Articles on Boiler Rooms in Stock Fraud Investment
Belgians Battle Boiler Room Investment
01/01 - A Belgian judge sentenced long-time boiler room fraudster
Canadian Jack Kronis (aka Jack Lewis) to seven years in prison
for his role in running a fraudulent securities ring out of Holland
where Dutch securities laws are considered lax. He and thirteen
other scammers, who got sentences which ranged up to ten years
( but may be eligible for release in three ) were also ordered
to repay the $33 million defrauded from 280 investors of Grimaldi
Hofmann and Co.
Kronis, 41, previously had a role in other such stock scams while
working at Durham Securities in Canada where 827 people lost $5
million. For that he served six months and was ordered to
repay $837,000 after pleading guilty to four counts of fraud.
Still pending is his U.S. trial for defrauding Americans as far
back as 1990 in schemes which sold grossly inflated metal commodities
such as indium and germanium.
Given the Rubber Boot
On August 21, 2001, the Thailand SEC filed a criminal complaint
against Heliocentric International Co., Ltd., Vladislov
Ivanov Patrov, Roy Danny Kamiew, Brian Hare and Mark
Pavic on the grounds that they conspired to conduct unlicensed
securities businesses in Thailand under the name of the Wellington
The fancy office location promoted in their brochures was simply
a switchboard service to their forty phone line, low rent boiler-room.
Following a raid in May, seventeen foreigners were arrested for
having no work permit and the documents seized as evidence determined
that the location was used to phone and lure overseas investors
into making investments in yet another overseas market.
I have a list of scam companies that I want others to look out
for. Do not trust them. I lost over $10,000. The names are: WMA,
Jeff Paul, Jake Bernstein Trading Company, Carlton Sheets, Dan
Kennedy, Ted Warren Stock Portfolio and Dundas System.
Anne Bolander 08/17/02
PHNOM PENH, Cambodia (Reuters) -- 07/21/03
A gang of 20 foreigners accused of running a hi-tech international
telecoms and investment "boiler room" scam out of Cambodia
have been expelled from the country, according to police.
The group of 14 Britons, two Americans, an Australian, a New Zealander,
a Thai and a Filipino, were rounded up last week in a military
police swoop on an office block in the heart of Phnom Penh, capital
of the impoverished southeast Asian nation.
Investigators said they had found stacks of computers and hi-tech
hardware, including a $100,000 broadband Internet server they said
had been used to build an illegal international telephone gateway.
Using this, the alleged conmen were cold-calling unsuspecting
people across the globe virtually for free to try to get them to
put their money in risky or non-existent investments, police said.
Legal experts said war-ravaged Cambodia probably lacked the relevant
financial or telecoms laws to launch a full prosecution of the
The telecoms ministry, however, said it had been cheated of $27,278
in international call charges and insisted on repayment.
"They have paid the bill and all of them left on Saturday," said
Chhay Sinarith, deputy chief of police in Phnom Penh.
It's full steam ahead for `boiler room' con artists
The premise of financial scams is human greed and
although gullible customers get fleeced of small fortunes, many
boiler rooms are not nearly as greedy as the investors they con
By John Aglionby THE GUARDIAN , LONDON - Jul 26, 2003
The three watches on the man's wrist were all set to different
time zones. One gave the time in New Zealand, the second in South
Africa and the third in New York. On the table in front of him
were three mobile phones, one for each group of customers in each
of the three countries, who all thought they were calling him locally.
He was actually in Taiwan.
The man with the watches, a Briton known as "Mr Big," showed
a second man sitting opposite him a fax he had just received, the
contents of which left little to the imagination. "It basically
said: `I'm going to come over there and I'm going to kill you.
I'm going to kill all your family unless I get my money back. I've
spent this much money with you.' It was really horrible," says
the second man, who gives his name as Barry Stephens.
"Let me show you something," Mr Big continued. He picked
up one of the phones, dialled the number on the fax and checked
"Mr So-and-so, I've just got your fax this morning," Stephens
quoted Mr Big as saying. Once the torrent of invective at the other
end of the line had subsided, Mr Big reportedly continued: "Look,
sir, we're a brokerage company. We can't guarantee you're going
to make money.
"Stocks go up and down. You're a man of the world, you know
that. But what I can tell you is that I have another opportunity
According to Stephens, "The conversation ended with the man
agreeing to send another US$20,000 after he had just sent him a
fax saying he was going to kill him."
The incident he describes is a snapshot of the world of boiler
rooms, where members of the public send complete strangers who
claim to be stockbrokers vast sums on the promise of making massive
and rapid returns.
More than 75 percent of investors end up losing all their money.
Despite gaining worldwide publicity in 2000 with the release of
the Hollywood blockbuster Boiler Room, starring Giovanni
Ribisi, Vin Diesel and Ben Affleck, thousands of people continue
to get conned every year.
Stephens, who claims he was "intimately involved" in
Mr Big's brokerage for several years, approached The Guardian after
hearing that a suspected boiler room was shut down in Cambodia
last week. He claims he wants to expose for the first time the
full details of how boiler rooms have fleeced tens of thousands
of people all over the world in the past decade, to help prevent
others from a similar fate.
Out of fear for his safety -- one man who allegedly double-crossed
a former boiler-room partner was gunned down in his BMW in Bangkok
last year -- Stephens has asked that his real name not be used.
The premise on which all boiler rooms operate is human greed,
"People think they're going to turn US$10,000 into US$100,000
by doing nothing. They don't think, it's too good to be true. They
don't stop to think, if it's so great why are you telling me about
it? Why am I so special?" he said.
Stephens says the operation he witnessed succeeded through an
elaborate web of deception, fraud and highly refined, high-pressure
telephone sales tactics in which most people didn't realize they
had been snared until it was too late.
The "sting" would begin with a harmless call from a
sweet-sounding, usually female, voice known as a "qualifier." She
(or he) would ask if the company's database records were still
accurate and offer a free subscription to a company newsletter,
The target would receive this glossy newsletter for several weeks.
It was usually up to 24 pages long and contained a selection of
business news. Among the genuine features, it would contain one
article, often very small, about a company developing a new product
or process. This company would have been bought by the boiler room,
and listed on the NASDAQ, where the requirements are much less
stringent than the New York or London stock exchanges. The boiler
room would then start to inflate the share price.
"But before they do that -- say when the price is US$2 a
share -- a broker would come to you and say, `Look, I represent
[the boiler room],'" Stephens says. "We have some inside
information, a bit naughty, shouldn't tell you, but this stock
is going to go through the roof in the next two weeks." Among
techniques used to convince male waverers were arguments such as: "Who
wears the trousers in your family? Do you make the decisions, or
These callers are known as "openers." Some victims would
send the money straight away but those who didn't would receive
a call a couple of weeks later from their "opener," who
would point out that the money had not been sent but the stock
had continued to climb -- because the boiler room had continued
to manipulate it.
He, or she -- Stephens says women "brokers" are usually
much more successful -- might offer to backdate the transaction
so the investor could "buy" at the original price. With
an offer like this, coupled with a little research showing that
the stock had indeed performed as claimed, most people were hooked.
"But that's the last they hear about it," Stephens says. "They
don't get any stock certificates, they don't get anything. So these
people will eventually call back. They'll watch the NASDAQ and
see the stock price go down because no stocks were ever bought,
the money just went into the back account and that was it. Thank
you very much."
Some people who call back in a panic are put through to a "cooler." Their
task is to cool down the customer before putting them through to
a "loader." Their job is to persuade the anxious investor
that the share price has fallen because the company has encountered
a hitch but that everything is on track, and it would actually
be better to buy more stock while it is cheap rather than sell.
Others who call are just given the run around; told that their
original "opener" is no longer at the company. "Eventually,
90 percent just go to sleep," Stephens says. "In other
words, they just get fed up and write off the money."
Those who don't give up and start making threats are connected
to the best "coolers." Sometimes the brokers will then
try and fob off the investor by saying that there are no buyers
at present and they should call back.
"The most threatening people were allowed to get some, or
all, of their money back, though," Stephens says. "But
the coolers were only ever allowed to return the money of 25 percent
of the people who demanded their money back."
When too many people started complaining the company would just
shut down and reopen under a different name, often less than 24
hours later. Mr Big's boiler room went through several incarnations
before he was caught. He is now in prison. Police found a dozen
passports in his possession when he was arrested.
The final category of boiler-room employee are the "sloppers." They
come into the picture when a firm closes and changes its name.
A slopper will call up a worried investor and say he has heard
about his or her plight and wants to help recover their money.
In order to do this there will be a fee, depending on the size
of the original investment.
The irony is, says Stephens, that, relatively speaking, many boiler
rooms are not nearly as greedy as the investors they con. He thinks
about US$2 million his boiler room raked in each month went on
expenses. He saw one monthly phone bill for US$450,000 that was
about two inches thick, and he knows that tens of thousands of
pounds went into making the company and its operations appear genuine.
"If you went to the company you would have sat down with
a broker, sat down with a manager and you would have been convinced
this was genuine. They would have bombarded you with pedigrees
"Meanwhile, in the same building, there's the boiler room.
They're all in shorts -- some guys are standing on their heads
doing yoga, taking the piss, bouncing baseballs off walls and catching
them while talking on headsets.
"They have all the objections on the wall, pasted up. Anything
anyone might say, below it is the stock answer in order to get
Most of the people involved were Jekyll and Hyde characters, Stephens
says. On the phone they appeared the epitome of decorum, the reality
was different. "These are the dregs of the earth, drug addicts,
wasters, used-car salesmen," he says. "If you met them
in person you wouldn't buy a box of matches from them. You wouldn't
talk to them at a bar. But over the phone they've got it."
Victims corroborate Stephens's claims. In 1997 and 1998, an Australian
named Lance (he is too embarrassed to allow his surname to be printed)
was persuaded by a broker to part with more than ?8,000 (US$12,923)
to buy shares in two companies allegedly on the cusp of greatness.
"No pressure was put on me," he says. "They just
went for the soft sell and I bought 1,000 shares of each."
He received share certificates but has no idea whether they are
genuine. Three months later, when the shares started losing value
rapidly, he tried to sell, but the broker had ceased operations
and its accounts had been passed on to a second broker. Lance said
this firm was initially just as convincing as the first.
"They even sent round a representative but as soon as I pressed
them they, too, dropped away," he said.
Two years later, in August 2000, Lance was suddenly contacted
by a third broker.
He convinced Lance to send him the share certificates so he could
sell them to people wanting to negatively gear their stock portfolios
for tax purposes by buying the worthless stock and selling blue-chip
shares in return.
"I gave up when [the broker] insisted I buy the blue-chip
shares first," he said. "It's stupid to do it once, it's
insane to do it again."