Beware recovery room scams

Samantha Street Samantha Street

The Financial Services Authority (FSA) has warned that 30% of people who have lost money through investment fraud will also fall victim to a recovery room fraud. 

A recovery room fraud is a follow-up to the lost investment. The perpetrators of the original scam will have shared or sold their customers’ personal details . Fraudsters will now be preying on the vulnerability of victims, exploiting their anxiety and in some cases desperation to see their investment ‘found’ or returned. This could see a fake liquidator make an approach in an attempt to extract further money from the victim. This is often seen when the previous investment was made over the telephone. 

Some of the most recent investment scam cases that have ended up in liquidation have been companies involved in wine, carbon credits, land, precious metals and diamonds.

Victims exploited

Victims of such companies may only find out their investment was a scam when they learn of the liquidation. The victim may receive a letter from the liquidator, see something on the internet or find out by chance when trying to contact the company for an update.

In many cases the official liquidator will have written to the creditors listed in the company’s records and advised there are no investments held in the victim’s name or any that are will be of nominal value. Fraudsters will use this to their advantage. When many victims are trying to come to terms with the distressing knowledge that their investment is worthless fraudsters will be busy making an approach to these victims, generally by telephone, in a bid to part them with even more of their savings.

Common tricks deployed

A common theme is emerging from the scammers. They are trying to add credibility to their approach and the victim may be told one of the following scenarios:

  • The liquidator has instructed the company to contact the creditor directly (sometimes purporting to be a government agency or legal professional)
  • The liquidator has concluded their role and now the scam company has received the victim’s details to take over their case
  • The scam company has located the victims lost ‘investment’ and the liquidator has authorised the company to facilitate the release for a fee/tax or sale to a buyer

Shockingly in some cases the scammer will masquerade as the legitimate liquidator.

These scammers will suggest a small fee at first. This will soon escalate with the fraudster providing various excuses for the delay and the need for further funds. Some victims we have spoken to say they felt such an approach probably was a scam but because the amount was small in comparison to their loss and it offered the opportunity to have their investment returned they wanted to take that risk.

The small amounts however soon grow with some losing track of the ‘recovery’ costs being incurred. The amounts lost in recovery room fraud can parallel that of the initial loss. No invested assets are ever recovered or money returned.

How to be ScamSmart and protect yourself from future scams

Words of warning

We are warning creditors to be wary of recovery room fraudsters. A liquidator would never instruct a third party to seek an upfront fee or tax to release a victim’s ‘lost’ investment, nor would they request any upfront cost. 

If you are approached to make any kind of payment to release your ‘found’ investment, always revert back to the liquidator. The genuine liquidator’s contact details can be confirmed by checking the London Gazette or through Companies House.

If you have been affected by an investment scam or believe you may have lost money to a recovery room fraud you should report the matter to Action Fraud the UK’s national reporting centre for fraud and cybercrime. Or get in touch with our investment scams team.

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