“A Big Lie is More Plausible Than The Truth” – Ernest Hemingway
Thirty-five wealthy investors from Russia, Germany, Canada and the United States lost over $24 million - none of which has ever been recovered - having been subject to the latest investment scam. Two men were convicted of swindling the investors by claiming to provide vast amounts of short-term credit in return for hefty fees. They in turn sold the investors bonds issued by railroad companies that actually went bankrupt a century ago. Needless to say, what the investors bought was worthless. Fraudsters are becoming more and more sophisticated and as such are now becoming very active in Moscow. Whilst these firms historically targeted the old and impressionable, this has now changed, and it is the younger, wealthier potential investor that is the new target, and the rewards are getting bigger and bigger for the scam merchants.
Another recent case highlights a common way of being caught out. The victim this time was an executive from a large corporation in Moscow. He was a seasoned investor who liked to speculate on the world’s stockmarkets. He was approached by telephone by a very convincing, polished stockbroker and subsequently transferred $30,000 to the ‘stockbroker’s’ account. Within two weeks he was advised that this $30,000 had grown to $75,000. The client was being pressured to add more funds to this winning investment. Common sense eventually prevailed, and he requested that he instead received his handsome reward. On making his request to withdraw, the mood of the ‘stockbroker’ changed, and he was now demanding a further $7,500 which would act as a deposit for the sale. What would you do in this situation ? The case in question was a complete scam – the stocks that he thought he had bought did not exist and the ‘stockbroker’ was no more than a salesman operating from an Asian boiler room along with 15-20 other salesman. The individual lost all his $30,000, but at least he did not part with the further $7,500 demanded.
It is frightening just how many people are caught out, and regrettably it has begun to tarnish the image of the genuine, professional adviser in Moscow and beyond. One must therefore always take independent professional advice before making any investment, particularly if the type of investment is unfamiliar to you. Always check on the credentials of a company or individual before dealing with them. One of the biggest alarm signals should be if someone makes a claim that an investment will produce guaranteed, risk-free or exceptional returns, as happened in the ‘railroad’ scam above. Most investments include an element of risk and returns cannot be guaranteed.
A professional adviser will never apply pressure tactics, so do not be bullied into making a quick decision and never sign up to anything immediately. You should take your time to conduct any research and, if the investment is genuine, there will usually be a 'cooling off' period in case you change your mind. The Financial Services industry is well regulated for the protection of the consumer – just make sure your adviser is licensed accordingly.
Mark Hollingsworth, Director, Hollingsworth
International Financial Services Ltd