Boiler room scams on the rise

A court order has recently been placed against a company that were operating a boiler room scam.

The order has been obtained by the Financial Services Authority and has secured around £60,000 in compensation for victims of the scam.

The name of the company operating the scam was called Monobank Plc and they released literature to people stating that they were establishing a credit card in Europe. Upon closer investigation the FSA found that this was not the case.

Despite the lack of development it was still possible for the company to become quoted on the smaller part of the Frankfurt Stock Exchange which is dedicated to smaller companies – this stock exchange comes with fewer regulations than the main one operating in the city. The ruling came from the High Court by Mr Justice Peter Smith and he found that the company were trying to sell worthless shares to the UK consumer.

The £60,000 is only a small amount of the money that the FSA hopes to finally secure. It is estimated that there are 20 people who have become victims of the scam but the authority have indicated that there are probably more people yet to come forward. All those who lost money will be entitled to some amount of compensation.

The director of financial crime for the FSA is Tracy McDermott who has commented, “This company knew exactly what was going on with their shares and how they were being sold to customers through companies operating boiler room scams. We are very pleased to announce that we are going to be able to recover some of the money so it can be given back to the people who were taken advantage of.

“Unfortunately, this sort of compensation is usually not possible and those who have been taken in by this type of scam simply lose their money.” First actions against the company were taken in the middle of last year with a High Court injunction that froze the assets of the company.

A boiler room scam is an operation where conmen phone up targets and persuade them to invest into shares that are either significantly overpriced or don’t actually exist. Normally these companies operate overseas and have a fake address and telephone number in the UK. Unfortunately, their being overseas complicates the legal situation which means that investors often lose everything they put in.

The FSA have important advice to be followed on how to avoid being taken in by a boiler room scam. The most important step is to ignore anyone who tries to sell you shares over the phone, all you should do is take down the details and then look them up on the FSA Register to see if the company is allowed to sell shares in the UK.

If they are not, report the company to the police or to the FSA. You could also check to see whether the company is listed on the FSA’s compilation of unauthorised businesses.