The so-called “boiler-room” scam may have been around for decades, but that doesn’t mean it isn’t keeping up with technology.
Boiler-room scams are high-pressure sales pitches from people who claim to be offering investments that will provide hefty returns, but are in reality either selling near-worthless penny stocks or simply trying to steal money from unwary investors. In recent months, the Financial Industry Regulatory Authority (FINRA) said it has seen an increase in the number of aggressive pitches.
Seniors should be especially wary of such solicitations because boiler-room operators tend to target older Americans, the regulatory group said. The scam has also been updated to take advantage of caller-ID services, showing victims a company name that sounds official or reputable, said Susan Axelrod, executive vice president of regulatory operations at FINRA.
That’s a similar twist to the more recent IRS scam, where fraudsters use caller-ID to make it appear that the tax agency is calling.
“It’s really about disguising a name and getting credibility,” Axelrod said. “Call spoofing makes it look legitimate.”
She said that while she’s not aware of boiler-room operators spoofing legitimate brokerages such as Merrill Lynch, they might use professional-sounding names similar to those of real Wall Street firms. Otherwise, the tactics remain remarkably unchanged, with the boiler-room scammers relying on high-pressure tactics to get their victims to hand over their money.
In one July case, a Texas man was scammed when a boiler-room operator convinced him to send two checks for $2,500 to what he believed was a securities firm. The company was nonexistent, however. In another case, an elderly couple lost $900,000 after they were convinced to buy almost worthless penny stocks, FINRA said.
Because seniors are living longer and many are worried about outliving their savings, some might be more susceptible to boiler-room pitches, which are designed to feed into investors’ desire to make some easy money. Add today’s low interest rates on top of a volatile market, and even more Americans may unwittingly fall victim to scammers.
A typical message, Axelrod said, is “’it’s guaranteed to make you money. Send me the money now.’” These operators, she added, “are always looking at ways to take advantage of people and commit fraud. Investors need to be alert.”
As a rule, investors should never agree to provide money, credit cards or access to their accounts while on a phone call, Axelrod said. She advises consumers to hang up and then look up the purported firm in FINRA’s broker check tool. For instance, searching for Global Arena Capital Corp. will uncover that the firm was expelled from the securities industry in January after engaging in a boiler-room operation.
FINRA also operates a securities help line for seniors at 1-844-574-3577 and a whistleblower line at 1-866-96-FINRA.
“The scams will come in different forms, and people will be creative,” Axelrod said. “It comes down to the basics: Know who you are doing business with, check with BrokerCheck to look up the background of the firm or individual. Never give out information like your Social Security number or credit card.”