Boiler Room Scheme Defrauds Victims of More Than $8.4 Million

Early this month, the United States Department of Justice (DOJ) announced the indictment of five defendants, each of whom have been charged in connection with an $8.4 million “boiler room” and money laundering scheme. [1] In addition to the DOJ’s criminal indictment of the group, the Securities and Exchange Commission also filed a civil case seeking injunctions and civil penalties. [2]

“Boiler room” operations are fraudulent schemes in which high-pressure, coercive sales tactics are used to induce clients into purchasing stocks or other investments. [3] Often, these operations consist of groups of salespeople working from offices in foreign countries who cold-call clients in an attempt to defraud them. [3] The salespeople involved in boiler room schemes are rarely licensed brokers, and the stocks they purport to sell may not exist at all. [3]

In the instant case, the DOJ alleges that the defendants conspired to commit securities fraud when they engaged in a boiler room scheme involving fake investment firms and shell companies used to mislead investors. [1] The alleged scheme operated from approximately June 2019 until August 2021, and defrauded English-speaking investors across the globe of more than $8 million. [4]

The defendants falsely held themselves out to prospective investors as employees of well-regarded investment firms, going so far as to fabricate websites and email accounts that appeared to be associated with these actual firms. [4]

Furthermore, the DOJ alleges that the defendants engaged in classic boiler room scheme telemarketing tactics to convince clients to wire large sums of money from their bank accounts to the defendants, under the false impression that they were purchasing securities. [4] Yet the defendants never invested the money, nor did they return the money to the victims. [4]

After stealing more than $8.4 million through this scheme, the DOJ alleges that the defendants went on to launder over $4.6 million of the stolen money, once again sending it overseas. [4] The proceeds were then split amongst the scheme’s conspirators. [4]

The SEC’s parallel civil action sheds additional light on the details of this boiler room scheme. According to the SEC”s February 9, 2022, complaint, the scheme primarily targeted retirement-age and elderly victims, whom the defendants convinced to purchase fake securities traded on U.S. exchanges. [ 2]

The complaint notes that Defendant Robert Leonard Booth operated boiler rooms with offices in both Thailand and Panama from 2019 until 2020. [2] Booth was not registered with the SEC in any capacity and worked in connection with other defendants who owned the various shell companies which victims were instructed to wire their payments. [2]

The group of fraudsters charged in this case stole the hard-earned savings of more than 140 unsuspecting victims. [2] As noted in the SEC”s complaint, this schemes particularly targeted elderly victims, highlighting the insidious nature of boiler room schemes within this particular vulnerable population. Of course, the hard-selling tactics employed by boiler room investment fraudsters could well mislead any prospective investor.

You can protect yourself from boiler room fraud by staying alert for a few key red flags commonly employed by these fraudsters. Some such red flags include offers for outrageously lucrative yet low-risk investment opportunities, a reluctance to divulge detailed information about the investment firm the salesperson works for, and references to secret or insider information. [5]

Additionally, investors are cautioned not to make immediate investment decisions over the phone or by email. Instead, it is important to carefully consider any potential investment opportunities by pausing and conducting research on the credibility of the firm and investment opportunity. [5] A simple way to check a stock salesperson who calls is to put their name into www.brokercheck.com and see what pops up.

If you think you have been impacted by a boiler room scheme or another fraudulent investment scheme, a trusted attorney at Savage Villoch law is ready to assist you in navigating your situation.

Sources: [1] https://www.justice.gov/usao-sdny/pr/five-defendants-charged-84-million-boiler-room-fraud-and-money-laundering-scheme [2] https://www.sec.gov/litigation/complaints/2022/comp25326.pdf [3] https://www.investopedia.com/ask/answers/what-is-a-boiler-room-operation/ [4] https://www.justice.gov/usao-sdny/press-release/file/1470416/download [5] https://www.forbes.com/sites/bartastor/2017/09/09/cracking-down-on-boiler-room-fraud-self-defense-tactics-to-fight-off-the-crooks/?sh=160a10e527ec