Investment scams

How to spot an investment scam

Following our experience with investment scams we’ve seen a pattern in how these companies operate and target investors. Read these warning signs to help prevent fraudsters getting hold of your money.

Spotting the signs

Wine, diamonds, carbon credits, precious metals, land for development, hotels, car parking, shares and graphene (a form of carbon) – the commodity may change but the underlying scam remains the same.

Clients should always be wary of unsolicited offers to invest, be that by phone, email or letter, or in person. Scammers will use clever persuasion techniques and jargon, and offer ‘guaranteed’ returns that are, in reality, too good to be true. If you think it is an incredible offer consider why they are offering it to you?

You can also expect pressure to part with your money straight away through one-off investment deals. They don’t want to give you time to think or carry out due diligence.

Some fraudsters even use prestigious London addresses or clones of established reputable companies to add authenticity to the fraud.

Always take your time when contemplating an investment and consider engaging with an authorised independent financial adviser or government body, such as the Financial Conduct Authority or Action Fraud.

According to Action Fraud: “£1.2 billion is lost to investment scams in the UK, with share sales, wine investments, land banking and carbon credits commonly used by fraudsters to target potential investors. Anyone can become a victim of investment fraud.”

We’ve listed some of the typical types of investment scams targeting consumers below.

Fine wine investment scams

UK-based wine investment company Bordeaux Fine Wines Limited is a high-profile case where investors lost significant amounts of money. David Ingram, a Grant Thornton partner, was appointed to act as liquidator by creditors. You can read the full story in: Can you recover money from wine investments gone wrong?

The Metropolitan Police in conjunction with the Wine and Spirits Trade Association have issued this investing in fine wine checklist to follow. They also ask potential investors to be especially wary when buying wine referred to as en primeur. En primeur wine is usually delivered two to three years after the vintage and can be particularly open to exploitation by fraudsters.

Carbon credit scams

A carbon credit is a certificate that permits the owner to emit a certain level of carbon dioxide. These are held on registries and, while they can be legitimate, certificates for companies to trade their emission allowance are not a viable commodity for individual investors to buy or sell their credits in a secondary market.

A Grant Thornton partner has been appointed as liquidator over various companies that mis-sold Voluntary Emissions Reduction (VER) carbon credits. These investments were sold to members of the public – often with a mark-up of 600%.

Some of the registries at which the credits were held have been shut down, meaning the investments have been lost. The liquidator has however been able to trace many of the carbon credits and has now initiated claims against connected individuals.

Land for development or land banking scams

Investors are approached to purchase a plot of land which, it is claimed, will soon have planning secured that will see a dramatic increase in that plot’s value. In the majority of cases the land is generally governed by restrictions that would never see such permission granted. Think to yourself if the land is so valuable why are they offering it to me? Why don't they exploit it themselves?

The land, once split into plots by the company, is often sold for an amount far greater than its actual value. Some investors have even reported finding they had been sold the same plot number as other investors. Even if they take you to visit the site it does not mean it is genuine.

Towers Property Development Limited, in liquidation with Grant Thornton, was such a scheme. Parcels of land were purchased, divided into plots and then offered for sale to members of the public as an investment. The company claimed that if planning permission were granted then a profit could be made from the resale or development of the land.

Trading Standards investigated and took action in respect of misleading sales and the company was wound up.

Getting your money back from investment scams

Even when a scam company has been wound up and appears to have no assets, a liquidator can bring claims against those individuals responsible, which in some cases can see a dividend returned to creditors.

If you believe you have been a victim of a fraud and would like to understand if we can help, please email: AssetTracingRecovery@uk.gt.com