Boiler room scam: Cold-callers promote diamond fraud
Vulnerable older people are being targeted by a new form of investment scam involving diamonds, fraud investigators have warned.
Companies are cold-calling with promises of stellar returns by investing in rare jewels.
In some cases the gems have been marked up by 17 times their actual value - and some victims worry the gems may not exist at all.
Several cases of diamond fraud are being investigated and about 250 reports were received last year, said Det Ch Insp Matthew Bradford, head of crime at the National Fraud Intelligence Bureau.
One of them involved an elderly man with Alzheimer's, who was called by a firm pitching diamond investments.
He ended up handing over more than £90,000 ($148,000) in three months. Each time a transaction was planned, he was told to keep it a secret.
"I get the impression my dad wanted to give these people all this money just to get them off his back," said the man's son, Ben.
"I think he was quite scared of them, and he feared for his own safety a little bit."
His father's financial adviser contacted Ben to establish why a large sum had been requested; his father was about to invest another £85,000 ($140,000) before his son intervened.
Because he has power of attorney over his father's affairs, Ben asked the diamond brokers to stop ringing and to hand over the jewels so they could be sold.
"But every time I contacted them there was some sort of obstacle in the way to stop them sending the stones," he said.
A former diamond broker told 5live Investigates about the tactics used by these companies.
General workplace noises could be heard on a tape in the background, he said.
"There weren't that many employees, so the sounds were played to make the office seem busier than it really was."
He had to follow a script and was trained in high-pressure tactics to get investors to part with their cash.
But staff were careful not to give too much away about themselves, he added.
"I became suspicious when I was told I should change my surname. The managers did it too, and I was told that it was to protect myself.
"Looking back, I think if everything's 100% legitimate, there would be no reason to hide."
Last year the Insolvency Service wound down another brokerage company, Jubilee Diamonds Ltd, whose employees commonly changed their names when dealing with customers.
In 18 months of trading, the company received some £2.3 million ($3.8 million), used fake testimonials, and sold gems vastly above their value.
Some of its brokers, who promised investors returns of up to 15%, took commission of up to a quarter of the total sales they made.
"It is just another yarn in what is a criminal web of deceitful boiler room scams, where individuals are targeted with cold-calling and pressured into making purchases," Det Ch Insp Bradford said.
"They often use technical jargon, impressive job titles and mock websites, and people are encouraged to keep the 'investment' secret.
"Sometimes the items don't even exist," he added. "I can only imagine how awful it must feel for people to discover that the savings they've accumulated in their working lives have vanished overnight."
One industry expert said the market for diamonds lacked transparency, making it vulnerable to abuse.
"It's hard to know the value of a diamond; much trading is negotiated privately, unlike other investments where a stock market reports prices," said Adam Laird, an investment manager with Hargreaves Lansdown.
"Most people buy through specialists so it's difficult to know if you are getting a fair price. It can also be difficult to sell, as this too involves haggling with a specialist."
As an unregulated form of investment, diamond brokers do not have to be registered with the regulator, the Financial Conduct Authority.
"They're completely spineless, gutless, faceless people," Ben said. "They hide behind a telephone or computer, and I think they target people who live on their own."
Anyone who thinks they may have been a victim of fraud, or who believes they may have information about a suspected fraud or scam - including diamond fraud - should report this through Action Fraud or by calling 0300 123 2040.
You can hear the full report on 5live Investigates on Sunday, 19 January at 11:00 GMT on BBC Radio 5 live.