Intermediaries are being warned against overseas investment scams that offer spectacular returns o...
Intermediaries are being warned against overseas investment scams that offer spectacular returns over short periods of time and that require sending large amounts of money to different countries.
Stephen Kerbel, director general at Ofta, the trade body for offshore financial advisers, said: "People are still getting trapped by these types of overseas scams. If it sounds to good to be true it certainly is."
New Zealand investors recently lost $1m in funds in an overseas scam that promised returns of 500% in six to eight weeks.
The funds were paid to the Equity Solutions Group on the basis that the money stayed in a New Zealand bank account. A letter confirming the fund's existence was supposed to be provided by the bank and supplied to a trader in the US, where somehow the trader would use the letter to trade, making up to 2000% per week.
The money was supposed to go to an offshore high yield investment. However, when the money was sent to the US the $1m was lost.
There have been many fraud investigations involving these types of overseas scams. They are based outside the country and involve high-pressured selling techniques to encourage investors to spend considerable amounts of money on worthless shares. Once the boiler room has taken investors' money it may vanish and reappear under a different name.
In the UK, a hotline has been established by the Financial Services Authority (FSA) for those who had fallen victim to these scams. In a recent survey by the FSA it was discovered 41% of callers had been investing for over 10 years and only 12% had never made an investment before. Although callers had a variety of backgrounds nearly 30% were professionals or directors.
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