Boiler Rooms

Investment Fraud, Stock Scams, Pump and Dump, Poop and Scoop

A room full of con artists with phones.


The Scam
A boiler room is the term used for any high pressure sales team. However, in the context of con artists it used to refer to a particular type of investment fraud that requires the selling of a large amount of stock in a short period of time. The scam has six steps.

1) The con artist buys stock in a small company with small profits or a shell company that does not exist and therefore has no profits.

2) The con artist and his sales staff call members of the general public and convince them to buy the same stock. The sales staff are usually unaware of the scam are simply following a phone sales script. The goal is to encourage as many people as possible to buy the stock.

3) Because of the sudden surge in people buying stock, the value of the company goes up, as does the stock price.

4) The con artist sells his stock at the inflated price.

5) Since the company is not profitable, the stock soon plummits in value and the victims lose their investment.

6) When the victim complains, the con artists passes them to a 'cooler' who assures them that they lost their money fair and square due to the risks associated with the stock exchange. One boiler room con artist managed to scam his victim out of $20,000. The victim sent a fax threatening to kill the con artist. The con artist rang him and not only managed to be forgiven but also seperated the victim from a further $20,000. This is called Reloading.

The Boiler Toom is often referred to as a "Pump and Dump" scheme. The con artist pumps up the value, then dumps the stock.

It is best depicted in the film "The Boiler Room" starring Giovanni Ribisi.

external image boilerr2.jpg

Poop and Scoop: The reverse of the Pump and Dump scam is the Poop and Scoop. The con artist will contact those who already own shares with a 'tip' that the company is close to collapse. The scared victims sell their stocks and the share price plummits. The con artist then buys the shares at a cheap price. When the company does not collapse, the share price rises and the con artist makes a fortune.

Short And Distort: The con artist short sells a stock, selling it but maintaining the option to buy it back soon. He then spreads bad news about the stock so that, when he does buy it back, it can get it for a cheaper price.

Poop and Scoop Bluff: Often, the con artist will simply keep the victim's money without buying the stock. Since no stock is even purchased, the share price never rises and the victim's believe they have simply lost their money in a fair investment.


Case Studies
During the American Civil War, two journalists conspired to drive up gold prices by publishing false articles in two newspapers that Abraham Lincoln was going to draft 400,000 men to join the army. This set off a chain reaction. If Lincoln was drafting men, then the war was not going well for the union. The public paniced and the stock market went down. Investors began to buy up gold and the price of gold went up by 10% netting the men a tidy profit.

Lincoln flew into a rage when he saw the newsaper articles and had the two men arrested as soon as the scam was uncovered.

Long con, stockmarket, telemarketing, film, cool off

Created by Nicholas J. Johnson
Australia's Honest Con Man