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Case studies - securities market/investment services

Case 30 - 'Boiler room' share scam cost Australian victims $21 million

Australian victims lost AUD21.5 million in a typical 'boiler-room' scam, in which they were offered the chance to buy discounted shares in overseas companies.

The victims were approached by overseas callers who offered them the opportunity to purchase discounted shares in major overseas companies. In each case, the caller knew the victim's name and details of their prior shareholdings. In preparation for the scam, the offenders had either purchased or stolen company shareholder registers with the full details of the victims and their prior purchases. The scheme worked like this:

  • The scammers targeted the victims and offered to arrange the purchase of worthless shares owned by the victim - shares held in defunct companies. The offenders claimed they were in contact with a buyer prepared to purchase the victims' worthless shares, while also offering the victims the chance to purchase discounted shares in major US companies.
  • The scammers then requested the payment for the sale of the victims' low-value shares be offset against the discounted purchase price of the shares in the US companies.
  • The victim, lured by the apparent opportunity to purchase blue-chip shares at discounted rates (while also offloading their worthless shares), paid the scammers the difference between the payment for the low-value shares and the cost of the 'discounted' blue-chip shares.

In completing these 'sales', various Australian victims transferred a total of AUD21.5 million to the scammers' bank account in Hong Kong (which had been opened using a fake name and identification). Law enforcement investigations revealed these funds were withdrawn from the Hong Kong account to purchase high-value assets. When some victims suspected they had been scammed and stopped sending money, the scammers threatened them with 'legal action' in the hope they would send more money.

To identify the extent of the fraud operation, AUSTRAC data was incorporated with information provided by overseas financial intelligence units. This combined financial intelligence identified the flow of funds around the world and revealed the true scope of the fraud, which extended to Thailand and the United States.

Offence Fraud
Customer Individual
Industry

Banking (ADIs); securities and derivatives

Report type IFTI
Channel Electronic
Jurisdiction International - Hong Kong, Thailand, the United States
Designated service

Securities market/investment services; account and deposit-taking services

Indicators

Multiple customers conducting international funds transfers to the same overseas beneficiary

Purchase of high-value assets

Use of false documentation/identification

Last modified: 28/11/2014 17:10