IRS-CI warns of boiler-room investment fraud schemes that often target the elderly

CHICAGO – Each year, thousands fall victim to boiler-room schemes which use high-pressure sales techniques to convince unsuspecting victims to invest in fictitious investments that appear to be real, according to IRS Criminal Investigation.

The organization said criminals hide behind fake investment firms and a network of shell companies to prey on unsuspecting victims worldwide. This year, as part of International Fraud Awareness Week, IRS-CI has issued the following tips to avoid becoming a boiler-room target.

Don't complete online requests for personal information from websites asking if you are interested in investing. Fraudsters use that information to target potential victims.Don't take a website at face value. A website shouldn't be the only evidence that a cold-caller represents a legitimate investment company. Fraudsters clone real investment company websites or purport to be from real investment companies that don't have websites.Double check employment information. Just because a cold-caller uses the names of legitimate brokers listed on the internet doesn't mean they are affiliated with those brokers.Do your own research. Fraudsters use online platforms to generate fictitious performance data for stocks that don't really exist.If you find yourself a victim of one of these schemes, do not pay a fee or tax to the fraudsters to withdraw money. You will end up losing more money and then the fraudsters will end communications with you.Report fraud to law enforcement. Submit Form 3949-A, Information Referral, if you suspect an individual or a business is committing fraud.

"The sales techniques used by criminal networks behind boiler rooms have grown increasingly sophisticated. These schemes touch multiples countries and thousands of victims," said IRS-CI Chief Jim Lee.

"It's heart-wrenching to watch people deplete their savings thinking they are investing in legitimate businesses or securities. ... we don't want additional victims to get boiled."

In fiscal year 2022, IRS-CI initiated 25 new boiler-room investigations. Thus far, the agency has obtained a 100% conviction rate on every case where court proceedings have concluded, Lee said.

Cases include a telemarketing scheme that targeted elderly and retired individuals by selling fraudulent stock and carbon credits resulting in $16 million in losses. Over a series of calls, the telemarketers persuaded victims to invest money under false and misleading pretenses, including the promise of short-term, high-yield, no-risk returns.

In reality, the investments were high-risk, illiquid, and in some instances, entirely fictitious, Lee said. Many victims were persuaded to make additional investments under the false pretense that they would not be permitted to sell their holdings until they purchased more.

The boiler room operators moved funds obtained from the scheme through U.S. bank accounts to overseas bank accounts in Cyprus, Switzerland and the U.K. in the names of various shell companies.

According to the IRS, two defendants have been sentenced to 52 and 42 months in prison, respectively, for their roles in the scheme. A third has pleaded guilty, and agreed to forfeit nearly $16 million and pay the same amount in restitution to the victims. He is awaiting sentencing.

Operation Furnace was an international investigation into boiler rooms in several Asian countries ranging from Turkey to Vietnam. According to the IRS, one of the main targets, Robert Leonard Booth, operated a boiler room in Thailand that laundered funds through U.S. accounts.

He was sentenced to 10 years in prison, and the operation resulted in 16 indictments in the U.S. and nine international arrests. Eight subjects have pleaded guilty, and law enforcement has seized approximately $6 million. Booth was ordered to pay approximately $2 million in restitution.