Rare metals: Beware the scam call that could cost you the earth
'Boiler room' conmen used to peddle worthless shares. But now they are selling rare metals like – believe it or not – yttrium. Tony Levene reports
Sunday 06 January 2013
The decision to answer your phone could potentially cost you thousands, particularly if the caller is from a firm offering the latest in get-rich-quick investment products. It used to be shares in unlisted companies that were the hallmark of these cold calling firms, working in so-called "boiler rooms."
But in recent years these firms have branched out into selling land or wine which supposedly has the potential to enjoy considerable growth but would prove subsequently worthless or fetch nowhere near the price paid. The sales pitch is always the same – get in now and the growth could be huge – but it's all unregulated, highly risky and trades on ignorance.
And there is one new type of investment being sold by these boiler room companies. A Midlands firm, for instance, is phoning investors offering a so-called "green energy bundle", For £6,744, buyers receive a kilo of dysprosium, a kilo of yttrium, and two kilos each of lanthanum and neodymium. And they are told these metals will move up sharply in value. But few have any idea of what these strange-sounding substances are or, more importantly, how to value and sell them.
All are, however, on the science lab periodic table of elements. They are among the 17 "rare earth elements" or "rare earth metals".
The Financial Services Authority says rare earth elements sales by unregulated UK firms is the latest scam. It warns: "Firms promoting these investments have often previously been involved in other high risk unregulated products such as carbon credits, landbanking, wine and whisky and overseas land and crops. They use high pressure sales tactics, targeting vulnerable and novice consumers."
Late last year a London meeting of creditors heard how many unsuspecting investors had already lost substantial sums in one such firm. There are around 25 to 30 similar companies – none of which needs FSA regulation – operating in the UK.
The £6,744 "bundle" came from a firm set up last September. The elements it sells are neither for energy nor green. Nor are they "rare", they are common but difficult to purify from ore. Their extraction causes pollution so most are mined and refined in China where environmental standards can be lower than in the West.
In minute quantities, they are essential in smartphones, computers, televisions and fibre optic communications systems, as well as windscreen wiper motors and wind turbines.
Using scripts similar to each other, sellers who cold call, send spam emails – often via legitimate sites – or advertise online, stress the elements' rarity, their necessity in electronics, growing demand and a fast increasing price.
If the salesperson thinks the investor is "sophisticated" he will say returns are "uncorrelated" with stocks and shares – they will go up irrespective of equity or bond prices.
The metals may be irreplaceable in industrial applications but the FSA says: "We have yet to see any convincing evidence that there is a viable market for investors to make money." While metals such as gold, lead or copper are traded worldwide with transparent values, rare earth prices are not available – dealing is in private between refiners and users.
But there is only "broad brush" information on specialist websites. Assuming the metals are standard 99 per cent purity and not oxides, the £6,744 "bundle" is worth approximately £900 – down from around £1,700 last January, and equal to a 7.5 times mark-up.
"Even if someone gets the elements as described, there is no effective market, and no smartphone or laptop maker is going to seek you out to buy a kilo or two," says Jonathan Phelan, the head of the unauthorised business department at the FSA. "These are industrial metals which are bought and sold by specialist firms."
Mr Phelan adds: "As with landbanking and carbon credits, these investments are unregulated so it is part of a long-running narrative about unscrupulous sellers side-stepping the rules.
"There was one exceptional £45,000 investment, but most start off around £5,000 to £10,000."
Working with fraud officers and the Insolvency Service, the FSA has had some success in recovering money from previous sales of unregulated products. "But it is only a proportion. People have lost a lot of money and we can't give any reassurance or comfort to past or future victims," says Mr Phelan.
"We don't regulate metals – it is up to the government to legislate. However, our role includes being concerned about consumers putting money at risk. And we inform other government agencies which scams are bubbling up."
The FSA has a warning notice about scams on its website, and Mr Phelan says: "Deal only with financial services firms authorised by us. That gives access to the Financial Ombudsman Service or Financial Services Compensation Scheme if things go wrong. With an unauthorised firm, you have no protection."
Tricked out of £45,000
Joanna Blyth (not her real name) lost £45,000 in a rare earth elements scam. In early 2011 Joanna, 36, from Bradford, inherited a substantial sum.
Wills are public documents so her details were "data-mined" and sold to investment firms. In August 2011, she was cold called by an unregulated wine company and invested about £5,000. Her details were then sold on as a "warm prospect". One tried to sell her carbon credits. Then, in August 2012, she was cold called by Rare Earth Metal Exchange Ltd based at a City of London mailbox.
It convinced her (and others) of 20 to 35 per cent gains. She invested £45,000 and was told rare earth metals "will see a sharp rise over the next 12 months." Last month the firm went into liquidation, and its total debts could top £1m.
Joanna bought dysprosium, used in magnetic applications, and was promised five one-kilo packages. Only one materialised. But even if all had been delivered, her metal would only have been worth about £3,500 – assuming she could find a buyer.
Martin Cronshaw of Yorkshire-based Wilsons Solicitors has advised Joanna. He said: "Salesmen used high-pressure tactics but as soon as she wanted to contact them she was unable to find them."
Simon Read: Frozen in time - the expat British pensioners who deserve a better deal
Donald MacInnes: My wasted hours in the retail deserts of Dixons-Carphone
Pension firms must ask consumers more questions, says City Watchdog
Money Insider: Smart alternatives to the pensioner bond
Number of serially under-performing investment funds has increased by a fifth, survey reveals
- 1 Double chins could be 'cured' without surgery or dieting using new injection
- 2 The BBC has just done more to eradicate ‘terrorism’ than all our wars since 9/11
- 3 Dog thinks owner is drowning in lake, dives in and tries to pull him out
- 4 Christian blogger says she will not wear leggings in public because they entice men and cause them to look at her 'lustfully'
- 5 Thank heavens for Louise Mensch and her foul-mouthed tweets to world leaders
'We would evict Queen from Buckingham Palace and allocate her council house,' say Greens
French court convicts three over homophobic tweets, in case hailed as a 'significant victory' by LGBT rights campaigners
Greece elections: Syriza and EU on collision course after election win for left-wing party
British Muslim school children suffering a backlash of abuse following Paris attacks
Islamic history is full of free thinkers - but recent attempts to suppress critical thought are verging on the absurd
British grandmother Lindsay Sandiford faces execution by firing squad in Indonesia
iJobs Money & Business
£16500 - £16640 per annum: Recruitment Genius: This fast growing Finance compa...
£30000 - £32000 per annum + benefits : Ashdown Group: A highly successful, int...
£18000 - £20000 per annum: Recruitment Genius: This rapidly expanding business...
£25 - 28k + Bonus: Guru Careers: An In-house / Internal Recruiter is needed to...
Day In a Page
Hibernate during winter and make your living during the summer at this busy guesthouse with panoramic sea views, in the village of Lynton
A four-bedroom penthouse next to the Tate with direct views of St Paul's from two floors of luxurious living space
A four-bedroom detached home surrounded by spacious gardens and woodland, close to New Pudsey
An 18th-century, three-bedroom home near Langstone Harbour built from ships beams with vaulted ceilings and wood burning stoves
A five-bedroom semi-detached home with a mix of period and modern features in a popular and convenient location
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
A three-bedroom villa with self-contained flat, minutes from Lake Windermere
A deceptively spacious, beautifully presented Georgian home with 3000sq ft of living space and five reception rooms
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village