The scam script that never changes

Despite the authorities clamping down on boiler room scams, these fraudsters are still sticking to the same old script.

They're back again. Just a week or so after the authorities rounded up more than 100 top ranking boiler room merchants in a cross-border operation which included the UK and Spain, my phone has started to ring again with rip-off financial deals.

As I wrote a week ago, the landline had been surprisingly free of scam calls for some two months. But the financial fraud world, like nature, abhors a vacuum. So once the dust died down a little on the arrests, they were soon back to their bad business.

It made sense for them to take a break while the heat was on. They know that the arrests took some two years of planning and evidence gathering, so they are unlikely to be repeated any time soon. It's a respite after a blitz. It's the same as when police make a huge effort to fine speeding motorists on a particular section of road – once the authorities have enjoyed the publicity and the immediate deterrent effect, the errant drivers return to their bad ways.

Those who remain free to continue ripping off investors are now better informed of how the authorities operate. But the scams remain much the same – my call led me to that long-term favourite, coloured diamonds.

The call apparently came from the “marketing division” of an “alternatives” investment company. Alternatives are generally anything that is not regulated by the watchdog Financial Conduct Authority, like rare earth minerals or wine.

It was the usual stuff. Am I the decision maker? Am I an active investor? Would I be comfortable with £5,000 if given the right opportunity?

I answered “yes” to all these questions (as I always do). Then the “marketing” man told me it was coloured diamonds and referred me to the “client” - a company specialising in these pretty baubles. I was promised that a “full report” would be posted to my home address (which they had). Needless to say, this has still failed to arrive.

So the coloured diamond scam merchants are at it again. It does not seem to matter that one of their number was publicly cut down by the Insolvency Service in February – I wrote about the forced demise of Appleguild, a former land banker trading as “Gold Standard Commodities” last month. And it does not seem to matter that this racket has been around – and warned against by me and others – for at least a dozen years.

It's the same old sales script. We have the “20-year proven track record” (from a company which can trace its lineage back to last summer), and the “market-savvy team of professionals” (which means guys who can read a script).

What's on that script? “Coloured diamonds have never gone down in price since 1973, with returns of between 15-25% per annum within this time frame. Thereby offering solid capital protection in addition to capital growth.”

The grammar is not great but that's not the real problem with this statement. It's meaningless because there is no way of checking. All diamonds are different and there is no continuous record of prices. But, taking the claim at face value and at the lower end of that range, it would imply that a diamond valued at £1,000 in 1973 would now be worth a-hard-to-believe £500,000. At the top end of that scale it would be worth an-even-harder-to-believe £8 million.

You would have thought the coloured diamond merchants could have come up with something accurate rather than such a wide range, given it is supposedly based on historic data.

So it's no surprise that my coloured diamond merchants can say: “Over the last 35 years fancy coloured diamonds have outperformed every traditional tangible investment, including gold and the property market.” I don't understand the “fancy” bit. Are there plain coloured diamonds?

And then we have the now routine press statement that some mine or other is closing, so while demand is increasing (it is obligatory in the scam world to include a reference to China, India or Brazil), supply is waning. But mines close all the time; mining companies open others.

The firm claims: “With a worldwide network of affiliated mine companies, affiliated trade companies and connections at the highest level of government we are professionally able to trade in rough- and polished diamonds, gold, diamond- and gold concessions. The hereby obtained margins can fluctuate but for general economic notions are to be called high. We make use of a network of domestic companies in all the represented countries, due to maintain a high level of professionality and access to the local markets.”

I have yet to meet anyone demanding a coloured diamond or read any fashion articles promoting their wearing. Neither have I ever met anyone who has gained from these gems – other than the scamsters selling them. But I have met losers.

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