Boiler room scammers looking to take advantage of popularity of crowdfunding.
Scammers are now setting their sights on crowdfunding, according to a new warning from the National Fraud Intelligence Bureau (NFIB).
Its proactive intelligence team said that it had become aware of boiler room scammers looking to take advantage of the growing form of investment, with some convicted scammers describing it as "the next biggest scam for boiler rooms".
What is crowdfunding?
Rather than go to a bank to get backing for a venture, many people and businesses now turn to the general public (the crowd) to get support.
Some crowdfunding ventures rely on what are essentially donations to the cause, and in return those who commit money get some form of modest reward.
For example, Unbound is a crowdfunding site which helps authors get the money together to get their work published. Small donations tend to get you a digital copy of the book, while larger donations can secure things like lunch with the author or a spot at the launch party.
[SPOTLIGHT]However other crowdfunding sites offer investors the chance to make some money, whether in the form of a peer-to-peer loan (from the likes of FundingCircle) or actually purchasing shares in the business (from the likes of Seedrs or CrowdCube). And it’s these people that the scammers have decided are ripe for being ripped off.
Get a great return from legitimate investments
Another boiler room scam
According to the NFIB, boiler room scammers are the ones looking to crowdfunding. These scams involve phoney stockbrokers, often based abroad, cold calling people to attempt to pressure them into securing a huge return from some form of nonsense investment.
The only difference here is that the scammers will be relying on the growing popularity of crowdfunding as part of the sales patter, rather than the usual boiler room favourites, like penny shares, wine investment or landbanking.
Protecting yourself
As a result, the way to guard yourself against crowdfunding scams is much the same as how to protect yourself against any investment scam.
If it seems to be too good to be true, it probably is. You only get high returns by taking on a high level of risk. And if you get an investment call out of the blue, you should always be on your guard.
Finally, do some research on any company you are thinking of dealing with. The Financial Conduct Authority keeps a database of unauthorised firms to be especially wary of.
Take a look at some legitimate opportunities in lovemoney's Investment centre
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