'Cold callers' scam $220 million from investors


A Thai policeman asks questions to suspected boiler room operators arrested in a Bangkok sweep last July

By Geoff Hiscock
CNN Asia Business Editor

SYDNEY, Australia (CNN) -- Telemarketers based mainly in Asia have scammed about $220 million from thousands of Australian investors, the country's stock watchdog reports.

The sting typically comes after the telemarketer promises them big returns on their money.

Australia's corporate regulator, the Australian Securities and Investments Commission (ASIC), says the problem is not confined to Asia. It warns that global losses from the scams could run into billions of dollars.

The "cold callers", as they are known, make false promises about investment returns and use elaborate set-ups to convince investors of their legitimacy, ASIC said.

Many of them are Western expatriates based in cities such as Bangkok, Manila, Taipei and Hong Kong.

ASIC chairman David Knott said Thursday the best way to deal with cold callers was simply to hang up the phone.

'Systematic cheating'

On Wednesday, the Australian corporate regulator released its report "International Cold Calling Investment Scams."


Three Westerners after arrest on stock-fraud charges in Bangkok, where a July raid snagged 80 foreigners and 22 Thais

The report shows that between 1999 and 2001, more than 82 unlicensed overseas telemarketing firms "systematically cheated Australian investors of an estimated A$400 million."

More than 7,300 people contacted ASIC directly, and 80 percent of them lost money.

Knott said the ASIC report documents the extraordinary lengths cold callers go to in establishing trust with potential investors.

He said they created sophisticated "props" such as expensive documentation and Web sites, and exploited the difficulties of cross-border law enforcement.

Typically, the cold callers offer shares in overseas companies. These shares usually turn out to be worthless. Often they come from the high-risk over-the-counter market in the United States.

Knott said the callers used complicated set-ups to make it harder for consumers to check investments or recover money.

"For example, an English operator cold called Australian investors from Bangkok, claiming to be in Japan, selling shares in a company operating in China, but traded through a U.S. over-the-counter market," Knott said. "Payment for the shares was routed through a Hong Kong bank account".

Prosecutions launched

ASIC said the cold callers were beyond Australian jurisdiction. But the regulator is using its international relationships to urge action against the operators.

It said prosecutions, arrests and other actions were taken by authorities in Thailand, Singapore, the Philippines, Indonesia and Hong Kong during 2001.

One of the most high-profile raids stemming from ASIC's information swapping was in Bangkok in July last year. Thai police and securities authorities arrested more than 100 people -- including citizens of Thailand, the United States, the United Kingdom, Australia and New Zealand -- for alleged involvement in running "boiler room" operations, or unlicensed share-selling companies(Full Story).

ASIC also pointed to the creation of an Internet blacklist of known cold-calling organizations, which can be found on its consumer Web site www.fido.asic.gov.au.

Knott said that if Australian investors want to invest offshore, it is relatively easy to do so through financial institutions that are licensed in Australia.