’s a Rolex Milgauss, with a black face and a stainless-steel bracelet. I would describe it as classy rather than flashy and it cost me about £9,000. Very few people comment on it as it’s a bit subtle compared to many of their more ‘blingy’ models.
About 18 months ago I was having a coffee with an ex ‘colleague’ discussing emerging opportunities in relation to crypto currencies. When he saw my watch and asked if it was real or a good copy, I blushed as I knew that (in my ‘old life’) many had suffered so I could buy that watch.
He then asked if I would be interested in joining him and another guy named ‘Chris’ in a scam to persuade punters to invest in collectable high-quality watches. He told me that trusted contacts in the trade would buy the watches from reputable auction houses to guarantee their provenance and authenticity. The watches would be held in a secure vault in Central London until their value increased to a point at which they would be resold, the profits realised and then shared with investors.
The Pitch
He reached into his man bag and pulled out a glossy tri-fold brochure that contained photographs of watches including Rolex, Piaget and Patek Philippe. These were accompanied by the sales blurb and steeply ascending lines on a graph, comparing their increasing value when plotted against the FTSE 100, over the past 10 years. Each investor would have to make an investment of between £10,000 and £100,000, and in return would receive a certificate that detailed the exact watch(es) in which they had invested. The eventual sale would be at the discretion of the company directors and as this was a medium to long-term investment, the minimum period of investment was five years. While I already knew the answer, I felt obliged to play along and ask him, “So where is the scam?” He replied, “There are no watches - it’s complete fantasy”.
I’m aware that most investors are normally very compliant, especially when they are trusting in the experience and skills of an industry expert; who are they to argue that the collectible watch market has peaked? However, what if a more belligerent family member decided to step in and demand to see the watch in the vault? He said that if that happened, the investment contract included a clause that the company could, at any time, return the original investment, less any (huge) administrative fees. This effectively turned the scam into a Ponzi Scheme, as the money from new investors would simply be used to pay those that wanted their money back.
Meeting the Mastermind
Being a lover of watches myself made no difference whatsoever to me as they didn’t really exist. However, this scam was something different. I could see why people, who were frustrated by the low interest rates currently available through banks and building societies might be tempted, so out of ‘professional curiosity’ I agreed to meet Chris and talk through the details.
The offices were rented and shabby with a sticky carpet and a toilet that was an obvious health hazard. While I do not pretend to be anything other than a reformed fraudster, this guy made even my skin crawl. He wore the most ornate and trashy Rolex I had ever seen, clearly a prop for meeting potential investors, and aftershave that was last used as a defoliant during the Vietnam War. The office had three desks, each staffed by a guy under 25 and who sounded as if they had watched The Wolf of Wall Street as a training video.
As much as this was clearly a ‘boiler-room operation’ by dint of the pressure being applied to prospective investors, Chris was also taking supervision and coaching seriously. He listened in to the calls themselves and provided immediate ‘feedback’ to the sales team. This included throwing a stapler at the head of one guy who had apparently missed an open goal to close a deal. They all worked to the same script, each of them personalising it slightly as they chatted to their prey. I picked up a spare script and noticed that the words ‘uncertified diamonds’ had been scrawled out and ‘collectable watches’ added in its place. I pointed to it and looked quizzically at my contact. ‘What does it matter?’ he replied “They didn’t exist any more than the watches do. We might be selling unicorn teeth next month!”
Previous Scams
Apparently, one of Chris’s most successful scams had involved investing in classic cars. The glossy brochures showed men and women enjoying wind-in-the-hair motoring as they whizzed down country lanes on a bright summer's day in a convertible red E-Type Jag. Investors were invited to buy investment bonds at £10,000 each. This money would be used to buy appreciating classic cars which would be stored in secure warehouses and lovingly cared for by professional mechanics. As an incentive, the purchase of each bond would entitle the investor one weekend every 3 months to loan a classic of their choice, and everything other than petrol was included. In 4 months, a team of 3 (2 men and one woman) took just over £2 million from investors. By the time the scam had been discovered they had moved on to something else and the money was long gone.
I politely refused the offer of a coffee owing to the state of the mugs and sat down to talk business in a small side office. With the door closed, Chris described the sales team as ‘too thick to understand the risks they were taking,’ and as he was only paying them on results, and in cash, there was nothing to tie him into what was going on. I then asked where he was getting his sales leads from; he said that he was sick of paying a fortune for lists of people who’ fitted the necessary demographic’, only for them to politely hang up. Instead, he had recently tried something different.
Chris had maintained his contacts with a few of those still topping up their tans and bank accounts on the back of dodgy timeshare scams and knew the value of the contact lists that guests fill in prior to attending the sales pitch (thinly disguised as an afternoon drinks party). In no time at all he had 4 guys and 2 women taking photos of those contact lists of punters and sending them to him on his mobile. Each full page of contacts earned them a crisp £50 note.
For those of us old enough to remember high interest rates on savings at 10% - and mortgages at 15%, boiler rooms in those days had to offer something much more attractive to tempt punters. If anything, austerity has worked in the fraudster's favour. Whilst savings rates currently languish at 3-5%, anyone offering you a 50% return on investment would immediately look suspicious, however, the same cannot be said for someone guaranteeing you a 'safe' 12-15% annual return.
Reflections and Advice
Having given up defrauding victims and now having to earn a legitimate living, I really understand the need to manage my money efficiently. This includes what I do with any surplus cash that I might want to invest. I appreciate that my particular experience provides me with a completely different outlook on life - and sometimes I find myself being overly suspicious of nearly everyone. The old saying that ‘if it looks too good to be true, then it probably is’ – this is 100% accurate.
Chris and his fellow boiler room colleagues are clever. They regularly change location, use technology to mask their true identities and employ people who have few (if any) scruples. They regularly target victims who may be vulnerable or be susceptible to being scammed for a variety of reasons.
A Word of Caution
If I had any advice to someone receiving a call from the likes of Chris or his team, it would simply be to hang up immediately without engaging in any conversation whatsoever.
Do not speak to them at all.
There is no need to be polite - just put the phone down and walk away. You have been warned.