Frans Roest: E-BOOK EDITION Share Fraud & Boiler Room Scams Exposed. A research about worldwide boiler room share fraud

Transcription

1 CONTENTS PART 1 19 STRUCTURE AND WORKING OF BOILER ROOMS SCAMS INTRODUCTION AND SCOPE OF THE PROBLEM Introduction Scope Expectation for the foreseeable future DEFINITIONS AND EXPLANATIONS Boiler Room Fraud (Stock)broker Cold-calling Market manipulation Insider trading Scalping Churning Microcap stock Penny stocks Pump-and-Dump scheme Making abuse of legitimate penny stock companies Ghost funds: Selling shares of non-existing companies Boiler room second phase / recovery rooms The Sucker list Forex (FX) trade Binary Option Trade Call Center Fraud 35

2 3.0 CHARACTERISTICS AND WORKING OF A WELL ORGANISED BOILER ROOM SCAM Introduction Organization of boiler rooms Utilizing loopholes in registration, or incorrect registration, under the national securities laws Utilizing the international embedding of the boiler room organization Purchased shares cannot be sold because of restrictions Purchased shares are worthless Phase two scam or recovery scam Damage control and countermeasures by boiler room organizations TACTICS TO LURE POTENTIAL VICTIMS TO BUY SHARES Introduction How to reach investors Claiming to be a legitimate broker by using professional looking names and websites Pretending to be listed on a reputable stock exchange Pretending to be interested in buying penny stock shares from boiler room victims Utilizing fax, , phone, twitter and social media Utilizing facilitators Utilizing quasi professional looking stock newsletters Utilizing professional looking look-a-like and cloned websites Use of Search Engine Optimization Abusive use of cloned names and cloned registration numbers Using and referring to fake regulatory website authorities Abusive use of a controlled bank PREVENTION AND PUBLIC WARNINGS AGAINST BOILER ROOMS Introduction Worldwide Europe Belgium 74

3 5.3.2 The Netherlands United Kingdom The National Fraud Authority (NFA) The 'Action Fraud' programme National Fraud Intelligence Bureau (NFIB) Financial Service Authority (FSA) Financial Conduct Authority (FCA) City of London Police Australia ASIC ACCC ACFT Scamwatch Canada Hong Kong United States of America The SEC Only if the case appears to involve a U.S. broker, the SEC has jurisdiction What you can do to avoid investment fraud, according to the SEC Red flags for fraud and persuasion tactics, according to the SEC Only if the case appears to involve a U.S. broker, the SEC has jurisdiction FINRA Scam tactics described by the FINRA: Red flags boiler room scams, according to the FINRA FINRA s advice to victims of boiler room frauds The Financial Fraud Enforcement Task Force ABOUT FOREX-TRADE AND BINARY OPTIONS SCAMS, Introduction Forex Robot scams Administrative charges in Forex cases 97

4 6.3.1 Administrative charge against U.S. Forex Global Solutions Warning against the New Zealand distributor Phoenix Forex Dutch warnings against Forex trade websites The IB Capital FX criminal case Investigation into the fraud by Forex Financial Services B.V Warnings and investigations concerning binary options U.S. warning against binary option and binary options trading platform EU-warning against binary option and binary options trading platform Cyprus and the regulation by CySEC in relation to binary option Times of Israel investigation into binary options trading scam Stricter regulation of financial trading in Israel needed to end the scams COOPERATION BETWEEN PRIVATE AND PUBLIC PARTIES DURING ASSET TRACKING Introduction Rise of private asset tracking and recovery agencies Cooperation between private and public partners Sharing public intelligence with the private sector Sharing intelligence information with competent foreign EU-authorities ACTIONS BY DISGRUNTLED VICTIMS ON THE RISE Introduction Boiler Room victims behind naming-and-shaming campaigns RECOMMENDATIONS REGARDING THE INTERNATIONAL COMBAT AGAINST BOILER ROOMS Introduction Recommendations Take boiler room fraud seriously Strive for improved cooperation between and with Financial Supervisory Bodies Strive for improved (international) political and judicial cooperation Strive for improved ways of disruption of boiler rooms Find ways to cooperate with legal representatives of public-private initiatives 125

5 PART 2 A CLOSER LOOK AT CASES THAT MADE THE NEWS U.S. PUMP-AND-DUMP CASES THAT MADE THE NEWS Introduction into Pump-and-Dump schemes The Sync2 Networks Corp. case The Siga Resources Corp. case The Stockster website case The Colin McCabe case The Cynck Technology Corp. Case Mafia New York Longshoremen stock fraud case The Eric C. Cusimano pump-and-dump -case The David and Donna Levy case South Florida men charged by SEC for inter-state penny stock fraud New York Long Island-based pump and dump fraud The NWMH scheme The CESX scheme BOILER ROOM FRAUD CASES THAT MADE THE NEWS Investigations in Australia The Brinton Group case The David John Hobbs case Operation Lima Violin II, Operation Unwind Investigations in Belgium The Grimaldi Hoffmann case The Dendermonde case Other cases related to Belgian Boiler Room scams Investigations in Bosnia The Dunmorr Group AG case 164

6 11.4 Investigations in Cambodia Phone fraud in Cambodia in Investigations in Canada The Bre-X-Minerals case Quest Water Global Inc Investigations in Germany Identity theft, market manipulation of unauthorised telephone orders Market manipulation in shares of Beira Goldfields Inc Investigations in Great-Britain Operation Wizard The George Abrue case The mastermind Tomas Wilmot case The Secure Trade and Title Ltd. case The Pension Liberation Fraud case The Mobilestream Oil case Operation 'Rico' Operation Steamroller The Inca Pacific Gold and Mining fraud case The fake Ferrari shares case Investigations in Hong Kong The Gary Aubrey Holmes case The Jerome Y.A. Herzberg case Investigations in The Netherlands FX Nevis case Witter Walwyn Overseas Ltd case Indictment of fraudulent means Indictment of embezzling funds Indictment of fraud and swindle Indictment of money laundering Erwin Lloyd AG case Franz Watermann AG case 191

7 Titan Investment AG case Altanus Limited referred to as Swiss money report Confiscation in Dutch Boiler Room fraud cases Investigations in the Philippines The mastermind Amador A. Pastrana case Investigations in Spain Introduction March 2013 raid on Boiler Room near Benidorm February 2014 Operation Rico on Spanish soil Investigations in Thailand The Brinton Group case Boiler room fraudsters on the run The Bridgecorp Ltd. Case Investigations in the United States of America Stock manipulation by using extortion at several brokerage firms The Nicolas Louis Geranio case The Sandy Winick case The defendants The target stock companies The cold calling market manipulation scheme of forcefield Energy AFTERWORD 207 APPENDIX I Webcomplaintform scams or unauthorised firms used by FCA in the U.K. 208 APPENDIX II Webcomplaintform on unlicensed firms used by SFC Hong Kong. 209 APPENDIX III Bibliography 210 In English 217 In Dutch 219 In German 220 In French 220 In Spanish 220

8 APPENDIX IV Theme Documentaries and Movies 221 APPENDIX V Relevant (government) websites 223 ABOUT THE AUTHOR 224 NOTES 226