DECLASSIFIEDNews |Banking and Financial Fraud
The High Court recently dealt with a case in which a wine merchant was found to be misleading investors through an unregulated investment scheme.
The company in question – Dow and Jones Limited – was selling fine wine to members of the public as an investment opportunity, yet most orders were not delivered and even for those that were, customers would be unlikely to get their original capital back due to the inflated buying price of almost double the retail cost.
Alongside overcharging their customers and investors, the company told clients they had to buy more to bulk up their wine portfolios. The company accounts were reflective of their dishonesty; orders from as far back as 2016 weren’t completed and inaccurate accounts had been filed at Companies House.
Investment fraud is not uncommon. In this case, the methods used to convince customers to buy into the fraudulent scheme were outlined by Irshard Mohammed, Senior Investigator at the Insolvency Service, as “Similar to boiler room operations, Dow and Jones used sales scripts from previously failed companies, which assisted salesmen to convince people, including the vulnerable, to invest their money in unregulated investments.
“The courts recognised the unscrupulous nature of Dow and Jones when it wound-up the company and our advice is always to reject unsolicited investment offers that sound too good to be true.”
The Official Receiver appointed to this case revealed that third parties (claiming to work for The Insolvency Service) were contacting investors promising investment returns if money was sent to them during the phone call.
Scams in which criminals impersonate the Insolvency Service are known as ‘recovery room scams’. These are defined as “fraudsters approaching investors who have been scammed or had failed investments, offering to help them get their money back for an upfront fee”. They usually adopt the role of an Official Receiver and use methods such as sending fake letters with the Insolvency Service logo, or referring investors to social media accounts of actual Insolvency Service employees.
The Insolvency Service Official Receivers do not ask investors to pay upfront fees to recover lost investment. Being asked for to pay these fees to ‘get paid faster’ or ‘increase the likelihood of profits’ is one of the surest signs of investment fraud.
Banks have become progressively better in recent years in trying to prevent their customers falling for investment fraud scams by implementing monitoring systems that can detect when payments have been made to scam companies, but continual education and awareness will always be key to achieving higher prevention.
For advice and support on recognising and avoiding investment fraud, contact Ali Twidale, Banking & Financial Fraud Consultant at firstname.lastname@example.org, on +44 (0)843 515 8686 or via our contact form.
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