Graphene: the 'miracle material' investment that will lose you money

Scammers are making ridiculous claims to try to fool people into investing in graphene.

Graphene – made from the world's abundant supply of carbon – is apparently the wonder material of our times.

Honestly, I have no idea if that's actually true. While there are high hopes that graphene, first patented nearly ten years ago by scientists at Manchester University, can be substituted for more expensive or heavier substances in electronic devices and batteries, as well as in aero, automotive and civil engineering, it is impossible to say if or when this will be commercially viable.

But even if it became as common as paper or steel, that is far from saying that investors will make a fortune from the substance.

Big money from graphene!

Yet that is what a growing number of recently established “investment” firms now promise. They claim investors can reap big rewards from buying into the substance.

Here's what one website says:

“The impact Graphene is going to have on such a huge range of industries is going to create investment opportunities previously unimagined. We partnered with the largest Graphene commodities trader in the U.K. in order to give its clients access to the SAFEST and most PROFITABLE way to invest directly into Graphene... the only PROVEN method to PROFIT from this new revolutionary product without having to buy stocks or shares in small, risky manufacturing companies.”

And this is signed by someone who calls himself “Senior Commodities Analyst”, whatever that means.

Claims on another site state:

• The market is expected to grow over 50% in the next two years
• Over 4,000 companies are buying Graphene, including Ford, Sony, Samsung, LG & NASA
• Billions are being invested into research and development worldwide

This may all be true, but it is not actually much help to an investor. So what if the market grows 50%? That's virtually zero to just a little more than nothing. So what if over 4,000 are buying it? All major manufacturers need a sample and even if they then went on to make major purchases, it would not necessarily cost them much or produce a profit for the makers. And ploughing billions into R&D? Yes, but then even more billions have been spent on space exploration with not a lot to show so far (beyond Teflon, anyway).

The investment firms – and it is easy to find half a dozen – pretend there is a way for investors to buy and sell the material for big gains. That's rubbish. There is no market whatsoever in graphene, if only because it is still an experimental substance. A market needs a standardised product with a large number of buyers and sellers.

This week, regulator the Financial Conduct Authority (FCA) issued a warning against investing in graphene. Ahead of the curve this time, the FCA found paperwork detailing how to push graphene in a raid on a boiler room operation.

Graphene scams are likely to come from the same people who, over the past 15 years, have brought us wine, land-banking, rare earth minerals, and carbon credits. These firms talk about “brokers” but there is nothing to broke.

I looked up one new company selling graphene to private investors. It has one director who gives a maildrop as his address. He has previously given other addresses including one associated with an African church (although he is not African). One of the unforeseen consequences of changing legislation to allow directors of animal testing laboratories to give corporate, rather than home, addresses is that many use this loophole to conceal genuine home details.

Setting up a company is easy-peasy, in any case. There is scant checking of names of directors, let alone addresses. And this director variously gives his occupation as entrepreneur, sales trader, commercial director and consultant.

As the FCA says: “It has been reported to us that callers promoting investments in graphene are using dubious, high-pressure sales tactics and targeting vulnerable consumers. There is a strong possibility of fraud with graphene, because it is unregulated and it is difficult to confirm that you have bought the genuine product.”

Let us go a little further than “strong possibility” to “100% certainty” and even if you bought the genuine product, it is impossible to know the price because there is no way of verifying it.

More on scams:

The worst scams of 2013

Don't fall for the Suffolk scammers!

Don't fall for this supermarket voucher scam

Why this property 'investment' was wound up by the High Court

The only thing 'guaranteed' with this scam is that you'll lose your money!