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

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."

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Guru Careers: Pricing Analyst

    £30 - 35k: Guru Careers: We are seeking a Pricing Analyst to join a leading e-...

    SThree: Trainee Recruitment Consultant

    £20000 - £25000 per annum + OTE £45K YR1: SThree: At SThree, we like to be dif...

    SThree: Trainee Recruitment Consultant

    £20000 - £25000 per annum + competitive: SThree: Did you know? SThree is a mul...

    Guru Careers: C# Project Team Lead

    £55 - 65k (DOE): Guru Careers: A unique opportunity for a permanent C# Develop...

    Day In a Page

    Fifa corruption: The 161-page dossier that exposes the organisation's dark heart

    The 161-page dossier that exposes Fifa's dark heart

    How did a group of corrupt officials turn football’s governing body into what was, in essence, a criminal enterprise? Chris Green and David Connett reveal all
    Mediterranean migrant crisis: 'If Europe thinks bombing boats will stop smuggling, it will not. We will defend ourselves,' says Tripoli PM

    Exclusive interview with Tripoli PM Khalifa al-Ghweil

    'If Europe thinks bombing boats will stop smuggling, it will not. We will defend ourselves'
    Raymond Chandler's Los Angeles: How the author foretold the Californian water crisis

    Raymond Chandler's Los Angeles

    How the author foretold the Californian water crisis
    Chinese artist who posted funny image of President Xi Jinping facing five years in prison as authorities crackdown on dissent in the arts

    Art attack

    Chinese artist who posted funny image of President Xi Jinping facing five years in prison
    Marc Jacobs is putting Cher in the limelight as the face of his latest campaign

    Cher is the new face of Marc Jacobs

    Alexander Fury explains why designers are turning to august stars to front their lines
    Parents of six-year-old who beat leukaemia plan to climb Ben Nevis for cancer charity

    'I'm climbing Ben Nevis for my daughter'

    Karen Attwood's young daughter Yasmin beat cancer. Now her family is about to take on a new challenge - scaling Ben Nevis to help other children
    10 best wedding gift ideas

    It's that time of year again... 10 best wedding gift ideas

    Forget that fancy toaster, we've gone off-list to find memorable gifts that will last a lifetime
    Paul Scholes column: With the Premier League over for another year, here are my end of season awards

    Paul Scholes column

    With the Premier League over for another year, here are my end of season awards
    Heysel disaster 30th anniversary: Liverpool have seen too much tragedy to forget fateful day in Belgium

    Liverpool have seen too much tragedy to forget Heysel

    Thirty years ago, 39 fans waiting to watch a European Cup final died as a result of a fatal cocktail of circumstances. Ian Herbert looks at how a club dealt with this tragedy
    Amir Khan vs Chris Algieri: Khan’s audition for Floyd Mayweather may turn into a no-win situation, says Frank Warren

    Khan’s audition for Mayweather may turn into a no-win situation

    The Bolton fighter could be damned if he dazzles and damned if he doesn’t against Algieri, the man last seen being decked six times by Pacquiao, says Frank Warren
    Blundering Tony Blair quits as Middle East peace envoy – only Israel will miss him

    Blundering Blair quits as Middle East peace envoy – only Israel will miss him

    For Arabs – and for Britons who lost their loved ones in his shambolic war in Iraq – his appointment was an insult, says Robert Fisk
    Fifa corruption arrests: All hail the Feds for riding to football's rescue

    Fifa corruption arrests

    All hail the Feds for riding to football's rescue, says Ian Herbert
    Isis in Syria: The Kurdish enclave still resisting the tyranny of President Assad and militant fighters

    The Kurdish enclave still resisting the tyranny of Assad and Isis

    In Syrian Kurdish cantons along the Turkish border, the progressive aims of the 2011 uprising are being enacted despite the war. Patrick Cockburn returns to Amuda
    How I survived Cambodia's Killing Fields: Acclaimed surgeon SreyRam Kuy celebrates her mother's determination to escape the US

    How I survived Cambodia's Killing Fields

    Acclaimed surgeon SreyRam Kuy celebrates her mother's determination to escape to the US
    Stephen Mangan interview: From posh buffoon to pregnant dad, the actor has quite a range

    How Stephen Mangan got his range

    Posh buffoon, hapless writer, pregnant dad - Mangan is certainly a versatile actor