As depicted in the popular movie Boiler Room, boiler room scams are expertly crafted schemes to unload non-existent shares or shares worth nothing on unknowing targets. If such shares exist, they typically have an elevated risk, prove unmarketable after initial acquisition and ultimately fetch the seller an inflated price. In reality, the company’s true value is much less than the amount touted in the sales pitch. In some cases, the shares and company are both non-existent. Some boiler room scammers will push hard up until you fork over a deposit at which time they will make a quick exit. Certain scams have evolved to the point that purchasers are contacted by fake buyers who claim they are willing to pay a lofty price only to convince the seller to pay a fee that leads to a dead end.
How to Identify a Boiler Room Scam
If you remain vigilant, you will have a better chance at identifying the true motives of your callers, emailers and other sales professionals. The first sign of a boiler room scam is a cold call that appears out of the blue. If you are not a regular customer of the company in question or if you have never done business with them, it is a cold call. Furthermore, if the business in question has a fancy name, it is a sign the person on the other end of the line is a fraudster under the guise of a name that sounds professional. Beware of overly formal and advanced job titles as such accolades are commonly used to impress targets.
Companies based abroad are more likely than domestic companies to run boiler room scams. Plenty of these groups have a telephone number listed in the United Kingdom or United States even though they are located elsewhere. Regardless of their contact number, these groups will likely pitch lofty returns. These promises, along with the commonly-offered free gift are clear signs the entire operation is a scam.
Do Some Homework Before Investing
Study up on the person or group offering the investment. Check with the Better Business Bureau and online review directories. Determine if the promoter is registered. If the party in question is not registered with the local securities regulator, move on to an investment that is more transparent and legitimate.
Pressure to Agree on the Spot is a Sign of Trouble
Boiler room scammers are notorious for attempting to force targets to buy in the moment. Scammers do not want you to hang up and think about making the purchase. If you are subjected to high pressure sales tactics that attempt to convince you to agree to terms on the spot or if you feel pressured to make a decision under pressure, excuse yourself from the discussion and do not fork over your money.
Insider Claims are Cause for Concern
Any group that claims to have insider facts or other inside knowledge is a looming problem. Such a group will never reveal how it obtained the insider knowledge. Furthermore, why would any group share such information? If they did obtain it, did they obtain it illegally? Boiler room fraudsters will even promise buyers that they cannot lose. The truth is all investments carry a level of risk. If anyone promises you a guaranteed return or a risk-free investment, they are merely out to steal your money.
A Request to Maintain Confidentiality is a Major Problem
Scammers do not want you to report information of their fraud to others. These fraudsters will likely request that you keep all information they provided to yourself. This is the exact opposite of transparent and legitimate businesses that want you to spread the word about their services. So be skeptical of any group that asks for full confidentiality.
Take Your Time, Get a Second Opinion and You Will not Fall Victim to Boiler Room Scams
When in doubt, err on the side of caution by obtaining a second opinion. You have every reason to be skeptical of the person on the other end of the line or screen. Obtain a second opinion from a trusted investment professional or attorney. Take your time, do not feel pressured to spend quickly and you will likely emerge with a decision you feel more confident about.